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|          West Virginia                                      | 55-0672148                                |
|-----------------------------------------------------------------------------------------------------|-------------------------------------------|
| (State or other jurisdiction ofincorporation or organization)                                       | (I.R.S. Employer Identification No.) |
|                                                                                           |                                      |
|         300 N. Main Street   Moorefield, West Virginia |    26836                   |
| (Address of principal executive offices)                                                            | (Zip Code)                                |

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

| Document                                                                                                          | Part of Form 10-K into which   document is incorporated |
|-------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|
| Portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011 | Part III - Items 10, 11, 12, 13, and 14                                |

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SUMMIT FINANCIAL GROUP, INC

| PART I.    |                                                                     |   |
|------------|--------------------------------------------------------------------------|--------|
|       |                                                                     |   |
| Item 1.    | Business                                                                 | 1-11   |
|       |                                                                     |   |
| Item 1A.   | Risk Factors                                                             | 12-22  |
|       |                                                                     |   |
| Item 1B.   | Unresolved Staff Comments                                                | 23     |
|       |                                                                     |   |
| Item 2.    | Properties                                                               | 23     |
|       |                                                                     |   |
| Item 3.    | Legal Proceedings                                                        | 23     |
|       |                                                                     |   |
| Item 4.    | Removed and Reserved                                                     |   |
|       |                                                                     |   |
| PART II.   |                                                                     |   |
|       |                                                                     |   |
| Item 5.    | Market for Registrant's Common Equity, Related                           |   |
|       | Shareholder Matters, and Issuer Purchases of Equity Securities           | 24     |
|       |                                                                     |   |
| Item 6.    | Selected Financial Data                                                  | 25     |
|       |                                                                     |   |
| Item 7.    | Management's Discussion and Analysis of Financial Condition and          |   |
|       | Results of Operations                                                    | 26-43  |
|       |                                                                     |   |
| Item 7A.   | Quantitative and Qualitative Disclosures about Market Risk               | 44     |
|       |                                                                     |   |
| Item 8.    | Financial Statements and Supplementary Data                              | 47-85  |
|       |                                                                     |   |
| Item 9.    | Changes in and Disagreements with Accountants on Accounting and          |   |
|       | Financial Disclosure                                                     | 86     |
|       |                                                                     |   |
| Item 9A.   | Controls and Procedures                                                  | 86     |
|       |                                                                     |   |
| Item 9B.   | Other Information                                                        | 86     |
|       |                                                                     |   |
|       |                                                                     |   |
| PART III.  |                                                                     |   |
|       |                                                                     |   |
| Item 10.   | Directors, Executive Officers, and Corporate Governance                  | 87     |
|       |                                                                     |   |
| Item 11.   | Executive Compensation                                                   | 87     |
|       |                                                                     |   |
| Item 12.   | Security Ownership of Certain Beneficial Owners                          |   |
|       | and Management and Related Shareholder Matters                           | 87     |
|       |                                                                     |   |
| Item 13.   | Certain Relationships and Related Transactions and Director Independence | 87     |
|       |                                                                     |   |
| Item 14.   | Principal Accounting Fees and Services                                   | 87     |
|       |                                                                     |   |
|       |                                                                     |   |
| PART IV.   |                                                                     |   |
|       |                                                                     |   |
| Item 15.   | Exhibits, Financial Statement Schedules                                  | 88-90  |
|       |                                                                     |   |
|       |                                                                     |   |
| SIGNATURES |                                                                     | 91     |

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PART I.

Item 1.

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Table of Contents

|                                                                 | Regulatory |   | Summit       |
|----------------------------------------------------------------------|------------|--------|--------------|
|                                                                 | LTV        |   | LTV          |
|                                                                 | Guideline  |   | Policy Limit |
| Undeveloped land                                                     | 65%        |   | 65%          |
| Land development                                                     | 75%        |   | 70%          |
| Construction:                                                        |       |   |         |
|    Commercial, multifamily, and other non-residential | 80%        |   | 80%          |
|    1-4 family residential, consumer borrower          | 85%        |   | 85%          |
|    1-4 family residential, commercial borrower        | 85%        |   | 80%          |
| Improved property                                                    | 85%        |   | 80%          |
| Owner occupied 1-4 family                                            | 90%        |   | 85%          |
| Home equity                                                          | 90%        |   | 90%          |

| Residential real estate                  |                           |
|------------------------------------------|--------------------------------|
| Owner occupied – 1st lien          | $ 12.0 million                 |
| Owner occupied – 2nd lien          | $   1.2 million |
|                                     |                           |
|                                     |                           |
| Commercial real estate                   |                           |
| Residential non-owner occupied, 1st lien | $   5.3 million |
| Owner occupied commercial real estate    | $ 21.8 million                 |
| Other commercial real estate             | $ 11.2 million                 |
|                                     |                           |
|                                     |                           |
| Construction, development & land     | $ 17.9 million                 |

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| §   | Centralize responsibility for consumer financial protection by creating a new agency, the Bureau of Consumer Financial Protection, responsible for implementing, examining and enforcing compliance with federal consumer financial laws. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Require the bank regulators to seek to make its capital requirements for all banks countercyclical so that capital requirements increase in times of economic expansion and decrease in times of economic contraction. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Require financial holding companies to be well-capitalized and well-managed as of July 21, 2011. Bank holding companies and banks must also be both well-capitalized and well-managed in order to acquire banks located outside their home state. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | Change the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital, eliminate the ceiling on the size of the Deposit Insurance Fund (DIF) and increase the floor of the size of the DIF, which generally will require an increase in the level of assessments for institutions with assets in excess of $10 billion. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Impose comprehensive regulation of the over-the-counter derivatives market, which would include certain provisions that would effectively prohibit insured depository institutions from conducting certain derivatives businesses in the institution itself. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Implement corporate governance revisions, including with regard to executive compensation and proxy access by shareholders that apply to all public companies, not just financial institutions. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Make permanent the $250 thousand limit for federal deposit insurance and provide unlimited federal deposit insurance until January 1, 2013 for non-interest bearing demand transaction accounts at all insured depository institutions. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Repeal the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Amend the Electronic Fund Transfer Act (EFTA) to, among other things, give the Federal Reserve the authority to establish rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | •  | introduces as a new capital measure “Common Equity Tier 1”, or “CET1”, specifies that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, defines CET1 narrowly by requiring that most deductions or adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, and expands the scope of the deductions or adjustments as compared to existing regulations;  |
|   | •  | when fully phased in on January 1, 2019, requires banks to maintain:                                                                                                                                                                                                                                                                                                                                                                                                                                                |

|   |          |                                                                                                                                                                                                                                                                                                                                   |
|--------|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | •  | as a newly adopted international standard, a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% CET1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of at least 7%);  |
|   | •  | a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation);                               |

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|   | •  | a minimum ratio of Total (that is, Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation);  |
|--------|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | •  | as a newly adopted international standard, a minimum leverage ratio of 3%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (as the average for each quarter of the month-end ratios for the quarter); and                                                          |

|   |          |                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | •  | provides for a “countercyclical capital buffer”, generally to be imposed when national regulators determine that excess aggregate credit growth becomes associated with a buildup of systemic risk, that would be a CET1 add-on to the capital conservation buffer in the range of 0% to 2.5% when fully implemented (potentially resulting in total buffers of between 2.5% and 5%). |

|   |          |                                                             |
|--------|---------------|------------------------------------------------------------------|
|   | •  | 3.5% CET1 to risk-weighted assets;                          |
|   | •  | 4.5% Tier 1 capital to risk-weighted assets; and  |
|   | •  | 8.0% Total capital to risk-weighted assets.                      |

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| 1.   | Distribution of Assets, Liabilities, and Shareholders’ |
|----------------|--------------------------------------------------------------|

| a.   |  Average Balance Sheets | 31 |
|----------------|------------------------------|----|

| b.   |  Analysis of Net Interest Earnings  | 29 |
|----------------|-----------------------------------------------|----|

| c.   |  Rate Volume Analysis of Changes in Interest Income and Expense  | 32 |
|----------------|----------------------------------------------------------------------------|----|

| 2.   | Investment Portfolio |
|----------------|----------------------|

| a.   |  Book Value of Investments | 35 |
|----------------|---------------------------------|----|

| b.   |  Maturity Schedule of Investments | 35 |
|----------------|----------------------------------------|----|

|   | c.  | Securities of Issuers Exceeding 10% of Shareholders’ Equity |   35 |
|--------|----------|-------------------------------------------------------------------|-----------|

| 3.   | Loan Portfolio |
|----------------|----------------|

| a.   |  Types of Loans | 34 |
|----------------|----------------------|----|

| b.   |  Maturities and Sensitivity to Changes in Interest Rates | 63 |
|----------------|---------------------------------------------------------------|----|

| c.   |  Risk Elements | 36 |
|----------------|---------------------|----|

| d.   |  Other Interest Bearing Assets | n/a |
|----------------|-------------------------------------|-----|

| 4.   |  Summary of Loan Loss Experience | 41 |
|----------------|---------------------------------------|----|

| 5.   | Deposits |
|----------------|----------|

| a.   | Breakdown of Deposits by Categories, Average Balance, |
|----------------|-------------------------------------------------------|

| b.   | Maturity Schedule of Time Certificates of Deposit and Other |
|----------------|-------------------------------------------------------------|

| 6.   |  Return of Equity and Assets | 29 |
|----------------|-----------------------------------|----|

| 7.   |  Short-term Borrowings | 73 |
|----------------|-----------------------------|----|

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Item 1A.

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

| §   | increased monitoring of the Bank’s current financial position; |
|--------------------|----------------------------------------------------------------------|

| §   | approval of an internally-prepared written risk assessment of all business activities and product lines of the Bank and the establishment of goals and limitations for each such business activity or product identified as containing elevated degrees of risk; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | achieving and maintaining a minimum Tier 1 leverage capital ratio of at least 8% and a total-risk-based capital ratio of at least 11%; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

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| §   | declaring an intent to pay a cash dividend only if we give 30 days prior notice to our regulatory authorities and they do not object; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| §   | reviewing the adequacy of the Bank’s loan policies and approving necessary changes to strengthen credit administration and risk identification; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | reviewing the investment policy and approving changes as appropriate; |
|--------------------|-----------------------------------------------------------------------|

| §   | reviewing the organizational structure of the Bank’s lending department; |
|--------------------|--------------------------------------------------------------------------------|

| §   | providing the Bank’s regulatory authorities with updated reports of criticized assets and/or formal work-out plans for all nonperforming borrowers with outstanding balances exceeding $1.0 million; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | establishing procedures to report all loans with balances exceeding $500,000 that have credit weaknesses or that fall outside of the Bank’s policy; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | maintaining an adequate allowance for loan and lease losses through charges to current operating income; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| §   | employing a qualified independent third party to assess the procedures used to estimate the Bank’s allowance for loan and lease losses in accordance with FAS 5 and FAS 114; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | preparing an updated comprehensive budget and earnings forecast for the bank; |
|--------------------|-------------------------------------------------------------------------------|

| §   | developing a comprehensive three-year strategic plan for the bank; |
|--------------------|--------------------------------------------------------------------|

| §   | reviewing overall liquidity objectives and developing and submitting to regulatory authorities plans and procedures aimed to improve liquidity and reduce reliance on volatile liabilities; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | performing a risk segmentation analysis of concentrations of credit and developing a plan to reduce any segment of the portfolio which regulatory authorities deem to be an undue concentration of credit; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | providing quarterly progress reports to the Bank’s regulatory authorities detailing steps taken to comply with the Bank MOU. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| §   | promote compliance with the provisions of the Bank MOU; |
|--------------------|---------------------------------------------------------|

| §   | suspend all cash dividends on our common stock until further notice; |
|--------------------|----------------------------------------------------------------------|

| §   | not incur any additional debt, other than trade payables, without the prior written consent of the principal banking regulators; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| §   | adopt and implement a capital plan that is acceptable to the principal banking regulators and that is designed to maintain an adequate level and composition of capital protection commensurate for the risk profile of the organization; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | provide quarterly progress reports to Summit’s regulatory authorities detailing the steps taken to comply with the Holding Company MOU. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | Operating results that vary from the expectations of management, securities  analysts and investors; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| §   | Developments in our business or in the financial sector generally; |
|--------------------|--------------------------------------------------------------------|

| §   | Regulatory changes affecting our industry generally or our businesses and operations; |
|--------------------|---------------------------------------------------------------------------------------|

| §   | The operating and securities price performance of companies that investors consider to be comparable to us; |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| §   | Announcements of strategic developments, acquisitions and other material events by us or our competitors; |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| §   | Changes in the credit, mortgage and real estate markets, including the markets for mortgage-related securities; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| §   | Changes in global financial markets and global economies and general market conditions, such as interest or foreign exchange rates, stocks, commodity, credit or asset valuations or volatility; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Changes in securities analysts’ estimates of financial performance |
|--------------------|--------------------------------------------------------------------------|

| §   | Volatility of stock market prices and volumes |
|--------------------|-----------------------------------------------|

| §   | Rumors or erroneous information |
|--------------------|---------------------------------|

| §   | Changes in market valuations of similar companies |
|--------------------|---------------------------------------------------|

| §   | Changes in interest rates |
|--------------------|---------------------------|

| §   | New developments in the banking industry |
|--------------------|------------------------------------------|

| §   | Variations in our quarterly or annual operating results |
|--------------------|---------------------------------------------------------|

| §   | New litigation or changes in existing litigation |
|--------------------|--------------------------------------------------|

| §   | Regulatory actions |
|--------------------|--------------------|

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| §   | actual or anticipated quarterly fluctuations in our operating and financial results; |
|--------------------|--------------------------------------------------------------------------------------|

| §   | our announcements of developments related to our business; |
|--------------------|------------------------------------------------------------|

| §   | changes in financial estimates and recommendations by financial analysts; |
|--------------------|---------------------------------------------------------------------------|

| §   | dispositions, acquisitions and financings; |
|--------------------|--------------------------------------------|

| §   | actions of our current shareholders, including sales of common stock by existing shareholders and our directors and executive officers; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| §   | fluctuations in the stock price and operating results of other companies deemed to be peers; |
|--------------------|----------------------------------------------------------------------------------------------|

| §   | actions by government regulators; and |
|--------------------|---------------------------------------|

| §   | developments related to the financial services industry. |
|--------------------|----------------------------------------------------------|

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Item 1B.

Item 2.

|                           |                       | Number of Offices |   |
|--------------------------------|----------------------------|-------------------|--------|
| Office Location                |                       | Owned             |   |   | Leased |   |   | Total |   |
| Summit Community Bank          |                       |              |   |   |   |   |   |   |   |
|                           | Moorefield, West Virginia  |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                           | Mathias, West Virginia     |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                           | Franklin, West Virginia    |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                           | Petersburg, West Virginia  |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                           | Charleston, West Virginia  |              |   | 2 |   |   |   | - |   |   |   | 2 |   |
|                           | Rainelle, West Virginia    |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                           | Rupert, West Virginia      |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                           | Winchester, Virginia       |              |   | 1 |   |   |   | 1 |   |   |   | 2 |   |
|                           | Leesburg, Virginia         |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                           | Harrisonburg, Virginia     |              |   | 1 |   |   |   | 1 |   |   |   | 2 |   |
|                           | Warrenton, Virginia        |              |   | - |   |   |   | 1 |   |   |   | 1 |   |
|                           | Martinsburg, West Virginia |              |   | 1 |   |   |   | - |   |   |   | 1 |   |
| Summit Insurance Services, LLC |                       |              |   |   |   |   |   |   |   |   |   |   |
|                           | Leesburg, Virginia         |              |   | - |   |   |   | 1 |   |   |   | 1 |   |

Item 3.

Item 4.

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PART II.

| Item 5. |  Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
|---------|--------------------------------------------------------------------------------------------------------------------|

|                 |   |    |   |   |    |   |   |    |   |   |    |   |
|----------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                 |   | First   |   |   | Second  |   |   | Third   |   |   | Fourth  |   |
|                 |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |
| 2010                 |   |    |   |   |    |   |   |    |   |   |    |   |
|  Dividends paid |   | $       | -      |   |    | $      | -      |    |   | $      | -       |   |   | $ | - |   |
|  High Bid       |   |    | 4.24   |   |    |   | 5.00   |    |   |   | 4.75    |   |   |   | 5.00 |   |
|  Low Bid        |   |    | 3.67   |   |    |   | 2.38   |    |   |   | 2.30    |   |   |   | 3.51 |   |
|                 |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| 2009                 |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
|  Dividends paid |   | $       | -      |   |    | $      | 0.06   |    |   | $      | -       |   |   | $ | - |   |
|  High Bid       |   |    | 10.00  |   |    |   | 8.75   |    |   |   | 8.62    |   |   |   | 5.01 |   |
|  Low Bid        |   |    | 6.85   |   |    |   | 5.25   |    |   |   | 5.00    |   |   |   | 3.50 |   |

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I
tem 6.

|                                                          |   | For the Year Ended       |      |
|---------------------------------------------------------------|--------|--------------------------|-----------|
|                                                          |   | (unless otherwise noted) |      |
|  Dollars in thousands, except per share amounts          |   | 2010                     |      |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|  Summary of Operations                                   |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |
|  Interest income                                         |   | $                        | 79,672    |   |   | $ | 89,536 |   |   | $ | 93,484 |   |   | $ | 91,384 |   |   | $ | 80,278 |   |
|  Interest expense                                        |   |                     | 39,520    |   |   |   | 45,994 |   |   |   | 49,409 |   |   |   | 52,317 |   |   |   | 44,379 |   |
|  Net interest income                                     |   |                     | 40,152    |   |   |   | 43,542 |   |   |   | 44,075 |   |   |   | 39,067 |   |   |   | 35,899 |   |
|  Provision for loan losses                               |   |                     | 21,350    |   |   |   | 20,325 |   |   |   | 15,500 |   |   |   | 2,055 |   |   |   | 1,845 |   |
|  Net interest income after provision                     |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      for loan losses                 |   |                     | 18,802    |   |   |   | 23,217 |   |   |   | 28,575 |   |   |   | 37,012 |   |   |   | 34,054 |   |
|  Noninterest income                                      |   |                     | 7,221     |   |   |   | 5,800 |   |   |   | 2,868 |   |   |   | 7,357 |   |   |   | 3,634 |   |
|  Noninterest expense                                     |   |                     | 30,953    |   |   |   | 31,898 |   |   |   | 29,434 |   |   |   | 25,098 |   |   |   | 21,610 |   |
|  Income (loss) before income taxes                       |   |                     | (4,930    | ) |   |   | (2,881 | ) |   |   | 2,009 |   |   |   | 19,271 |   |   |   | 16,078 |   |
|  Income tax expense (benefit)                            |   |                     | (2,955    | ) |   |   | (2,165 | ) |   |   | (291 | ) |   |   | 5,734 |   |   |   | 5,018 |   |
|  Income (loss) from continuing operations                |   |                     | (1,975    | ) |   |   | (716 | ) |   |   | 2,300 |   |   |   | 13,537 |   |   |   | 11,060 |   |
|  Income (loss) from discontinued operations              |   |                     | -         |   |   |   | - |   |   |   | - |   |   |   | (7,081 | ) |   |   | (2,803 | ) |
|  Net income (loss)                                       |   |                     | (1,975    | ) |   |   | (716 | ) |   |   | 2,300 |   |   |   | 6,456 |   |   |   | 8,257 |   |
|  Dividends on preferred shares                           |   |                     | 297       |   |   |   | 74 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|  Net income (loss) applicable to common shares           |   | $                        | (2,272    | ) |   | $ | (790 | ) |   | $ | 2,300 |   |   | $ | 6,456 |   |   | $ | 8,257 |   |
|                                                          |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Balance Sheet Data (at year end)                        |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Assets                                                  |   | $                        | 1,478,470 |   |   | $ | 1,584,625 |   |   | $ | 1,627,116 |   |   | $ | 1,435,536 |   |   | $ | 1,235,519 |   |
|  Securities available for sale                           |   |                     | 271,730   |   |   |   | 271,654 |   |   |   | 327,606 |   |   |   | 283,015 |   |   |   | 235,780 |   |
|  Loans                                                   |   |                     | 995,319   |   |   |   | 1,137,336 |   |   |   | 1,192,157 |   |   |   | 1,052,489 |   |   |   | 916,045 |   |
|  Deposits                                                |   |                     | 1,036,939 |   |   |   | 1,017,338 |   |   |   | 965,850 |   |   |   | 828,687 |   |   |   | 888,687 |   |
|  Short-term borrowings                                   |   |                     | 1,582     |   |   |   | 49,739 |   |   |   | 153,100 |   |   |   | 172,055 |   |   |   | 60,428 |   |
|  Long-term borrowings                                    |   |                     | 304,109   |   |   |   | 381,492 |   |   |   | 382,748 |   |   |   | 315,738 |   |   |   | 176,110 |   |
|  Shareholders' equity                                    |   |                     | 89,821    |   |   |   | 90,660 |   |   |   | 87,244 |   |   |   | 89,420 |   |   |   | 78,752 |   |
|                                                          |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Credit Quality                                          |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net loan charge-offs                                    |   | $                        | 21,126    |   |   | $ | 20,258 |   |   | $ | 7,759 |   |   | $ | 1,066 |   |   | $ | 446 |   |
|  Nonperforming assets                                    |   |                     | 92,235    |   |   |   | 107,504 |   |   |   | 56,082 |   |   |   | 12,391 |   |   |   | 5,353 |   |
|  Allowance for loan losses                               |   |                     | 17,224    |   |   |   | 17,000 |   |   |   | 16,933 |   |   |   | 9,192 |   |   |   | 7,511 |   |
|                                                          |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Per Share Data                                          |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Earnings per share from continuing operations           |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Basic earnings                        |   | $                        | (0.31     | ) |   | $ | (0.11 | ) |   | $ | 0.31 |   |   | $ | 1.87 |   |   | $ | 1.55 |   |
|     Diluted earnings                      |   |                     | (0.31     | ) |   |   | (0.11 | ) |   |   | 0.31 |   |   |   | 1.85 |   |   |   | 1.54 |   |
|  Earnings per share from discontinued operations         |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Basic earnings                        |   |                     | -         |   |   |   | - |   |   |   | - |   |   |   | (0.98 | ) |   |   | (0.39 | ) |
|     Diluted earnings                      |   |                     | -         |   |   |   | - |   |   |   | - |   |   |   | (0.97 | ) |   |   | (0.39 | ) |
|  Earnings per share                                      |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Basic earnings                        |   |                     | (0.31     | ) |   |   | (0.11 | ) |   |   | 0.31 |   |   |   | 0.89 |   |   |   | 1.16 |   |
|     Diluted earnings                      |   |                     | (0.31     | ) |   |   | (0.11 | ) |   |   | 0.31 |   |   |   | 0.88 |   |   |   | 1.15 |   |
|  Book value per common share (at year end) (A)           |   |                     | 11.01     |   |   |   | 11.19 |   |   |   | 11.77 |   |   |   | 12.07 |   |   |   | 11.12 |   |
|  Tangible book value per common share (at year end) (A)  |   |                     | 9.90      |   |   |   | 10.04 |   |   |   | 10.46 |   |   |   | 10.70 |   |   |   | 10.66 |   |
|  Cash dividends                                          |   |                     | -         |   |   |   | 0.06 |   |   |   | 0.36 |   |   |   | 0.34 |   |   |   | 0.32 |   |
|                                                          |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Performance Ratios                                      |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Return on average equity                                |   |                     | -2.60     | % |   |   | -0.90 | % |   |   | 2.59 | % |   |   | 7.34 | % |   |   | 10.44 | % |
|  Return on average assets                                |   |                     | -0.15     | % |   |   | -0.05 | % |   |   | 0.15 | % |   |   | 0.50 | % |   |   | 0.70 | % |
|  Equity to assets                                        |   |                     | 6.1       | % |   |   | 5.7 | % |   |   | 5.4 | % |   |   | 6.2 | % |   |   | 6.4 | % |
|                                                          |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  (A) - Assumes conversion of convertible preferred stock |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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Item 7.

| ·   | Net loss for 2010 totaled $2,272,000 compared to net loss of $790,000 in 2009.  These losses are primarily the result of lower net interest income, continued high loan loss provisions, and charges related to the writedowns of OREO properties to fair value and other than temporary impairments of securities. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our allowance for loan losses totaled 1.70% of total loans at December 31, 2010, compared to 1.47% at December 31, 2009. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| ·   | In 2010, nonperforming assets decreased by $15.3 million. We continue to manage our problem assets through a combination of asset sales, loan workouts and charge-offs. However, disposition of foreclosed real estate remains difficult to achieve as the return of our real estate markets to normal activity levels has been slow. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The impact of foregone net interest income from nonaccruing loans negatively impacted the margin keeping it well below historical margins. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During 2010, we reduced wholesale funding to 36% of total assets, compared to 42% a year ago. |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | We remained well-capitalized by regulatory capital guidelines at December 31, 2010. |
|--------------------|-------------------------------------------------------------------------------------|

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| (in thousands)     |   | Community Banking |    |   | Insurance Services |   |
|--------------------|--------|-------------------|---------|--------|--------------------|--------|
|               |   |              |    |   |               |   |
| Fair value         |   | $                 | 159,510 |   |               | $      | 7,000 |   |
| Carrying amount    |   |              | 126,755 |   |               |   | 6,651 |   |
| Allocated goodwill |   |              | 1,488   |   |               |   | 4,710 |   |
|               |   |              |    |   |               |   |   |   |

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| Dollars in thousands    |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Community banking       |   | $      | (838   | )      |   | $      | 563    |   |   | $ | 4,119 |   |
| Insurance               |   |   | 249    |   |   |   | 248    |   |   |   | 330 |   |
| Parent and other        |   |   | (1,683 | )      |   |   | (1,601 | )      |   |   | (2,149 | ) |
| Consolidated net income |   | $      | (2,272 | )      |   | $      | (790   | )      |   | $ | 2,300 |   |

| ·   | $56 million of long term FHLB advances matured or were paid off at an average rate of 5.44% |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | $27 million of long term repurchase agreements repriced from an average rate of 9.18% to 4.63%. |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | $20.9 million of brokered certificates of deposit matured at an average rate of 4.6% and were replaced by $23.7 million at an average rate of 2.8% |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

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| TABLE I - AVERAGE DISTRIBUTION OF CONSOLIDATED ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY,                                                                                                    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| INTEREST EARNINGS & EXPENSES, AND AVERAGE YIELDS/RATES                                                                                                                                      |   |   |   |   |   |
|                                                                                                                                                                                            | 2010 |   | 2009 |   | 2008 |
|                                                                                                                                                                                            | Average | Earnings/ | Yield/ |   | Average | Earnings/ | Yield/ |   | Average | Earnings/ | Yield/ |
| Dollars in thousands                                                                                                                                                                            | Balances | Expense | Rate |   | Balances | Expense | Rate |   | Balances | Expense | Rate |
| ASSETS                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Interest earning assets                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |
|     Loans, net of unearned interest (1)                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
|         Taxable                                                                                                                                         |  $1,082,537 |  $65,643 | 6.06% |   |  $1,184,571 |  $71,405 | 6.03% |   |  $1,127,808 |  $77,055 | 6.83% |
|         Tax-exempt (2)                                                                                                                                  |  5,965 |  476 | 7.98% |   |  8,045 |  665 | 8.27% |   |  8,528 |  697 | 8.17% |
|     Securities                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |
|         Taxable                                                                                                                                         |  253,529 |  11,922 | 4.70% |   |  271,820 |  15,602 | 5.74% |   |  264,667 |  13,707 | 5.18% |
|         Tax-exempt (2)                                                                                                                                  |  40,048 |  2,670 | 6.67% |   |  46,740 |  3,150 | 6.74% |   |  49,953 |  3,380 | 6.77% |
| Federal Funds sold and interest                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
|   bearing deposits with other banks                                                                                                                                                   |  16,373 |  31 | 0.19% |   |  1,335 |  13 | 0.97% |   |  370 |  8 | 2.16% |
|                                                                                                                                                                                            |  $1,398,452 |  $80,742 | 5.77% |   |  $1,512,511 |  $90,835 | 6.01% |   |  $1,451,326 |  $94,847 | 6.54% |
| Noninterest earning assets                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |
|     Cash and due from banks                                                                                                                                                 |  4,267 |   |   |   |  18,282 |   |   |   |  18,792 |   |   |
|     Banks premises and equipment                                                                                                                                            |  23,742 |   |   |   |  23,646 |   |   |   |  22,154 |   |   |
|    Other assets                                                                                                                                                                  |  104,907 |   |   |   |  60,656 |   |   |   |  38,760 |   |   |
|     Allowance for loan losses                                                                                                                                               |  (19,226) |   |   |   |  (18,293) |   |   |   |  (12,980) |   |   |
|         Total assets                                                                                                                                    |  $1,512,142 |   |   |   |  $1,596,802 |   |   |   |  $1,518,052 |   |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                            |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |
|     Interest bearing demand deposits                                                                                                                                        |  $147,513 |  $583 | 0.40% |   |  $154,233 |  $784 | 0.51% |   |  $190,066 |  $2,416 | 1.27% |
|     Savings deposits                                                                                                                                                        |  188,233 |  2,323 | 1.23% |   |  112,712 |  1,774 | 1.57% |   |  55,554 |  908 | 1.63% |
|     Time deposits                                                                                                                                                           |  605,663 |  18,131 | 2.99% |   |  632,988 |  22,407 | 3.54% |   |  568,491 |  24,019 | 4.23% |
|     Short-term borrowings                                                                                                                                                   |  16,172 |  80 | 0.49% |   |  99,497 |  573 | 0.58% |   |  112,383 |  2,392 | 2.13% |
|     Long-term borrowings and                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |
|       subordinated debentures                                                                                                                                     |  380,235 |  18,403 | 4.84% |   |  429,481 |  20,457 | 4.76% |   |  419,454 |  19,674 | 4.69% |
|                                                                                                                                                                                            |  $1,337,816 |  $39,520 | 2.95% |   |  $1,428,911 |  $45,995 | 3.22% |   |  $1,345,948 |  $49,409 | 3.67% |
| Noninterest bearing liabilities                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
|     Demand deposits                                                                                                                                                         |  73,971 |   |   |   |  71,281 |   |   |   |  75,165 |   |   |
|     Other liabilities                                                                                                                                                       |  9,597 |   |   |   |  8,666 |   |   |   |  7,976 |   |   |
|     Total liabilities                                                                                                                                                       |  1,421,384 |   |   |   |  1,508,858 |   |   |   |  1,429,089 |   |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |
|     Shareholders' equity - preferred                                                                                                                                        |  3,519 |   |   |   |  3,519 |   |   |   |  - |   |   |
|     Shareholders' equity - common                                                                                                                                           |  87,239 |   |   |   |  84,425 |   |   |   |  88,963 |   |   |
|       Total liabilities and                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |
|         shareholders' equity                                                                                                                            |  $1,512,142 |   |   |   |  $1,596,802 |   |   |   |  $1,518,052 |   |   |
| NET INTEREST EARNINGS                                                                                                                                                                           |  $41,222 |   |   |   |  $44,840 |   |   |   |  $45,438 |   |
| NET INTEREST MARGIN                                                                                                                                                                             |   |   | 2.95% |   |   |   | 2.96% |   |   |   | 3.13% |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |
| (1) For purposes of this table, nonaccrual loans are included in average loan balances.  Included in interest and fees on loans are loan fees of $534,000,                            |   |
|      $890,000, and $775,000 for the years ended December 31, 2010, 2009 and 2008 respectively.                                                                         |   |   |   |   |   |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |
| (2) For purposes of this table, interest income on tax-exempt securities and loans has been adjusted assuming an effective combined Federal and state tax                                       |
|      rate of 34% for all years presented.  The tax equivalent adjustment results in an increase in interest income of $1,070,000, $1,298,000, and $1,363,000 |   |
|      for the years ended December 31, 2010, 2009 and 2008 respectively.                                                                                                     |   |

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| Table II - Changes in Interest Margin Attributable to Rate and Volume |   |                |   |   |                |   |   |
|-----------------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|
|                                                                  |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   | 2010 Versus 2009    |   |   | 2009 Versus 2008    |   |
|                                                                  |   | Increase (Decrease) |   |   | Increase (Decrease) |   |
|                                                                  |   | Due to Change in:   |   |   | Due to Change in:   |   |
| Dollars in thousands                                                  |   | Volume              |   |   | Rate                |   |   | Net |   |   | Volume |   |   | Rate |   |   | Net |   |
| Interest earned on:                                                   |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                 |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Taxable                                                   |   | $                   | (6,185 | )      |                | $      | 423    |   |   | $ | (5,762 | ) |   | $ | 3,757 |   |   | $ | (9,407 | ) |   | $ | (5,650 | ) |
|   Tax-exempt                                                |   |                | (167   | )      |                |   | (22    | ) |   | $ | (189 | ) |   |   | (40 | ) |   |   | 8 |   |   | $ | (32 | ) |
| Securities                                                            |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Taxable                                                   |   |                | (999   | )      |                |   | (2,681 | ) |   | $ | (3,680 | ) |   |   | 378 |   |   |   | 1,517 |   |   | $ | 1,895 |   |
|   Tax-exempt                                                |   |                | (446   | )      |                |   | (34    | ) |   | $ | (480 | ) |   |   | (217 | ) |   |   | (13 | ) |   | $ | (230 | ) |
| Federal funds sold and interest                                       |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   bearing deposits with other banks                         |   |                | 36     |   |                |   | (18    | ) |   |   | 18 |   |   |   | 11 |   |   |   | (6 | ) |   |   | 5 |   |
| Total interest earned on                                              |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   interest earning assets                                   |   |                | (7,761 | )      |                |   | (2,332 | ) |   |   | (10,093 | ) |   |   | 3,889 |   |   |   | (7,901 | ) |   |   | (4,012 | ) |
|                                                                  |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest paid on:                                                     |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand                                               |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   deposits                                                  |   |                | (33    | )      |                |   | (168   | ) |   |   | (201 | ) |   |   | (390 | ) |   |   | (1,242 | ) |   |   | (1,632 | ) |
| Savings deposits                                                      |   |                | 995    |   |                |   | (446   | ) |   |   | 549 |   |   |   | 901 |   |   |   | (35 | ) |   |   | 866 |   |
| Time deposits                                                         |   |                | (934   | )      |                |   | (3,342 | ) |   |   | (4,276 | ) |   |   | 2,551 |   |   |   | (4,163 | ) |   |   | (1,612 | ) |
| Short-term borrowings                                                 |   |                | (422   | )      |                |   | (71    | ) |   |   | (493 | ) |   |   | (247 | ) |   |   | (1,572 | ) |   |   | (1,819 | ) |
| Long-term borrowings and                                              |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    subordinated debentures                             |   |                | (2,379 | )      |                |   | 325    |   |   |   | (2,054 | ) |   |   | 475 |   |   |   | 308 |   |   |   | 783 |   |
|   Total interest paid on                                    |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     interest bearing liabilities                  |   |                | (2,773 | )      |                |   | (3,702 | ) |   |   | (6,475 | ) |   |   | 3,290 |   |   |   | (6,704 | ) |   |   | (3,414 | ) |
|                                                                  |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                   |   | $                   | (4,988 | )      |                | $      | 1,370  |   |   | $ | (3,618 | ) |   | $ | 599 |   |   | $ | (1,197 | ) |   | $ | (598 | ) |

| Table III -- Noninterest Income                                       |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Dollars in thousands                                                  |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|     Insurance commissions                         |   | $      | 4,744  |   |   | $      | 5,045  |   |   | $ | 5,139 |   |
|     Service fees                                  |   |   | 3,039  |   |   |   | 3,330  |   |   |   | 3,246 |   |
|     Mortgage origination revenue                  |   |   | 186    |   |   |   | 265    |   |   |   | 94 |   |
|     Realized securities gains (losses)            |   |   | 2,051  |   |   |   | 1,497  |   |   |   | (6 | ) |
|     Other-than-temporary impairment of securities |   |   | (988   | )      |   |   | (5,366 | )      |   |   | (7,060 | ) |
|     Net cash settlement on interest rate swaps    |   |   | -      |   |   |   | -      |   |   |   | (170 | ) |
|     Change in fair value of interest rate swaps   |   |   | -      |   |   |   | -      |   |   |   | 705 |   |
|     Gain (loss) on sale of assets                 |   |   | 142    |   |   |   | (112   | )      |   |   | 126 |   |
|     ATM/Debit Card Income                         |   |   | 997    |   |   |   | 764    |   |   |   | 646 |   |
|     Writedown of OREO                             |   |   | (3,401 | )      |   |   | -      |   |   |   | - |   |
|     Other                                         |   |   | 451    |   |   |   | 377    |   |   |   | 148 |   |
| Total                                                                 |   | $      | 7,221  |   |   | $      | 5,800  |   |   | $ | 2,868 |   |

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| Table IV - Noninterest Expense                                       |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
|                                                                 |   |   |   |   | Change  |   |   |   |   |   | Change |   |   |   |   |
| Dollars in thousands                                                 |   | 2010   |   |   |  $ |   |   |   | %      |   |   |   | 2009   |   |   |  $ |   |   |   | %      |   |   |   | 2008 |   |
|     Salaries, commissions, and employee benefits |   | $      | 15,133 |   |    | $      | (775   | )      |   |   | -4.9   | %      |   | $      | 15,908 |    |   | $      | (854   | )      |   |   | -5.1 | % |   | $ | 16,762 |   |
|     Net occupancy expense                        |   |   | 2,009  |   |    |   | (23    | )      |   |   | -1.1   | %      |   |   | 2,032  |    |   |   | 162    |   |   |   | 8.7 | % |   |   | 1,870 |   |
|     Equipment expense                            |   |   | 2,457  |   |    |   | 306    |   |   |   | 14.2   | %      |   |   | 2,151  |    |   |   | (22    | )      |   |   | -1.0 | % |   |   | 2,173 |   |
|     Supplies                                     |   |   | 481    |   |    |   | (486   | )      |   |   | -50.3  | %      |   |   | 967    |    |   |   | 42     |   |   |   | 4.5 | % |   |   | 925 |   |
|     Professional fees                            |   |   | 1,015  |   |    |   | (394   | )      |   |   | -28.0  | %      |   |   | 1,409  |    |   |   | 686    |   |   |   | 94.9 | % |   |   | 723 |   |
|     Advertising                                  |   |   | 148    |   |    |   | (50    | )      |   |   | -25.3  | %      |   |   | 198    |    |   |   | (91    | )      |   |   | -31.5 | % |   |   | 289 |   |
|     Amortization of intangibles                  |   |   | 351    |   |    |   | -      |   |   |   | 0.0    | %      |   |   | 351    |    |   |   | -      |   |   |   | 0.0 | % |   |   | 351 |   |
|     FDIC premiums                                |   |   | 2,870  |   |    |   | (353   | )      |   |   | -11.0  | %      |   |   | 3,223  |    |   |   | 2,479  |   |   |   | 333.2 | % |   |   | 744 |   |
|     OREO expense                                 |   |   | 1,577  |   |    |   | 1,099  |   |   |   | 229.9  | %      |   |   | 478    |    |   |   | 336    |   |   |   | 236.6 | % |   |   | 142 |   |
|     Other                                        |   |   | 4,912  |   |    |   | (269   | )      |   |   | -5.2   | %      |   |   | 5,181  |    |   |   | (274   | )      |   |   | -5.0 | % |   |   | 5,455 |   |
| Total                                                                |   | $      | 30,953 |   |    | $      | (945   | )      |   |   | -3.0   | %      |   | $      | 31,898 |    |   | $      | 2,464  |   |   |   | 8.4 | % |   | $ | 29,434 |   |

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| Table V - Loans by Type |   |   |      |   |     |   |   |   |   |   |      |   |   |   |   |   |     |   |      |   |   |   |     |   |   |   |      |   |
|-------------------------|--------|--------|-----------|--------|----------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|----------|--------|-----------|--------|--------|--------|----------|--------|--------|--------|-----------|--------|
|                    |   | 2010   |      |   | 2009     |   |   | 2008   |   |   | 2007      |   |   | 2006   |   |
|                    |   |   |      |   | Percent  |   |   |   |   |   | Percent   |   |   |   |   |   | Percent  |   |      |   |   |   | Percent  |   |   |   |      |   | Percent |   |
| Dollars in thousands    |   | Amount |      |   | of Total |   |   | Amount |   |   | of Total  |   |   | Amount |   |   | of Total |   |      | Amount |   |   | of Total |   |   | Amount |      |   | of Total |   |
|                    |   |   |      |   |     |   |   |   |   |   |      |   |   |   |   |   |     |   |      |   |   |   |     |   |   |   |      |   |   |   |
| Commercial              |   | $      | 97,261    |   |     |   | 9.6    | %      |   | $      | 122,508   |   |   |   | 10.6   | %      |     | $      | 130,106   |   |   |   | 10.7     | %      |   | $      | 92,599    |   |   |   | 8.7 | % |   | $ | 69,470 |   |   |   | 7.5 | % |
| Commercial real estate  |   |   | 423,011   |   |     |   | 41.7   | %      |   |   | 465,037   |   |   |   | 40.2   | %      |     |   | 452,264   |   |   |   | 37.3     | %      |   |   | 384,478   |   |   |   | 36.1 | % |   |   | 314,198 |   |   |   | 34.0 | % |
| Construction and        |   |   |      |   |     |   |   |   |   |   |      |   |   |   |   |   |     |   |      |   |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| development             |   |   | 112,840   |   |     |   | 11.1   | %      |   |   | 162,080   |   |   |   | 14.1   | %      |     |   | 215,465   |   |   |   | 17.9     | %      |   |   | 225,270   |   |   |   | 21.3 | % |   |   | 215,820 |   |   |   | 23.3 | % |
| Residential mortgage    |   |   | 352,328   |   |     |   | 34.7   | %      |   |   | 372,867   |   |   |   | 32.2   | %      |     |   | 376,026   |   |   |   | 31.0     | %      |   |   | 322,640   |   |   |   | 30.3 | % |   |   | 282,512 |   |   |   | 30.5 | % |
| Consumer                |   |   | 23,886    |   |     |   | 2.4    | %      |   |   | 28,203    |   |   |   | 2.4    | %      |     |   | 31,519    |   |   |   | 2.6      | %      |   |   | 31,956    |   |   |   | 3.0 | % |   |   | 36,455 |   |   |   | 3.9 | % |
| Other                   |   |   | 4,840     |   |     |   | 0.5    | %      |   |   | 5,652     |   |   |   | 0.5    | %      |     |   | 6,061     |   |   |   | 0.5      | %      |   |   | 6,641     |   |   |   | 0.6 | % |   |   | 6,969 |   |   |   | 0.8 | % |
|                    |   |   |      |   |     |   |   |   |   |   |      |   |   |   |   |   |     |   |      |   |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans             |   | $      | 1,014,166 |   |     |   | 100.0  | %      |   | $      | 1,156,347 |   |   |   | 100.0  | %      |     | $      | 1,211,441 |   |   |   | 100.0    | %      |   | $      | 1,063,584 |   |   |   | 100.0 | % |   | $ | 925,424 |   |   |   | 100.0 | % |

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Table of Contents

| Table VI - Securities Maturity Analysis                              |   |
|----------------------------------------------------------------------|--------|
|                                                                 |   |   |   |   |   |   |   | After one |   |   | After five |   |   |   |   |   |   |   |
|                                                                 |   | Within |   |   | but within |   |   | but within |   |   | After |   |
|                                                                 |   | one year |   |   | five years |   |   | ten years |   |   | ten years |   |
|  (At amortized cost, dollars in thousands)                      |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  U. S. Government agencies                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     and corporations                             |   | $ | 2,191 |   |   |   | 4.1 | % |   | $ | 5,578 |   |   |   | 3.5 | % |   | $ | 8,309 |   |   |   | 3.0 | % |   | $ | 14,566 |   |   |   | 3.2 | % |
|  Residential mortgage backed securities:                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Government sponsored agencies    |   |   | 57,478 |   |   |   | 4.3 | % |   |   | 55,776 |   |   |   | 3.6 | % |   |   | 3,604 |   |   |   | 4.4 | % |   |   | 2,750 |   |   |   | 4.6 | % |
|       Nongovernment sponsored entities |   |   | 15,034 |   |   |   | 6.1 | % |   |   | 33,178 |   |   |   | 6.3 | % |   |   | 7,697 |   |   |   | 6.0 | % |   |   | 4,348 |   |   |   | 7.9 | % |
|  State and political                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     subdivisions                                 |   |   | 365 |   |   |   | - |   |   |   | 5,403 |   |   |   | 6.7 | % |   |   | 5,851 |   |   |   | 6.3 | % |   |   | 47,567 |   |   |   | 5.7 | % |
|  Corporate debt securities                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 999 |   |   |   | 6.0 | % |   |   | - |   |   |   | - |   |
|  Other                                                          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 77 |   |   |   | - |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total                                                          |   | $ | 75,068 |   |   |   | 4.7 | % |   | $ | 99,935 |   |   |   | 4.7 | % |   | $ | 26,460 |   |   |   | 4.9 | % |   | $ | 69,308 |   |   |   | 5.3 | % |

| Table VII - Deposits           |   |   |      |   |   |   |      |   |   |   |    |   |   |   |    |
|--------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|---------|--------|--------|--------|---------|
| Dollars in thousands           |   | 2010   |      |   | 2009   |   |      | 2008   |   |   | 2007    |   |   | 2006   |    |
| Noninterest bearing demand     |   | $      | 74,604    |   |   | $      | 74,119    |   |   | $      | 69,808  |   |   | $      | 65,727  |   |   | $ | 62,591 |   |
| Interest bearing demand        |   |   | 150,291   |   |   |   | 148,587   |   |   |   | 156,990 |   |   |   | 222,825 |   |   |   | 220,167 |   |
| Savings                        |   |   | 177,053   |   |   |   | 188,419   |   |   |   | 61,689  |   |   |   | 40,845  |   |   |   | 47,984 |   |
| Certificates of deposit        |   |   | 367,040   |   |   |   | 328,858   |   |   |   | 347,444 |   |   |   | 291,294 |   |   |   | 249,952 |   |
| Individual Retirement Accounts |   |   | 37,664    |   |   |   | 35,541    |   |   |   | 33,330  |   |   |   | 31,605  |   |   |   | 28,370 |   |
| Retail deposits                |   |   | 806,652   |   |   |   | 775,524   |   |   |   | 669,261 |   |   |   | 652,296 |   |   |   | 609,064 |   |
| Wholesale deposits             |   |   | 230,287   |   |   |   | 241,814   |   |   |   | 296,589 |   |   |   | 176,391 |   |   |   | 279,623 |   |
| Total deposits                 |   | $      | 1,036,939 |   |   | $      | 1,017,338 |   |   | $      | 965,850 |   |   | $      | 828,687 |   |   | $ | 888,687 |   |

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Table of Contents

| Table VIII - Nonperforming Assets                  |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                               |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Dollars in thousands                               |   | 2010   |   |   | 2009   |   |    | 2008   |   |   | 2007   |   |   | 2006   |   |
|  Accruing loans past due 90 days or more:     |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
|  Commercial                                   |   | $      | -      |   |   | $      | 23      |   |   | $      | -      |   |   | $      | 702    |   |   | $ | 34 |   |
|  Commercial real estate                       |   |   | -      |   |   |   | -       |   |   |   | -      |   |   |   | 2,821  |   |   |   | 137 |   |
|  Commercial construction & development    |   |   | -      |   |   |   | -       |   |   |   | 1,015  |   |   |   | -      |   |   |   | - |   |
|  Residential construction & development   |   |   | -      |   |   |   | -       |   |   |   | -      |   |   |   | 1,919  |   |   |   | 3,971 |   |
|  Residential real estate                      |   |   | 1,442  |   |   |   | 156     |   |   |   | 2      |   |   |   | 1,765  |   |   |   | 425 |   |
|  Consumer                                     |   |   | -      |   |   |   | 20      |   |   |   | 22     |   |   |   | 209    |   |   |   | 70 |   |
|  Other                                        |   |   | -      |   |   |   | 2       |   |   |   | -      |   |   |   | -      |   |   |   | 1 |   |
|  Total 90+ days past due                      |   |   | 1,442  |   |   |   | 201     |   |   |   | 1,039  |   |   |   | 7,416  |   |   |   | 4,638 |   |
|  Nonaccrual loans:                            |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Commercial                                   |   |   | 1,318  |   |   |   | 408     |   |   |   | 198    |   |   |   | 14     |   |   |   | 24 |   |
|  Commercial real estate                       |   |   | 2,686  |   |   |   | 35,217  |   |   |   | 24,323 |   |   |   | 1,524  |   |   |   | - |   |
|  Commercial construction & development    |   |   | -      |   |   |   | 11,553  |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
|  Residential construction & development   |   |   | 10,049 |   |   |   | 14,775  |   |   |   | 17,368 |   |   |   | 98     |   |   |   | - |   |
|  Residential real estate                      |   |   | 6,075  |   |   |   | 4,407   |   |   |   | 4,983  |   |   |   | 1,247  |   |   |   | 584 |   |
|  Consumer                                     |   |   | 141    |   |   |   | 381     |   |   |   | 58     |   |   |   | 34     |   |   |   | 30 |   |
|  Total nonaccrual loans                       |   |   | 20,269 |   |   |   | 66,741  |   |   |   | 46,930 |   |   |   | 2,917  |   |   |   | 638 |   |
|  Foreclosed properties:                       |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Commercial                                   |   |   | 597    |   |   |   | -       |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
|  Commercial real estate                       |   |   | 14,745 |   |   |   | 4,788   |   |   |   | 875    |   |   |   | 430    |   |   |   | - |   |
|  Commercial construction & development    |   |   | 17,021 |   |   |   | 2,028   |   |   |   | 180    |   |   |   | 525    |   |   |   | - |   |
|  Residential construction & development   |   |   | 34,377 |   |   |   | 30,230  |   |   |   | 6,575  |   |   |   | 391    |   |   |   | - |   |
|  Residential real estate                      |   |   | 3,495  |   |   |   | 3,247   |   |   |   | 480    |   |   |   | 712    |   |   |   | 41 |   |
|  Consumer                                     |   |   | -      |   |   |   | -       |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
|  Total foreclosed properties                  |   |   | 70,235 |   |   |   | 40,293  |   |   |   | 8,110  |   |   |   | 2,058  |   |   |   | 41 |   |
|  Repossessed assets                           |   |   | 289    |   |   |   | 269     |   |   |   | 3      |   |   |   | -      |   |   |   | 36 |   |
|  Total nonperforming assets                   |   | $      | 92,235 |   |   | $      | 107,504 |   |   | $      | 56,082 |   |   | $      | 12,391 |   |   | $ | 5,353 |   |
|                                               |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total nonperforming loans as a               |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     percentage of total loans  |   |   | 2.14   | %      |   |   | 5.79    | %      |   |   | 3.97   | %      |   |   | 0.97   | % |   |   | 0.57 | % |
|                                               |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total nonperforming assets as a              |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     percentage of total assets |   |   | 6.24   | %      |   |   | 6.78    | %      |   |   | 3.45   | %      |   |   | 0.86   | % |   |   | 0.43 | % |

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| Table IX - Significant Nonperforming Loan Relationships |                                                                                                                         |
|---------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|
| December 31, 2010                                       |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dollars in thousands                                    |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Location                                                | Underlying Collateral                                                                                                        | Loan Origination Date | Loan Nonaccrual Date |   | Loan Balance |   | Method Used to Measure Impairment |   | Most Recent Appraised Value |   |   |   | Amount Allocated to Allowance for Loan Losses |   |   | Amount Previously Charged-off |   |
|                                                    |
| Rockingham Co., VA & Hardy Co., WV                  | Residential subdivision & undeveloped acreage                                                                            | Nov. 2007 | Mar. 2009 |   | $ | 2,617 |   | Collateral value |   | $ | 3,034 |   |   | (1) |   | $ | - |   |   | $ | 1,102 |   |
| Loudoun Co., VA                                    | Commercial building                                                                                                          | Jan. 2009 | June 2010 |   | $ | 1,310 |   | Collateral value |   | $ | 1,265 |   |   | (1) |   | $ | 231 |   |   | $ | - |   |
| Jefferson Co., WV                                       | Residential building lots, single family residence & undeveloped acreage                                                 | Aug. 2006 & Dec. 2007 | Oct. 2010 |   | $ | 1,749 |   | Collateral value |   | $ | 1,341 |   |   | (1) |   | $ | 1,022 |   |   | $ | - |   |
| Berkeley Co., WV                                        | Residential subdivision & undeveloped acreage                                                                            | Sept. 2009 | Oct. 2010 |   | $ | 1,357 |   | Collateral value |   | $ | 525 |   |   | (1) |   | $ | 884 |   |   | $ | - |   |
| Western MD and Florida                                  | Residential development, undeveloped acreage, 2 residential condos, a single family residence and a residential building lot | Various 2003-2007 | June 2010 |   | $ | 5,832 |   | Collateral value |   | $ | 7,937 |   |   | (1) |   | $ | 1,266 |   |   | $ | - |   |
|                                                    |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) - Values are based upon recent external appraisal.  |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Table X - Internally Criticized Loans |   |                    |    |   |   |   |    |   |   |
|---------------------------------------|--------|-------------------------|---------|--------|--------|--------|---------|--------|--------|
|                                  |   | Balance at December 31, |    |
| Dollars in thousands                  |   | 2010                    |    |   | 2009   |   |    | 2008   |   |
| Commerical                            |   | $                       | 5,979   |   |   | $      | 6,413   |   |   | $ | 984 |   |
| Commercial real estate                |   |                    | 36,395  |   |   |   | 56,726  |   |   |   | 30,435 |   |
| Land development & construction   |   |                    | 34,751  |   |   |   | 38,279  |   |   |   | 60,589 |   |
| Residential real estate               |   |                    | 29,045  |   |   |   | 21,854  |   |   |   | 18,405 |   |
| Consumer                              |   |                    | 40      |   |   |   | -       |   |   |   | 633 |   |
| Total                                 |   | $                       | 106,210 |   |   | $      | 123,272 |   |   | $ | 111,046 |   |

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| Table XI - Allocation of the Allowance for Loan Losses |   |   |   |   |                                       |   |   |   |   |   |                                       |   |   |   |   |   |                                       |   |   |   |   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------------------------------------------|--------|--------|--------|--------|--------|--------------------------------------------|--------|--------|--------|--------|--------|--------------------------------------------|--------|--------|--------|--------|--------|
|                                                   |   |   |   |   |                                       |   |   |   |   |   |                                       |   |   |   |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | 2010   |   |   | 2009                                       |   |   | 2008   |   |   | 2007                                       |   |   | 2006   |   |
|  Dollars in thousands                             |   | Amount |   |   | % of loans in each category to total loans |   |   | Amount |   |   | % of loans in each category to total loans |   |   | Amount |   |   | % of loans in each category to total loans |   |   | Amount |   |   | % of loans in each category to total loans |   |   | Amount |   |   | % of loans in each category to total loans |   |
|  Commercial                                       |   | $      | 323    |   |                                       |   | 9.6    | %      |   | $      | 401                                        |   |   |   | 10.6   | %      |                                       | $      | 546    |   |   |   | 10.7 | % |   | $ | 543 |   |   |   | 8.7 | % |   | $ | 367 |   |   |   | 7.5 | % |
|  Commercial real estate                           |   |   | 4,049  |   |                                       |   | 41.7   | %      |   |   | 3,938                                      |   |   |   | 40.2   | %      |                                       |   | 4,705  |   |   |   | 37.4 | % |   |   | 3,254 |   |   |   | 36.1 | % |   |   | 3,088 |   |   |   | 34.0 | % |
|  Construction and development                     |   |   | 8,182  |   |                                       |   | 11.1   | %      |   |   | 8,747                                      |   |   |   | 14.0   | %      |                                       |   | 7,536  |   |   |   | 17.8 | % |   |   | 2,668 |   |   |   | 21.2 | % |   |   | 2,121 |   |   |   | 23.3 | % |
|  Residential real estate                          |   |   | 4,376  |   |                                       |   | 34.7   | %      |   |   | 3,626                                      |   |   |   | 32.3   | %      |                                       |   | 3,458  |   |   |   | 31.0 | % |   |   | 1,991 |   |   |   | 30.4 | % |   |   | 1,057 |   |   |   | 30.5 | % |
|  Consumer                                         |   |   | 263    |   |                                       |   | 2.4    | %      |   |   | 249                                        |   |   |   | 2.4    | %      |                                       |   | 427    |   |   |   | 2.6 | % |   |   | 451 |   |   |   | 3.0 | % |   |   | 561 |   |   |   | 3.9 | % |
|  Other                                            |   |   | 31     |   |                                       |   | 0.5    | %      |   |   | 39                                         |   |   |   | 0.5    | %      |                                       |   | 261    |   |   |   | 0.5 | % |   |   | 285 |   |   |   | 0.6 | % |   |   | 197 |   |   |   | 0.8 | % |
|  Unallocated                                      |   |   | -      |   |                                       |   | 0.0    | %      |   |   | -                                          |   |   |   | 0.0    | %      |                                       |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 120 |   |   |   | - |   |
|                                                   |   | $      | 17,224 |   |                                       |   | 100.0  | %      |   | $      | 17,000                                     |   |   |   | 100.0  | %      |                                       | $      | 16,933 |   |   |   | 100.0 | % |   | $ | 9,192 |   |   |   | 100.0 | % |   | $ | 7,511 |   |   |   | 100.0 | % |

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| TABLE XII - ALLOWANCE FOR LOAN LOSSES                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Dollars in thousands                                       |   | 2010   |   |   | 2009   |   |   | 2008   |   |   | 2007   |   |   | 2006 |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Balance, beginning of year                           |   | $      | 17,000 |   |   | $      | 16,933 |   |   | $      | 9,192  |   |   | $ | 7,511 |   |   | $ | 6,112 |   |
|   Losses:                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Commercial                   |   |   | 601    |   |   |   | 479    |   |   |   | 198    |   |   |   | 50 |   |   |   | 32 |   |
|       Commercial real estate       |   |   | 9,239  |   |   |   | 469    |   |   |   | 1,131  |   |   |   | 154 |   |   |   | 185 |   |
|       Construction and development |   |   | 7,937  |   |   |   | 16,946 |   |   |   | 4,529  |   |   |   | 80 |   |   |   |   |   |
|       Residential real estate      |   |   | 3,836  |   |   |   | 3,921  |   |   |   | 1,608  |   |   |   | 618 |   |   |   | 35 |   |
|       Consumer                     |   |   | 279    |   |   |   | 214    |   |   |   | 375    |   |   |   | 216 |   |   |   | 200 |   |
|       Other                        |   |   | 233    |   |   |   | 231    |   |   |   | 203    |   |   |   | 160 |   |   |   | 289 |   |
|   Total                                                |   |   | 22,125 |   |   |   | 22,260 |   |   |   | 8,044  |   |   |   | 1,278 |   |   |   | 741 |   |
|   Recoveries:                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Commercial                   |   |   | 38     |   |   |   | 129    |   |   |   | 4      |   |   |   | 2 |   |   |   | 1 |   |
|       Commercial real estate       |   |   | 273    |   |   |   | 23     |   |   |   | 17     |   |   |   | 13 |   |   |   | 46 |   |
|       Construction and development |   |   | 331    |   |   |   | 1,615  |   |   |   | -      |   |   |   | 20 |   |   |   | - |   |
|       Residential real estate      |   |   | 164    |   |   |   | 29     |   |   |   | 64     |   |   |   | 15 |   |   |   | 7 |   |
|       Consumer                     |   |   | 87     |   |   |   | 90     |   |   |   | 72     |   |   |   | 58 |   |   |   | 62 |   |
|       Other                        |   |   | 106    |   |   |   | 116    |   |   |   | 128    |   |   |   | 104 |   |   |   | 179 |   |
|   Total                                                |   |   | 999    |   |   |   | 2,002  |   |   |   | 285    |   |   |   | 212 |   |   |   | 295 |   |
|   Net losses                                           |   |   | 21,126 |   |   |   | 20,258 |   |   |   | 7,759  |   |   |   | 1,066 |   |   |   | 446 |   |
|   Provision for loan losses                            |   |   | 21,350 |   |   |   | 20,325 |   |   |   | 15,500 |   |   |   | 2,055 |   |   |   | 1,845 |   |
|   Reclassification of reserves related to loans        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   previously reflected in discontinued operations      |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 692 |   |   |   | - |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Balance, end of year                                 |   | $      | 17,224 |   |   | $      | 17,000 |   |   | $      | 16,933 |   |   | $ | 9,192 |   |   | $ | 7,511 |   |

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| ·   | Would have limited amounts of maturing brokered deposits to replace in the short-term, as we have limited our brokered deposits maturing in any one quarter to no more than $50 million. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Presently has $371 million in available sources of liquid funds which could be drawn upon to fund maturing brokered deposits until Summit Community had restored its capital to well capitalized status. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Would first seek to restore its capital to well capitalized status through capital contributions from Summit, its parent holding company.  Summit has present cash reserves in excess of $4 million available for capital infusion into Summit Community. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Would generally have no more than $100 million in brokered deposits maturing in any one year time frame, which is well within its presently available sources of liquid funds, if in the event Summit does not have the capital resources to restore Summit Community’s capital to well capitalized status.  One year would give Summit Community ample time to raise alternative funds either through retail deposits or the sale of assets, and obtain capital resources to restore it to well capitalized status. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Would severely curtail lending and other growth activities until such time as access to this line could be restored, thus eliminating the need for net new advances. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Would still have available current liquid funding sources totaling $113 million aside from its FHLB line and, |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | In addition, would have available currently almost $64 million unpledged government agency securities (debentures and mortgage backed securities) that are available for use in repurchase arrangements with institutional broker and would result in a funding source of at least $51 million to meet unforeseen liquidity needs. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Presently has $371 million in available sources of liquid funds which could be drawn upon immediately to fund any “net run off” of deposits from this activity. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Would severely curtail lending and other growth activities so as to preserve the availability of as much contingency funds as possible. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Would begin offering its own competitive deposit program when deemed prudent so as to restore the retail deposits lost to the competition. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | The Bank achieving and maintaining a minimum Tier 1 leverage capital ratio of at least 8% and a total risk-based capital ratio of at least 11%; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Bank providing 30 days prior notice of any declaration of intent to pay cash dividends to provide the Bank’s regulatory authorities an opportunity to object; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Summit suspending all cash dividends on its common stock until further notice.  Dividends on all preferred stock, as well as interest payments on subordinated notes underlying Summit’s trust preferred securities, continue to be permissible; and, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Summit not incurring any additional debt, other than trade payables, without the prior written consent of the principal banking regulators. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Review overall liquidity objectives and develop and submit to regulatory authorities plans and procedures aimed to improve liquidity and reduce reliance on volatile liabilities; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Perform a risk segmentation analysis of concentrations of credit and develop plan to reduce any segment of the portfolio which regulatory authorities deem to be an undue concentration of credit. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Table XIII - Contractual Cash Obligations |   |                                       |    |   |
|-------------------------------------------|--------|--------------------------------------------|---------|--------|
|                                      |   |                                       |    |   |   |   |
| Dollars in thousands                      |   | Long Term Debt and Subordinated Debentures |    |   | Operating Leases |   |
| 2011                                      |   |                                       | 35,395  |   |   |   | 199 |   |
| 2012                                      |   |                                       | 66,720  |   |   |   | 150 |   |
| 2013                                      |   |                                       | 41,885  |   |   |   | 138 |   |
| 2014                                      |   |                                       | 83,416  |   |   |   | 125 |   |
| 2015                                      |   |                                       | 11,894  |   |   |   | 21 |   |
| Thereafter                                |   |                                       | 101,188 |   |   |   | - |   |
| Total                                     |   | $                                          | 340,498 |   |   | $ | 633 |   |

| Table XIV - Off-Balance Sheet Arrangements                        |   |
|-------------------------------------------------------------------|--------|
|                                                              |   |   |   |
| Dollars in thousands                                              |   |   |   |
| Commitments to extend credit                                      |   |
|     Revolving home equity and                 |   |   |   |
|         credit card lines |   | $ | 43,848 |   |
|     Construction loans                        |   |   | 15,232 |   |
|     Other loans                               |   |   | 36,342 |   |
| Standby letters of credit                                         |   |   | 4,882 |   |
| Total                                                             |   | $ | 100,304 |   |

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Item 7A.

|                                                 |   |                      |   |   |           |   |
|------------------------------------------------------|--------|---------------------------|--------|--------|----------------|--------|
| Change in                                            |   | Estimated % Change in Net |   |
| Interest Rates                                       |   | Interest Income Over:     |   |
| (basis points)                                       |   | 0 - 12 Months             |   |   | 13 - 24 Months |   |
| Down 100 (1)                                         |   |                      | 1.00   | %      |           |   | 8.10 | % |
| Up 100 (1)                                           |   |                      | -1.75  | %      |           |   | 4.57 | % |
| Up 200 (1)                                           |   |                      | -3.39  | %      |           |   | 2.20 | % |
| Up 400 (2)                                           |   |                      | -3.36  | %      |           |   | 1.05 | % |
|                                                 |   |                      |   |   |           |   |   |   |
| (1) assumes a parallel shift in the yield curve |   |                      |   |   |           |
| (2) assumes 400 bp increase over 24 months      |   |                      |   |   |           |

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| /s/ H. Charles Maddy, III | /s/ Robert S. Tissue              |  /s/ Julie R. Cook      |
|---------------------------|-----------------------------------|------------------------------|
| President and        | Senior Vice President        | Vice President               |
| Chief Executive Officer   | and Chief Financial Officer  | and Chief Accounting Officer |

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Item 8.

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|                                                                                                           |   | December 31, |      |
|----------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|
|  Dollars in thousands                                                                                     |   | 2010         |      |   | 2009 |   |
|                                                                                                           |   |         |      |   |   |   |
|  ASSETS                                                                                                   |   |         |      |   |   |   |
|  Cash and due from banks                                                                                  |   | $            | 4,652     |   |   | $ | 6,813 |   |
|  Interest bearing deposits with other banks                                                               |   |         | 45,696    |   |   |   | 34,247 |   |
|  Securities available for sale                                                                            |   |         | 271,730   |   |   |   | 271,654 |   |
|  Other investments                                                                                        |   |         | 22,941    |   |   |   | 24,008 |   |
|  Loan held for sale, net                                                                                  |   |         | 343       |   |   |   | 1 |   |
|  Loans, net                                                                                               |   |         | 995,319   |   |   |   | 1,137,336 |   |
|  Property held for sale, net                                                                              |   |         | 70,235    |   |   |   | 40,293 |   |
|  Premises and equipment, net                                                                              |   |         | 23,092    |   |   |   | 24,234 |   |
|  Accrued interest receivable                                                                              |   |         | 5,879     |   |   |   | 6,323 |   |
|  Intangible assets                                                                                        |   |         | 9,002     |   |   |   | 9,353 |   |
|  Other assets                                                                                             |   |         | 29,581    |   |   |   | 30,363 |   |
|  Total assets                                                                                             |   | $            | 1,478,470 |   |   | $ | 1,584,625 |   |
|                                                                                                           |   |         |      |   |   |   |   |   |
|  LIABILITIES AND SHAREHOLDERS' EQUITY                                                                     |   |         |      |   |   |   |   |   |
|  Liabilities                                                                                              |   |         |      |   |   |   |   |   |
|      Deposits                                                                         |   |         |      |   |   |   |   |   |
|          Non-interest bearing                                     |   | $            | 74,604    |   |   | $ | 74,119 |   |
|          Interest bearing                                         |   |         | 962,335   |   |   |   | 943,219 |   |
|       Total deposits                                                             |   |         | 1,036,939 |   |   |   | 1,017,338 |   |
|      Short-term borrowings                                                            |   |         | 1,582     |   |   |   | 49,739 |   |
|      Long-term borrowings                                                             |   |         | 304,109   |   |   |   | 381,492 |   |
|      Subordinated debentures                                                          |   |         | 16,800    |   |   |   | 16,800 |   |
|      Subordinated debentures owed to unconsolidated subsidiary trusts                 |   |         | 19,589    |   |   |   | 19,589 |   |
|      Other liabilities                                                                |   |         | 9,630     |   |   |   | 9,007 |   |
|       Total liabilities                                                          |   |         | 1,388,649 |   |   |   | 1,493,965 |   |
|  Commitments and Contingencies                                                                            |   |         |      |   |   |   |   |   |
|                                                                                                           |   |         |      |   |   |   |   |   |
|  Shareholders' Equity                                                                                     |   |         |      |   |   |   |   |   |
|      Preferred stock and related surplus, $1.00 par value; authorized 250,000 shares; |   |         |      |   |   |   |   |   |
|           3,710 shares issued 2010 and 2009                  |   |         | 3,519     |   |   |   | 3,519 |   |
|      Common stock and related surplus, $2.50 par value; authorized 20,000,000;        |   |         |      |   |   |   |   |   |
|           issued 2010 and 2009 - 7,425,472 shares            |   |         | 24,508    |   |   |   | 24,508 |   |
|      Retained earnings                                                                |   |         | 61,201    |   |   |   | 63,474 |   |
|      Accumulated other comprehensive income                                           |   |         | 593       |   |   |   | (841 | ) |
|       Total shareholders' equity                                                 |   |         | 89,821    |   |   |   | 90,660 |   |
|                                                                                                           |   |         |      |   |   |   |   |   |
|   Total liabilities and shareholders' equity                                                         |   | $            | 1,478,470 |   |   | $ | 1,584,625 |   |

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|                                                                                                                                                                                                      |   |                            |   |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Dollars in thousands (except per share amounts)                                                                                                                                                           |   | For the Year Ended December 31, |   |
|                                                                                                                                                                                                      |   | 2010                            |   |   | 2009   |   |   | 2008   |   |
|  Interest income                                                                                                                                                                                     |   |                            |   |   |   |   |   |   |   |
|      Interest and fees on loans                                                                                                                                                  |   |                            |   |   |   |   |   |   |   |
|          Taxable                                                                                                                                             |   | $                               | 65,643 |   |   | $      | 71,405 |   |   | $ | 77,055 |   |
|          Tax-exempt                                                                                                                                          |   |                            | 314    |   |   |   | 439    |   |   |   | 460 |   |
|      Interest and dividends on securities                                                                                                                                        |   |                            |   |   |   |   |   |   |   |   |   |   |
|          Taxable                                                                                                                                             |   |                            | 11,922 |   |   |   | 15,601 |   |   |   | 13,707 |   |
|          Tax-exempt                                                                                                                                          |   |                            | 1,762  |   |   |   | 2,079  |   |   |   | 2,254 |   |
|      Interest on interest bearing deposits with other banks                                                                                                                      |   |                            | 31     |   |   |   | 12     |   |   |   | 4 |   |
|      Interest on Federal Funds sold                                                                                                                                              |   |                            | -      |   |   |   | -      |   |   |   | 4 |   |
|                  Total interest income                                                                               |   |                            | 79,672 |   |   |   | 89,536 |   |   |   | 93,484 |   |
|  Interest expense                                                                                                                                                                                    |   |                            |   |   |   |   |   |   |   |   |   |   |
|      Interest on deposits                                                                                                                                                        |   |                            | 21,036 |   |   |   | 24,951 |   |   |   | 27,343 |   |
|      Interest on short-term borrowings                                                                                                                                           |   |                            | 80     |   |   |   | 573    |   |   |   | 2,392 |   |
|      Interest on long-term borrowings and subordinated debentures                                                                                                                |   |                            | 18,404 |   |   |   | 20,470 |   |   |   | 19,674 |   |
|                  Total interest expense                                                                              |   |                            | 39,520 |   |   |   | 45,994 |   |   |   | 49,409 |   |
|                  Net interest income                                                                                 |   |                            | 40,152 |   |   |   | 43,542 |   |   |   | 44,075 |   |
|      Provision for loan losses                                                                                                                                                   |   |                            | 21,350 |   |   |   | 20,325 |   |   |   | 15,500 |   |
|                  Net interest income after provision for loan losses                                                 |   |                            | 18,802 |   |   |   | 23,217 |   |   |   | 28,575 |   |
|  Noninterest income                                                                                                                                                                                  |   |                            |   |   |   |   |   |   |   |   |   |   |
|      Insurance commissions                                                                                                                                                       |   |                            | 4,744  |   |   |   | 5,045  |   |   |   | 5,139 |   |
|      Service fees                                                                                                                                                                |   |                            | 3,039  |   |   |   | 3,330  |   |   |   | 3,246 |   |
|      Realized securities gains (losses)                                                                                                                                          |   |                            | 2,051  |   |   |   | 1,497  |   |   |   | (6 | ) |
|      Net cash settlement on interest rate swaps                                                                                                                                  |   |                            | -      |   |   |   | -      |   |   |   | (170 | ) |
|      Change in fair value of interest rate swaps                                                                                                                                 |   |                            | -      |   |   |   | -      |   |   |   | 705 |   |
|      Gain (loss) on sale of assets                                                                                                                                               |   |                            | 142    |   |   |   | (112   | )      |   |   | 126 |   |
|      Writedown of OREO                                                                                                                                                           |   |                            | (3,401 | )      |   |   | -      |   |   |   | - |   |
|      Other                                                                                                                                                                       |   |                            | 1,634  |   |   |   | 1,406  |   |   |   | 888 |   |
|      Total other-than-temporary impairment loss on securities                                                                                                                    |   |                            | (1,816 | )      |   |   | (5,892 | )      |   |   | (7,060 | ) |
|      Portion of loss recognized in other comprehensive income                                                                                                                    |   |                            | 828    |   |   |   | 526    |   |   |   | - |   |
|      Net impairment loss recognized in earnings                                                                                                                                  |   |                            | (988   | )      |   |   | (5,366 | )      |   |   | (7,060 | ) |
|                  Total noninterest income                                                                            |   |                            | 7,221  |   |   |   | 5,800  |   |   |   | 2,868 |   |
|  Noninterest expenses                                                                                                                                                                                |   |                            |   |   |   |   |   |   |   |   |   |   |
|      Salaries and employee benefits                                                                                                                                              |   |                            | 15,133 |   |   |   | 15,908 |   |   |   | 16,762 |   |
|      Net occupancy expense                                                                                                                                                       |   |                            | 2,009  |   |   |   | 2,032  |   |   |   | 1,870 |   |
|      Equipment expense                                                                                                                                                           |   |                            | 2,457  |   |   |   | 2,151  |   |   |   | 2,173 |   |
|      Supplies                                                                                                                                                                    |   |                            | 481    |   |   |   | 967    |   |   |   | 925 |   |
|      Professional fees                                                                                                                                                           |   |                            | 1,015  |   |   |   | 1,409  |   |   |   | 723 |   |
|      Amortization of intangibles                                                                                                                                                 |   |                            | 351    |   |   |   | 351    |   |   |   | 351 |   |
|      FDIC premiums                                                                                                                                                               |   |                            | 2,870  |   |   |   | 3,223  |   |   |   | 744 |   |
|      OREO expense                                                                                                                                                                |   |                            | 1,577  |   |   |   | 478    |   |   |   | 142 |   |
|      Other                                                                                                                                                                       |   |                            | 5,060  |   |   |   | 5,379  |   |   |   | 5,744 |   |
|                  Total noninterest expenses                                                                          |   |                            | 30,953 |   |   |   | 31,898 |   |   |   | 29,434 |   |
|  Income (loss) before income tax expense                                                                                                                                                             |   |                            | (4,930 | )      |   |   | (2,881 | )      |   |   | 2,009 |   |
|      Income tax expense (benefit)                                                                                                                                                |   |                            | (2,955 | )      |   |   | (2,165 | )      |   |   | (291 | ) |
|                           Net income (loss)                             |   |                            | (1,975 | )      |   |   | (716   | )      |   |   | 2,300 |   |
|  Dividends on preferred shares                                                                                                                                                                       |   |                            | 297    |   |   |   | 74     |   |   |   | - |   |
|                           Net income (loss) applicable to common shares |   | $                               | (2,272 | )      |   | $      | (790   | )      |   | $ | 2,300 |   |
|                                                                                                                                                                                                      |   |                            |   |   |   |   |   |   |   |   |   |   |
|  Basic earnings per common share                                                                                                                                                                     |   | $                               | (0.31  | )      |   | $      | (0.11  | )      |   | $ | 0.31 |   |
|                                                                                                                                                                                                      |   |                            |   |   |   |   |   |   |   |   |   |   |
|  Diluted earnings per common share                                                                                                                                                                   |   | $                               | (0.31  | )      |   | $      | (0.11  | )      |   | $ | 0.31 |   |

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|                                                                                                                  |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |
|-----------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|---------|--------|------------|--------|---------|----------|--------|--------|---------------|--------|--------|---------------|---------|
|                                                                                                                  |   | Preferred |   |   | Common    |    |   |       |   |    |     |   |   | Accumulated   |   |   |          |    |
|                                                                                                                  |   | Stock and |   |   | Stock and |    |   |       |   |    |     |   |   | Other         |   |   | Total         |    |
|                                                                                                                  |   | Related   |   |   | Related   |    |   | Retained   |   |    | Treasury |   |   | Comprehensive |   |   | Shareholders' |    |
|  Dollars in thousands (except per share amounts)                                                                 |   | Surplus   |   |   | Surplus   |    |   | Earnings** |   |    | Stock    |   |   | Income (Loss) |   |   | Equity**      |    |
|  Balance, December 31, 2007                                                                                      |   |  $   | -      |   |      |  $ | 24,391 |       |   |  $ | 65,077   |   |   |  $       | -      |   |          |  $ | (48 | ) |   |  $ | 89,420 |   |
|  Comprehensive income:                                                                                           |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|    Net income                                                                                          |   |      | -      |   |      |    | -      |       |   |    | 2,300    |   |   |          | -      |   |          |    | - |   |   |   | 2,300 |   |
|    Other comprehensive income,                                                                         |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|      net of deferred tax benefit of $1,146:                                                  |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|      Net unrealized loss on securities of $3,016, net                                        |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|        of reclassification adjustment for losses included                          |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|        in net income of $6                                                         |   |      | -      |   |      |    | -      |       |   |    | -        |   |   |          | -      |   |          |    | (1,870 | ) |   |   | (1,870 | ) |
|      Total comprehensive income                                                              |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   | 430 |   |
|  Exercise of stock options                                                                                       |   |      | -      |   |      |    | 15     |       |   |    | -        |   |   |          | -      |   |          |    | - |   |   |   | 15 |   |
|  Stock compensation expense                                                                                      |   |      | -      |   |      |    | 12     |       |   |    | -        |   |   |          | -      |   |          |    | - |   |   |   | 12 |   |
|  Repurchase of common stock                                                                                      |   |      | -      |   |      |    | 35     |       |   |    | -        |   |   |          | -      |   |          |    | - |   |   |   | 35 |   |
|  Cash dividends declared ($0.36 per share)                                                                       |   |      | -      |   |      |    | -      |       |   |    | (2,668   | )      |   |          | -      |   |          |    | - |   |   |   | (2,668 | ) |
|  Balance, December 31, 2008                                                                                      |   |      | -      |   |      |    | 24,453 |       |   |    | 64,709   |   |   |          | -      |   |          |    | (1,918 | ) |   |   | 87,244 |   |
|  Comprehensive income:                                                                                           |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|    Net loss                                                                                            |   |      | -      |   |      |    | -      |       |   |    | (716     | )      |   |          | -      |   |          |    | - |   |   |   | (716 | ) |
|    Other comprehensive income:                                                                         |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|        Non-credit related other-than-temporary                                     |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|             impairment on debt securities of $75, net of  |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|             deferred tax benefit of $28                   |   |      | -      |   |      |    | -      |       |   |    | -        |   |   |          | -      |   |          |    | 47 |   |   |   | 47 |   |
| Net unrealized loss on securities of $1,663, net of deferred                                                          |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |
| tax benefit of $633 and reclassification adjustment for gains                                                         |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |
|            included in net income of $1,497                    |   |      | -      |   |      |    | -      |       |   |    | -        |   |   |          | -      |   |          |    | 1,030 |   |   |   | 1,030 |   |
|      Total comprehensive income                                                              |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   | 361 |   |
|  Exercise of stock options                                                                                       |   |      | -      |   |      |    | 55     |       |   |    | -        |   |   |          | -      |   |          |    | - |   |   |   | 55 |   |
|  Issuance of 3,710 shares of preferred stock                                                                     |   |      | 3,519  |   |      |    | -      |       |   |    | -        |   |   |          | -      |   |          |    | - |   |   |   | 3,519 |   |
|  Preferred stock cash dividends declared ($20.00 per share)                                                      |   |      | -      |   |      |    | -      |       |   |    | (74      | )      |   |          | -      |   |          |    | - |   |   |   | (74 | ) |
|  Common stock cash dividends declared ($0.06 per share)                                                          |   |      | -      |   |      |    | -      |       |   |    | (445     | )      |   |          | -      |   |          |    | - |   |   |   | (445 | ) |
|  Balance, December 31, 2009                                                                                      |   |      | 3,519  |   |      |    | 24,508 |       |   |    | 63,474   |   |   |          | -      |   |          |    | (841 | ) |   |   | 90,660 |   |
|  Comprehensive income:                                                                                           |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|    Net loss                                                                                            |   |      | -      |   |      |    | -      |       |   |    | (1,975   | )      |   |          | -      |   |          |    | - |   |   |   | (1,975 | ) |
|    Other comprehensive income:                                                                         |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|        Non-credit related other-than-temporary                                     |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|             impairment on debt securities of $828, net of |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |
|             deferred tax benefit of $315                  |   |      | -      |   |      |    | -      |       |   |    | -        |   |   |          | -      |   |          |    | (513 | ) |   |   | (513 | ) |
| Net unrealized loss on securities of $3,140, net of deferred                                                          |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   | -      |          |
| tax benefit of $1,193 and reclassification adjustment for gains                                                       |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |
|            included in net income of $2,051                    |   |      | -      |   |      |    | -      |       |   |    | -        |   |   |          | -      |   |          |    | 1,947 |   |   |   | 1,947 |   |
|      Total comprehensive income                                                              |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   | (541 | ) |
|  Preferred stock cash dividends declared ($20.00 per share)                                                      |   |      | -      |   |      |    | -      |       |   |    | (297     | )      |   |          | -      |   |          |    | - |   |   |   | (297 | ) |
|  Balance, December 31, 2010                                                                                      |   | $         | 3,519  |   |      | $       | 24,508 |       |   | $       | 61,201   |   |   | $             | -      |   |          | $       | 593 |   |   | $ | 89,821 |   |
|  **column may not add due to rounding                                                                            |   |      |   |   |      |    |   |       |   |    |     |   |   |          |   |   |          |    |   |   |   |   |   |   |

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|                                                                                                                              |   | For the Year Ended December 31, |     |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|----------|
|  Dollars in thousands                                                                                                        |   | 2010                            |     |   | 2009 |   |   | 2008 |   |
|  CASH FLOWS FROM OPERATING ACTIVITIES                                                                                        |   |                            |     |   |   |   |   |   |   |
|      Net income (loss)                                                                                   |   | $                               | (1,975   | ) |   | $ | (716 | ) |   | $ | 2,300 |   |
|      Adjustments to reconcile net earnings to net cash provided by operating activities:                 |   |                            |     |   |   |   |   |   |   |   |   |   |
|          Depreciation                                                                |   |                            | 1,566    |   |   |   | 1,600 |   |   |   | 1,602 |   |
|          Provision for loan losses                                                   |   |                            | 21,350   |   |   |   | 20,325 |   |   |   | 15,500 |   |
|          Stock compensation expense                                                  |   |                            | -        |   |   |   | - |   |   |   | 12 |   |
|          Deferred income tax expense (benefit)                                       |   |                            | (4,424   | ) |   |   | 1,272 |   |   |   | (5,745 | ) |
|          Loans originated for sale                                                   |   |                            | (9,778   | ) |   |   | (16,498 | ) |   |   | (5,961 | ) |
|          Proceeds from loans sold                                                    |   |                            | 9,437    |   |   |   | 17,508 |   |   |   | 6,420 |   |
|          (Gains) on loans sold                                                       |   |                            | -        |   |   |   | (34 | ) |   |   | (60 | ) |
|          Realized security (gains) losses                                            |   |                            | (2,051   | ) |   |   | (1,497 | ) |   |   | 6 |   |
|          Change in fair value of derivative instruments                              |   |                            | -        |   |   |   | - |   |   |   | (705 | ) |
|          Other-than-temporary losses on securities                                   |   |                            | 988      |   |   |   | 5,366 |   |   |   | 7,060 |   |
|          (Gain) loss on sale of assets                                               |   |                            | (142     | ) |   |   | 112 |   |   |   | (126 | ) |
|          Writedown of property held for sale                                         |   |                            | 3,401    |   |   |   | - |   |   |   | 196 |   |
|          Amortization of securities premiums (accretion of discounts), net           |   |                            | (620     | ) |   |   | (2,561 | ) |   |   | (519 | ) |
|          Amortization of goodwill and purchase accounting adjustments, net           |   |                            | 363      |   |   |   | 363 |   |   |   | 363 |   |
|          Tax benefit of exercise of stock options                                    |   |                            | -        |   |   |   | - |   |   |   | 6 |   |
|          (Increase) decrease in accrued interest receivable                          |   |                            | 444      |   |   |   | 894 |   |   |   | (26 | ) |
|          (Increase) decrease in other assets                                         |   |                            | 1,917    |   |   |   | (6,167 | ) |   |   | (2,533 | ) |
|          Increase in other liabilities                                          |   |                            | 623      |   |   |   | 348 |   |   |   | 2,575 |   |
|              Net cash provided by operating activities           |   |                            | 21,099   |   |   |   | 20,315 |   |   |   | 20,365 |   |
|  CASH FLOWS FROM INVESTING ACTIVITIES                                                                                        |   |                            |     |   |   |   |   |   |   |   |   |   |
|      Proceeds from maturities and calls of securities available for sale                                 |   |                            | 60,972   |   |   |   | 21,365 |   |   |   | 22,944 |   |
|      Proceeds from sales of securities available for sale                                                |   |                            | 50,893   |   |   |   | 45,543 |   |   |   | 1,141 |   |
|      Principal payments received on  securities available for sale                             |   |                            | 57,444   |   |   |   | 73,631 |   |   |   | 30,858 |   |
|      Purchases of securities available for sale                                                          |   |                            | (165,390 | ) |   |   | (84,166 | ) |   |   | (112,086 | ) |
|      Purchases of other investments                                                                      |   |                            | (2,998   | ) |   |   | (3,982 | ) |   |   | (15,232 | ) |
|      Redemption of Federal Home Bank Loan Stock                                                          |   |                            | 1,065    |   |   |   | - |   |   |   | 12,257 |   |
|      Proceeds from maturities and calls of other investments                                             |   |                            | 3,000    |   |   |   | 3,000 |   |   |   | - |   |
|      Net decrease in federal funds sold                                                                  |   |                            | -        |   |   |   | 2 |   |   |   | 179 |   |
|      Principal collected from (loans made to) customers, net                                             |   |                            | 71,571   |   |   |   | (777 | ) |   |   | (163,971 | ) |
|      Purchases of premises and equipment                                                                 |   |                            | (426     | ) |   |   | (3,409 | ) |   |   | (1,940 | ) |
|      Proceeds from sale of other repossessed assets & property held for sale                         |   |                            | 18,295   |   |   |   | 3,411 |   |   |   | 2,889 |   |
|      (Purchase of) interest bearing deposits with other banks                                            |   |                            | (11,449  | ) |   |   | (34,139 | ) |   |   | (31 | ) |
|      Purchases of life insurance contracts                                                               |   |                            | -        |   |   |   | (2,100 | ) |   |   | - |   |
|      Proceeds from early termination of interest rate swap                                               |   |                            | -        |   |   |   | - |   |   |   | 212 |   |
|              Net cash provided by (used in) investing activities |   |                            | 82,977   |   |   |   | 18,379 |   |   |   | (222,780 | ) |
|  CASH FLOWS FROM FINANCING ACTIVITIES                                                                                        |   |                            |     |   |   |   |   |   |   |   |   |   |
|      Net increase (decrease) in demand deposit, NOW and savings accounts                                 |   |                            | (9,176   | ) |   |   | 122,638 |   |   |   | (40,910 | ) |
|      Net increase (decrease) in time deposits                                                            |   |                            | 28,777   |   |   |   | (71,151 | ) |   |   | 178,071 |   |
|      Net (decrease) in short-term borrowings                                                             |   |                            | (48,157  | ) |   |   | (103,360 | ) |   |   | (18,955 | ) |
|      Proceeds from long-term borrowings                                                                  |   |                            | -        |   |   |   | 82,656 |   |   |   | 131,281 |   |
|      Repayments of long-term borrowings                                                                  |   |                            | (77,384  | ) |   |   | (83,911 | ) |   |   | (54,377 | ) |
|      Proceeds from issuance of subordinated debentures                                                   |   |                            | -        |   |   |   | 6,762 |   |   |   | - |   |
|      Net proceeds from issuance of preferred stock                                                       |   |                            | -        |   |   |   | 3,519 |   |   |   | - |   |
|      Exercise of stock options                                                                           |   |                            | -        |   |   |   | 43 |   |   |   | 9 |   |
|      Dividends paid                                                                                      |   |                            | -        |   |   |   | (445 | ) |   |   | (2,668 | ) |
|      Dividends paid on preferred stock                                                                   |   |                            | (297     | ) |   |   | - |   |   |   | - |   |
|      Reinvested dividends                                                                                     |   |                            | -        |   |   |   | 12 |   |   |   | 35 |   |
|          Net cash provided by (used in) financing activities                         |   |                            | (106,237 | ) |   |   | (43,237 | ) |   |   | 192,486 |   |
|      Increase (Decrease) in cash and due from banks                                                      |   |                            | (2,161   | ) |   |   | (4,543 | ) |   |   | (9,929 | ) |
|      Cash and due from banks:                                                                            |   |                            |     |   |   |   |   |   |   |   |   |   |
|          Beginning                                                                   |   |                            | 6,813    |   |   |   | 11,356 |   |   |   | 21,285 |   |
|          Ending                                                                      |   | $                               | 4,652    |   |   | $ | 6,813 |   |   | $ | 11,356 |   |

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|                                                                       |   | For the Year Ended December 31, |   |
|----------------------------------------------------------------------------|--------|---------------------------------|--------|
|  Dollars in thousands                                                 |   | 2010                            |   |   | 2009 |   |   | 2008 |   |
|  SUPPLEMENTAL DISCLOSURES OF CASH                                     |   |                            |   |   |   |   |   |   |   |
|      FLOW INFORMATION                             |   |                            |   |   |   |   |   |   |   |
|      Cash payments for:                           |   |                            |   |   |   |   |   |   |   |
|          Interest             |   | $                               | 40,537 |   |   | $ | 46,645 |   |   | $ | 49,347 |   |
|          Income taxes         |   | $                               | 275    |   |   | $ | 1,395 |   |   | $ | 4,190 |   |
|                                                                       |   |                            |   |   |   |   |   |   |   |   |   |   |
|  SUPPLEMENTAL SCHEDULE OF NONCASH                                     |   |                            |   |   |   |   |   |   |   |   |   |   |
|      INVESTING AND FINANCING ACTIVITIES           |   |                            |   |   |   |   |   |   |   |   |   |   |
|      Other assets acquired in settlement of loans |   | $                               | 49,095 |   |   | $ | 35,273 |   |   | $ | 8,802 |   |

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Table of Contents

| Fair Value Measurements                        | Note 3 | Page 54 |
|------------------------------------------------|-------------|---------|
| Securities                                     | Note 4      | Page 59 |
| Loans                                          | Note 5      | Page 63 |
| Allowance for Loan Losses                      | Note 6      | Page 69 |
| Property Held for Sale                         | Note 7      | Page 71 |
| Premises and Equipment                         | Note 8      | Page 71 |
| Intangible Assets                              | Note 9      | Page 71 |
| Securities Sold Under Agreements to Repurchase | Note 11     | Page 74 |
| Income Taxes                                   | Note 12     | Page 75 |
| Stock Based Compensation                       | Note 13     | Page 77 |
| Earnings Per Share                             | Note 18     | Page 82 |

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| NOTE 2. | SIGNIFICANT NEW AUTHORITATIVE ACCOUNTING GUIDANCE |
|---------|---------------------------------------------------|

|   | Level 1:  Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 2:   | Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. |
|--------|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Level 3:  Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                 |   | Balance at        |    |   | Fair Value Measurements Using: |   |
|----------------------------------------------------------------------|--------|-------------------|---------|--------|--------------------------------|--------|
| Dollars in thousands                                                 |   | December 31, 2010 |    |   | Level 1                        |   |   | Level 2 |   |   | Level 3 |   |
| Available for sale securities                                        |   |              |    |   |                           |   |   |   |   |   |   |   |
|    U.S. Government sponsored agencies                 |   | $                 | 30,665  |   |                           | $      | - |   |   | $ | 30,665 |   |   | $ | - |   |
|    Mortgage backed securities:                        |   |              |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|       Government sponsored agencies    |   |              | 123,037 |   |                           |   | - |   |   |   | 123,037 |   |   |   | - |   |
|       Nongovernment sponsored agencies |   |              | 59,267  |   |                           |   | - |   |   |   | 59,267 |   |   |   | - |   |
|    State and political subdivisions                   |   |              | 22,388  |   |                           |   | - |   |   |   | 22,388 |   |   |   | - |   |
|    Corporate debt securities                          |   |              | 949     |   |                           |   | - |   |   |   | 949 |   |   |   | - |   |
|    Other equity securities                            |   |              | 77      |   |                           |   | - |   |   |   | 77 |   |   |   | - |   |
|    Tax-exempt state and political subdivisions        |   |              | 35,347  |   |                           |   | - |   |   |   | 35,347 |   |   |   | - |   |
| Total available for sale securities                                  |   | $                 | 271,730 |   |                           | $      | - |   |   | $ | 271,730 |   |   | $ | - |   |

|                                                                 |   | Balance at        |    |   | Fair Value Measurements Using: |   |
|----------------------------------------------------------------------|--------|-------------------|---------|--------|--------------------------------|--------|
| Dollars in thousands                                                 |   | December 31, 2009 |    |   | Level 1                        |   |   | Level 2 |   |   | Level 3 |   |
| Available for sale securities                                        |   |              |    |   |                           |   |   |   |   |   |   |   |
|    U.S. Government sponsored agencies                 |   | $                 | 54,961  |   |                           | $      | - |   |   | $ | 54,961 |   |   | $ | - |   |
|    Mortgage backed securities:                        |   |              |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|       Government sponsored agencies    |   |              | 100,036 |   |                           |   | - |   |   |   | 100,036 |   |   |   | - |   |
|       Nongovernment sponsored agencies |   |              | 69,797  |   |                           |   | - |   |   |   | 69,797 |   |   |   | - |   |
|    State and political subdivisions                   |   |              | 3,792   |   |                           |   | - |   |   |   | 3,792 |   |   |   | - |   |
|    Corporate debt securities                          |   |              | 356     |   |                           |   | - |   |   |   | 356 |   |   |   | - |   |
|    Other equity securities                            |   |              | 77      |   |                           |   | - |   |   |   | 77 |   |   |   | - |   |
|    Tax-exempt state and political subdivisions        |   |              | 42,635  |   |                           |   | - |   |   |   | 42,635 |   |   |   | - |   |
| Total available for sale securities                                  |   | $                 | 271,654 |   |                           | $      | - |   |   | $ | 271,654 |   |   | $ | - |   |

|                                             |   | Available for |   |
|--------------------------------------------------|--------|---------------|--------|
|                                             |   | Sale          |   |
| Dollars in thousands                             |   | Securities    |   |
| Balance January 1, 2009                          |   | $             | 11,711 |   |
| Total realized/unrealized gains (losses):        |   |          |   |   |
| Included in earnings                             |   |          | (5,151 | ) |
| Included in other comprehensive income           |   |          | 4,401  |   |
| Purchases, sales, issuances and settlements, net |   |          | (970   | ) |
| Transfers between categories                     |   |          | (9,991 | ) |
| Balance December 31, 2009                        |   | $             | -      |   |
| Total realized/unrealized gains (losses):        |   |          |   |   |
| Included in earnings                             |   |          | -      |   |
| Included in other comprehensive income           |   |          | -      |   |
| Purchases, sales, issuances and settlements, net |   |          | -      |   |
| Transfers between categories                     |   |          | -      |   |
| Balance December 31, 2010                        |   | $             | -      |   |

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|                                                 |   | Balance at        |   |   | Fair Value Measurements Using: |   |
|------------------------------------------------------|--------|-------------------|--------|--------|--------------------------------|--------|
| Dollars in thousands                                 |   | December 31, 2010 |   |   | Level 1                        |   |   | Level 2 |   |   | Level 3 |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |
| Residential mortgage loans held for sale             |   | $                 | 343    |   |                           | $      | - |   |   | $ | 343 |   |   | $ | - |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans                                       |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial                         |   |              | 630    |   |                           |   | - |   |   |   | - |   |   |   | 630 |   |
|    Commercial real estate             |   |              | 16,408 |   |                           |   | - |   |   |   | 13,569 |   |   |   | 2,839 |   |
|    Construction and development       |   |              | 13,940 |   |                           |   | - |   |   |   | 11,251 |   |   |   | 2,689 |   |
|    Residential real estate            |   |              | 21,028 |   |                           |   | - |   |   |   | 14,836 |   |   |   | 6,192 |   |
| Total impaired loans                                 |   | $                 | 52,006 |   |                           | $      | - |   |   | $ | 39,656 |   |   | $ | 12,350 |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| OREO                                                 |   | $                 | 70,235 |   |                           | $      | - |   |   | $ | 69,855 |   |   | $ | 380 |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   | Balance at        |   |   | Fair Value Measurements Using: |   |
| Dollars in thousands                                 |   | December 31, 2009 |   |   | Level 1                        |   |   | Level 2 |   |   | Level 3 |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage loans held for sale             |   | $                 | 1      |   |                           | $      | - |   |   | $ | 1 |   |   | $ | - |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans                                       |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|     Commercial                   |   | $                 | 104    |   |                           | $      | - |   |   | $ | - |   |   | $ | 104 |   |
|     Commercial real estate       |   |              | 48,057 |   |                           |   | - |   |   |   | 30,585 |   |   |   | 17,472 |   |
|     Construction and development |   |              | 25,621 |   |                           |   | - |   |   |   | 20,718 |   |   |   | 4,903 |   |
|     Residential real estate      |   |              | 702    |   |                           |   | - |   |   |   | 702 |   |   |   | - |   |
| Total impaired loans                                 |   | $                 | 74,484 |   |                           | $      | - |   |   | $ | 52,005 |   |   | $ | 22,479 |   |
|                                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| OREO                                                 |   | $                 | 40,293 |   |                           | $      | - |   |   | $ | 38,788 |   |   | $ | 1,505 |   |

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|                                                                                   |   | At December 31, |      |
|----------------------------------------------------------------------------------------|--------|-----------------|-----------|
|                                                                                   |   | 2010            |      |   | 2009 |   |
|                                                                                   |   |            |      |   | Estimated |   |   |   |   |   | Estimated |   |
|                                                                                   |   | Carrying        |      |   | Fair |   |   | Carrying |   |   | Fair |   |
|  Dollars in thousands                                                             |   | Value           |      |   | Value |   |   | Value |   |   | Value |   |
|  Financial assets:                                                                |   |            |      |   |   |   |   |   |   |   |   |   |
|      Cash and due from banks                                  |   | $               | 4,652     |   |   | $ | 4,652 |   |   | $ | 6,813 |   |   | $ | 6,813 |   |
|      Interest bearing deposits,                               |   |            |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          other banks                      |   |            | 45,696    |   |   |   | 45,696 |   |   |   | 34,247 |   |   |   | 34,247 |   |
|      Securities available for sale                            |   |            | 271,730   |   |   |   | 271,730 |   |   |   | 271,654 |   |   |   | 271,654 |   |
|      Other investments                                        |   |            | 22,941    |   |   |   | 22,941 |   |   |   | 24,008 |   |   |   | 24,008 |   |
|      Loans held for sale, net                                 |   |            | 343       |   |   |   | 343 |   |   |   | 1 |   |   |   | 1 |   |
|      Loans, net                                               |   |            | 995,319   |   |   |   | 1,002,889 |   |   |   | 1,137,336 |   |   |   | 1,152,837 |   |
|      Accrued interest receivable                              |   |            | 5,879     |   |   |   | 5,879 |   |   |   | 6,323 |   |   |   | 6,323 |   |
|                                                                                   |   | $               | 1,346,560 |   |   | $ | 1,354,130 |   |   | $ | 1,480,382 |   |   | $ | 1,495,883 |   |
|  Financial liabilities:                                                           |   |            |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Deposits                                                 |   | $               | 1,036,939 |   |   | $ | 1,102,131 |   |   | $ | 1,017,338 |   |   | $ | 1,087,212 |   |
|      Short-term borrowings                                    |   |            | 1,582     |   |   |   | 1,582 |   |   |   | 49,739 |   |   |   | 49,739 |   |
|      Long-term borrowings                                     |   |            | 304,109   |   |   |   | 323,803 |   |   |   | 381,492 |   |   |   | 395,375 |   |
|     Subordinated debentures                                        |   |            | 16,800    |   |   |   | 16,800 |   |   |   | 16,800 |   |   |   | 16,800 |   |
|     Subordinated debentures owed to                                |   |            |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          unconsolidated subsidiary trusts |   |            | 19,589    |   |   |   | 19,589 |   |   |   | 19,589 |   |   |   | 19,589 |   |
|      Accrued interest payable                                 |   |            | 3,130     |   |   |   | 3,130 |   |   |   | 4,146 |   |   |   | 4,146 |   |
|                                                                                   |   | $               | 1,382,149 |   |   | $ | 1,467,035 |   |   | $ | 1,489,104 |   |   | $ | 1,572,861 |   |

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Table of Contents

|                                                                                                           |   | 2010      |    |
|----------------------------------------------------------------------------------------------------------------|--------|-----------|---------|
|                                                                                                           |   | Amortized |    |   | Unrealized |   |   | Estimated |   |
|  Dollars in thousands                                                                                     |   | Cost      |    |   | Gains |   |   | Losses |   |   | Fair Value |   |
|  Available for Sale                                                                                       |   |      |    |   |   |   |   |   |   |   |   |   |
|      Taxable debt securities                                                          |   |      |    |   |   |   |   |   |   |   |   |   |
|          U. S. Government agencies                                |   |      |    |   |   |   |   |   |   |   |   |   |
|              and corporations                 |   | $         | 30,645  |   |   | $ | 319 |   |   | $ | 299 |   |   | $ | 30,665 |   |
|          Residential mortgage-backed securities:                  |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|              Government-sponsored agencies    |   |      | 119,608 |   |   |   | 3,642 |   |   |   | 213 |   |   |   | 123,037 |   |
|              Nongovernment-sponsored entities |   |      | 60,257  |   |   |   | 2,528 |   |   |   | 3,518 |   |   |   | 59,267 |   |
|          State and political subdivisions                         |   |      | 23,342  |   |   |   | 6 |   |   |   | 960 |   |   |   | 22,388 |   |
|          Corporate debt securities                                |   |      | 999     |   |   |   | - |   |   |   | 50 |   |   |   | 949 |   |
|  Total taxable debt securities                                                                            |   |      | 234,851 |   |   |   | 6,495 |   |   |   | 5,040 |   |   |   | 236,306 |   |
|      Tax-exempt debt securities                                                       |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          State and political subdivisions                         |   |      | 35,843  |   |   |   | 211 |   |   |   | 707 |   |   |   | 35,347 |   |
|  Total tax-exempt debt securities                                                                         |   |      | 35,843  |   |   |   | 211 |   |   |   | 707 |   |   |   | 35,347 |   |
|      Equity securities                                                                |   |      | 77      |   |   |   | - |   |   |   | - |   |   |   | 77 |   |
|  Total available for sale securities                                                                      |   | $         | 270,771 |   |   | $ | 6,706 |   |   | $ | 5,747 |   |   | $ | 271,730 |   |

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Table of Contents

|                                                                                                           |   | 2009      |    |
|----------------------------------------------------------------------------------------------------------------|--------|-----------|---------|
|                                                                                                           |   | Amortized |    |   | Unrealized |   |   | Estimated |   |
|  Dollars in thousands                                                                                     |   | Cost      |    |   | Gains |   |   | Losses |   |   | Fair Value |   |
|  Available for Sale                                                                                       |   |      |    |   |   |   |   |   |   |   |   |   |
|      Taxable debt securities                                                          |   |      |    |   |   |   |   |   |   |   |   |   |
|          U. S. Government agencies                                |   |      |    |   |   |   |   |   |   |   |   |   |
|              and corporations                 |   | $         | 54,850  |   |   | $ | 693 |   |   | $ | 582 |   |   | $ | 54,961 |   |
|          Residential mortgage-backed securities:                  |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|              Government-sponsored agencies    |   |      | 95,939  |   |   |   | 4,189 |   |   |   | 92 |   |   |   | 100,036 |   |
|              Nongovernment-sponsored entities |   |      | 75,546  |   |   |   | 662 |   |   |   | 6,411 |   |   |   | 69,797 |   |
|          State and political subdivisions                         |   |      | 3,760   |   |   |   | 37 |   |   |   | 5 |   |   |   | 3,792 |   |
|          Corporate debt securities                                |   |      | 350     |   |   |   | 6 |   |   |   | - |   |   |   | 356 |   |
|  Total taxable debt securities                                                                            |   |      | 230,445 |   |   |   | 5,587 |   |   |   | 7,090 |   |   |   | 228,942 |   |
|      Tax-exempt debt securities                                                       |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          State and political subdivisions                         |   |      | 42,486  |   |   |   | 570 |   |   |   | 421 |   |   |   | 42,635 |   |
|  Total tax-exempt debt securities                                                                         |   |      | 42,486  |   |   |   | 570 |   |   |   | 421 |   |   |   | 42,635 |   |
|      Equity securities                                                                |   |      | 77      |   |   |   | - |   |   |   | - |   |   |   | 77 |   |
|  Total available for sale securities                                                                      |   | $         | 273,008 |   |   | $ | 6,157 |   |   | $ | 7,511 |   |   | $ | 271,654 |   |

| Dollars in thousands     |   | Proceeds from |   |   | Gross realized |   |
|--------------------------|--------|---------------|--------|--------|----------------|--------|
|                     |   |          |   |   | Calls and      |   |   | Principal |   |   |   |   |   |   |   |
| Years ended December 31, |   | Sales         |   |   | Maturities     |   |   | Payments |   |   | Gains |   |   | Losses |   |
| 2010                     |   | $             | 50,893 |   |           | $      | 60,972 |   |   | $ | 57,444 |   |   | $ | 2,061 |   |   | $ | 10 |   |
| 2009                     |   | $             | 45,543 |   |           | $      | 21,365 |   |   | $ | 73,631 |   |   | $ | 1,511 |   |   | $ | 14 |   |
| 2008                     |   | $             | 1,141  |   |           | $      | 22,944 |   |   | $ | 30,858 |   |   | $ | 6 |   |   | $ | 12 |   |

|                             |   | Amortized |    |   | Estimated  |   |
|----------------------------------|--------|-----------|---------|--------|------------|--------|
|  Dollars in thousands       |   | Cost      |    |   | Fair Value |   |
|                             |   |      |    |   |       |   |
|  Due in one year or less    |   | $         | 75,068  |   |       | $      | 76,987 |   |
|  Due from one to five years |   |      | 99,935  |   |       |   | 100,922 |   |
|  Due from five to ten years |   |      | 26,460  |   |       |   | 25,476 |   |
|  Due after ten years        |   |      | 69,231  |   |       |   | 68,268 |   |
|  Equity securities          |   |      | 77      |   |       |   | 77 |   |
|  Total                      |   | $         | 270,771 |   |       | $      | 271,730 |   |

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Table of Contents

|                                               |   | 2010            |   |   | 2009       |   |
|----------------------------------------------------|--------|-----------------|--------|--------|------------|--------|
|                                               |   | Residential MBS |   |   |       |   |   |   |   |   | Residential MBS |   |   |   |   |   |   |   |
|                                               |   | Nongovernment   |   |   |       |   |   |   |   |   | Nongovernment |   |   |   |   |   |   |   |
|                                               |   | - Sponsored     |   |   | Equity     |   |   |   |   |   | - Sponsored |   |   | Equity |   |   |   |   |
|  Dollars in thousands                         |   | Entities        |   |   | Securities |   |   | Total |   |   | Entities |   |   | Securities |   |   | Total |   |
|                                               |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total other-than-temporary impairment losses |   | $               | (1,816 | )      |       | $      | - |   |   | $ | (1,816 | ) |   | $ | (5,646 | ) |   | $ | (215 | ) |   | $ | (5,861 | ) |
|  Portion of loss recognized in                |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    other comprehensive income       |   |            | 828    |   |       |   | - |   |   |   | 828 |   |   |   | 495 |   |   |   | - |   |   |   | 495 |   |
|  Net impairment losses recognized in earnings |   | $               | (988   | )      |       | $      | - |   |   | $ | (988 | ) |   | $ | (5,151 | ) |   | $ | (215 | ) |   | $ | (5,366 | ) |

| Dollars in thousands                                                                        |   | Total  |   |
|---------------------------------------------------------------------------------------------|--------|--------|--------|
|  Balance, January 1, 2010                                                              |   | $      | (2,922 | ) |
|  Additions for the credit component on debt securities in which                        |   |   |   |   |
|      other-than-temporary impairment was not previously recognized |   |   | (988   | ) |
|  Securities sold during the period                                                     |   |   | -      |   |
|  Balance, December 31, 2010                                                            |   | $      | (3,910 | ) |

|                            |  Weighted |  Range   |
|---------------------------------|----------------|---------------|
|                            |  Average  |  Minimum |  Maximum |
|  Constant prepayment rates | 8.1%           | 3.1%          | 14.4% |
|  Constant default rates    | 8.4%           | 3.0%          | 13.2% |
|  Loss severities           | 49.8%          | 34.0%         | 55.0% |

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Table of Contents

|                                                                             |   | 2010                |   |
|----------------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                             |   | Less than 12 months |   |   | 12 months or more |   |   | Total |   |
|                                                                             |   | Estimated           |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
| Dollars in thousands                                                             |   | Fair Value          |   |   | Loss |   |   | Fair Value |   |   | Loss |   |   | Fair Value |   |   | Loss |   |
| Temporarily impaired securities                                                  |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Taxable debt securities                                        |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      U. S. Government agencies                          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        and corporations                       |   | $                   | 9,658  |   |   | $ | (284 | ) |   | $ | 1,272 |   |   | $ | (15 | ) |   | $ | 10,930 |   |   | $ | (299 | ) |
|      Residential mortgage-backed securities:            |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Government-sponsored agencies    |   |                | 24,869 |   |   |   | (213 | ) |   |   | - |   |   |   | - |   |   |   | 24,869 |   |   |   | (213 | ) |
|         Nongovernment-sponsored entities |   |                | 7,506  |   |   |   | (459 | ) |   |   | 12,695 |   |   |   | (2,716 | ) |   |   | 20,201 |   |   |   | (3,175 | ) |
|      State and political subdivisions                   |   |                | 18,215 |   |   |   | (955 | ) |   |   | 385 |   |   |   | (5 | ) |   |   | 18,600 |   |   |   | (960 | ) |
|      Corporate debt securities                          |   |                | 949    |   |   |   | (50 | ) |   |   | - |   |   |   | - |   |   |   | 949 |   |   |   | (50 | ) |
|    Tax-exempt debt securities                                     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      State and political subdivisions                   |   |                | 17,523 |   |   |   | (555 | ) |   |   | 1,169 |   |   |   | (152 | ) |   |   | 18,692 |   |   |   | (707 | ) |
|      Total temporarily impaired securities              |   |                | 78,720 |   |   |   | (2,516 | ) |   |   | 15,521 |   |   |   | (2,888 | ) |   |   | 94,241 |   |   |   | (5,404 | ) |
| Other-than-temporarily impaired securities                                       |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Taxable debt securities                                        |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential mortgage-backed securities:            |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Nongovernment-sponsored entities |   |                | 71     |   |   |   | (43 | ) |   |   | 4,624 |   |   |   | (300 | ) |   |   | 4,695 |   |   |   | (343 | ) |
|      Total other-than-temporarily                       |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  impaired securities                                                        |   |                | 71     |   |   |   | (43 | ) |   |   | 4,624 |   |   |   | (300 | ) |   |   | 4,695 |   |   |   | (343 | ) |
|  Total                                                                      |   | $                   | 78,791 |   |   | $ | (2,559 | ) |   | $ | 20,145 |   |   | $ | (3,188 | ) |   | $ | 98,936 |   |   | $ | (5,747 | ) |

|                                                                             |   | 2009                |   |
|----------------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                             |   | Less than 12 months |   |   | 12 months or more |   |   | Total |   |
|                                                                             |   | Estimated           |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
| Dollars in thousands                                                             |   | Fair Value          |   |   | Loss |   |   | Fair Value |   |   | Loss |   |   | Fair Value |   |   | Loss |   |
| Temporarily impaired securities                                                  |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Taxable debt securities                                        |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      U. S. Government agencies                          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        and corporations                       |   | $                   | 26,607 |   |   | $ | (581 | ) |   | $ | 138 |   |   | $ | (1 | ) |   | $ | 26,745 |   |   | $ | (582 | ) |
|      Residential mortgage-backed securities:            |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Government-sponsored agencies    |   |                | 9,612  |   |   |   | (91 | ) |   |   | 68 |   |   |   | (1 | ) |   |   | 9,680 |   |   |   | (92 | ) |
|         Nongovernment-sponsored entities |   |                | 24,500 |   |   |   | (1,530 | ) |   |   | 21,485 |   |   |   | (4,637 | ) |   |   | 45,985 |   |   |   | (6,167 | ) |
|    Tax-exempt debt securities                                     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      State and political subdivisions                   |   |                | 12,100 |   |   |   | (138 | ) |   |   | 3,748 |   |   |   | (288 | ) |   |   | 15,848 |   |   |   | (426 | ) |
|  Other equity securties                                                     |   |                | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other-than-temporarily impaired securities                                       |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Taxable debt securities                                        |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential mortgage-backed securities:            |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Nongovernment-sponsored entities |   |                | -      |   |   |   | - |   |   |   | 1,670 |   |   |   | (244 | ) |   |   | 1,670 |   |   |   | (244 | ) |
|      Total other-than-temporarily                       |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  impaired securities                                                        |   |                | -      |   |   |   | - |   |   |   | 1,670 |   |   |   | (244 | ) |   |   | 1,670 |   |   |   | (244 | ) |
|  Total                                                                      |   | $                   | 72,819 |   |   | $ | (2,340 | ) |   | $ | 27,109 |   |   | $ | (5,171 | ) |   | $ | 99,928 |   |   | $ | (7,511 | ) |

----

Table of Contents

| Dollars in thousands                                                  |   | 2010   |      |   | 2009   |   |
|-----------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|  Commercial                                                      |   | $      | 97,059    |   |   | $      | 122,249 |   |
|  Commercial real estate                                          |   |   |      |   |   |   |   |   |
|       Owner-occupied                    |   |   | 187,098   |   |   |   | 172,838 |   |
|       Non-owner occupied                |   |   | 235,337   |   |   |   | 291,437 |   |
|  Construction and development                                    |   |   |      |   |   |   |   |   |
|       Land and land development         |   |   | 99,085    |   |   |   | 121,127 |   |
|       Construction                      |   |   | 13,691    |   |   |   | 40,827 |   |
|  Residential real estate                                         |   |   |      |   |   |   |   |   |
|       Non-jumbo                         |   |   | 239,290   |   |   |   | 253,946 |   |
|       Jumbo                             |   |   | 61,340    |   |   |   | 67,303 |   |
|       Home equity                       |   |   | 50,987    |   |   |   | 50,812 |   |
|  Consumer                                                        |   |   | 24,145    |   |   |   | 28,470 |   |
|  Other                                                           |   |   | 4,511     |   |   |   | 5,327 |   |
|       Total loans, net of unearned fees |   |   | 1,012,543 |   |   |   | 1,154,336 |   |
|  Less allowance for loan losses                                  |   |   | 17,224    |   |   |   | 17,000 |   |
|        Loans, net                  |   | $      | 995,319   |   |   | $      | 1,137,336 |   |

|                                   |   |   |    |   | After 1    |   |    |    |   |
|----------------------------------------|--------|--------|---------|--------|------------|--------|---------|---------|--------|
|                                   |   | Within |    |   | but within |   |    | After   |   |
| Dollars in thousands                   |   | 1Year  |    |   | 5 Years    |   |    | 5 Years |   |
| Commercial                             |   | $      | 34,590  |   |       | $      | 44,532  |    |   | $ | 17,937 |   |
| Commercial real estate                 |   |   | 26,815  |   |       |   | 104,966 |    |   |   | 290,654 |   |
| Construction and development           |   |   | 83,437  |   |       |   | 1,603   |    |   |   | 27,736 |   |
| Residential real estate                |   |   | 33,338  |   |       |   | 20,026  |    |   |   | 298,253 |   |
| Consumer                               |   |   | 3,622   |   |       |   | 18,477  |    |   |   | 2,046 |   |
| Other                                  |   |   | 454     |   |       |   | 1,152   |    |   |   | 2,905 |   |
|                                   |   | $      | 182,256 |   |       | $      | 190,756 |    |   | $ | 639,531 |   |
|                                   |   |   |    |   |       |   |    |    |   |   |   |   |
| Loans due after one year with:         |   |   |    |   |       |   |    |    |   |   |   |   |
|     Variable rates |   |   |    |   |       | $      | 231,264 |    |   |   |   |   |
|     Fixed rates    |   |   |    |   |       |   | 599,022 |    |   |   |   |   |
|                                   |   |   |    |   |       | $      | 830,286 |    |   |   |   |   |

----

Table of Contents

|                                                    |   | At December 31, 2010 |   |
|---------------------------------------------------------|--------|----------------------|--------|
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Recorded |   |
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Investment |   |
|                                                    |   | Past Due             |   |   |   |   |   | > 90 days |   |
| Dollars in thousands                                    |   | 30-59 days           |   |   | 60-89 days |   |   | > 90 days |   |   | Total |   |   | Current |   |   | and Accruing |   |
| Commercial                                              |   | $                    | 388    |   |   | $ | 307 |   |   | $ | 1,286 |   |   | $ | 1,981 |   |   | $ | 95,078 |   |   | $ | - |   |
| Commercial real estate                                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Owner-occupied            |   |                 | 364    |   |   |   | - |   |   |   | 1,348 |   |   |   | 1,712 |   |   |   | 185,386 |   |   |   | - |   |
|      Non-owner occupied        |   |                 | 3,697  |   |   |   | 590 |   |   |   | 310 |   |   |   | 4,597 |   |   |   | 230,740 |   |   |   | - |   |
| Construction and development                            |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Land and land development |   |                 | 3,023  |   |   |   | 131 |   |   |   | 9,732 |   |   |   | 12,886 |   |   |   | 86,199 |   |   |   | - |   |
|      Construction              |   |                 | -      |   |   |   | 2 |   |   |   | 317 |   |   |   | 319 |   |   |   | 13,372 |   |   |   | - |   |
| Residential real estate                                 |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Non-jumbo                 |   |                 | 3,557  |   |   |   | 2,412 |   |   |   | 3,953 |   |   |   | 9,922 |   |   |   | 229,368 |   |   |   | - |   |
|      Jumbo                     |   |                 | 2,997  |   |   |   | 10,383 |   |   |   | 2,549 |   |   |   | 15,929 |   |   |   | 45,411 |   |   |   | 1,442 |   |
|      Home equity               |   |                 | 501    |   |   |   | 270 |   |   |   | 51 |   |   |   | 822 |   |   |   | 50,165 |   |   |   | - |   |
| Consumer                                                |   |                 | 420    |   |   |   | 147 |   |   |   | 107 |   |   |   | 674 |   |   |   | 23,471 |   |   |   | - |   |
| Other                                                   |   |                 | 9      |   |   |   | 10 |   |   |   | - |   |   |   | 19 |   |   |   | 4,492 |   |   |   | - |   |
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total                     |   | $                    | 14,956 |   |   | $ | 14,252 |   |   | $ | 19,653 |   |   | $ | 48,861 |   |   | $ | 963,682 |   |   | $ | 1,442 |   |
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   | At December 31, 2009 |   |
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Recorded |   |
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Investment |   |
|                                                    |   | Past Due             |   |   |   |   |   |   | > 90 days |   |
| Dollars in thousands                                    |   | 30-59 days           |   |   | 60-89 days |   |   | > 90 days |   |   | Total |   |   | Current |   |   | and Accruing |   |
| Commercial                                              |   | $                    | 457    |   |   | $ | 1,227 |   |   | $ | 333 |   |   | $ | 2,017 |   |   | $ | 120,232 |   |   | $ | 23 |   |
| Commercial real estate                                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Owner-occupied            |   |                 | 50     |   |   |   | 18 |   |   |   | 627 |   |   |   | 695 |   |   |   | 172,143 |   |   |   | - |   |
|      Non-owner occupied        |   |                 | 1,419  |   |   |   | 13,636 |   |   |   | 23,328 |   |   |   | 38,383 |   |   |   | 253,054 |   |   |   | - |   |
| Construction and development                            |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Land and land development |   |                 | 162    |   |   |   | 879 |   |   |   | 20,466 |   |   |   | 21,507 |   |   |   | 99,620 |   |   |   | - |   |
|      Construction              |   |                 | 109    |   |   |   | 11 |   |   |   | 5,862 |   |   |   | 5,982 |   |   |   | 34,845 |   |   |   | - |   |
| Residential real estate                                 |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Non-jumbo                 |   |                 | 3,623  |   |   |   | 3,197 |   |   |   | 3,455 |   |   |   | 10,275 |   |   |   | 243,671 |   |   |   | 120 |   |
|      Jumbo                     |   |                 | 682    |   |   |   | - |   |   |   | - |   |   |   | 682 |   |   |   | 66,621 |   |   |   | - |   |
|      Home equity               |   |                 | 993    |   |   |   | 726 |   |   |   | 136 |   |   |   | 1,855 |   |   |   | 48,957 |   |   |   | 36 |   |
| Consumer                                                |   |                 | 604    |   |   |   | 274 |   |   |   | 334 |   |   |   | 1,212 |   |   |   | 27,258 |   |   |   | 20 |   |
| Other                                                   |   |                 | 13     |   |   |   | 11 |   |   |   | 2 |   |   |   | 26 |   |   |   | 5,301 |   |   |   | 2 |   |
|                                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total                     |   | $                    | 8,112  |   |   | $ | 19,979 |   |   | $ | 54,543 |   |   | $ | 82,634 |   |   | $ | 1,071,702 |   |   | $ | 201 |   |

----

Table of Contents

|                                          |   |   |   |   |   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|
| Dollars in thousands                          |   | 2010   |   |   | 2009   |   |
|                                          |   |   |   |   |   |   |
| Commercial                                    |   | $      | 1,318  |   |   | $      | 409 |   |
| Commercial real estate                        |   |   |   |   |   |   |   |   |
|    Owner-occupied              |   |   | 2,372  |   |   |   | 627 |   |
|    Non-owner occupied          |   |   | 314    |   |   |   | 34,590 |   |
| Construction and development                  |   |   |   |   |   |   |   |   |
|    Land & land development |   |   | 9,732  |   |   |   | 19,157 |   |
|    Construction                |   |   | 317    |   |   |   | 7,171 |   |
| Residential mortgage                          |   |   |   |   |   |   |   |   |
|    Non-jumbo                   |   |   | 4,918  |   |   |   | 3,624 |   |
|    Jumbo                       |   |   | 1,106  |   |   |   | 682 |   |
|    Home equity                 |   |   | 51     |   |   |   | 100 |   |
| Consumer                                      |   |   | 141    |   |   |   | 381 |   |
| Other                                         |   |   | -      |   |   |   | - |   |
|                                          |   |   |   |   |   |   |   |   |
|      Total           |   | $      | 20,269 |   |   | $      | 66,741 |   |

| §   | Loans which we risk-rate (consisting of loan relationships having aggregate balances in excess of $2,000,000, or loans exceeding $500,000 and exhibiting credit weakness) through our normal loan review procedures and which, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement.   Risk-rated loans with insignificant delays or insignificant short falls in the amount of payments expected to be collected are not considered to be impaired. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Loans that have been modified in a troubled debt restructuring. |
|--------------------|-----------------------------------------------------------------|

|                                                   |                    |   | December 31, |   |
|--------------------------------------------------------|-------------------------|--------|--------------|--------|
| Dollars in thousands                                   |                    |   | 2010         |   |   | 2009 |   |
| Impaired loans with an allowance                       |                    |   | $            | 18,477 |   |   | $ | 39,210 |   |
| Impaired loans without an allowance                    |                    |   |         | 38,404 |   |   |   | 46,123 |   |
| Total impaired loans                                   |                    |   | $            | 56,881 |   |   | $ | 85,333 |   |
|                                                   |                    |   |         |   |   |   |   |   |   |
| Allowance for loan losses attributed to impaired loans |                    |   | $            | 4,875  |   |   | $ | 10,211 |   |
|                                                   |                    |   |         |   |   |   |   |   |   |
|                                                   | Year ended December 31, |   |
| Dollars in thousands                                   | 2010                    |   |         | 2009   |   |   |   | 2008 |   |
| Average balance of impaired loans                      |  $53,352           |   | $            | 75,698 |   |   | $ | 31,896 |   |
| Interest income recognized on impaired loans           |  $2,423            |   | $            | 298    |   |   | $ | 70 |   |

----

Table of Contents

| Method Used to Measure Impairment of Impaired Loans |   |       |
|-----------------------------------------------------|--------|------------|
| Dollars in thousands                                |   |       |   |   |   |   |   |
| Loan Category                                       |   | 12/31/2010 |   |   | 12/31/2009 |   | Method used to measure impairment |
| Commerical                                          |   | $          | 630 |   |   | $ | 301 |   | Fair value of collateral |
| Commerical real estate                              |   |       |   |   |   |   |   |   |   |
|    Owner-occupied                    |   |       | 8,866 |   |   |   | 6,527 |   | Fair value of collateral |
|                                                |   |       | 2,623 |   |   |   | 2,388 |   | Discounted cash flow |
|    Non-owner occupied                |   |       | 4,922 |   |   |   | 37,112 |   | Fair value of collateral |
|                                                |   |       | 530 |   |   |   | 5,270 |   | Discounted cash flow |
| Construction and development                        |   |       |   |   |   |   |   |   |   |
|    Land & land development       |   |       | 16,515 |   |   |   | 25,616 |   | Fair value of collateral |
|    Construction                      |   |       | - |   |   |   | 5,475 |   | Fair value of collateral |
| Residential mortgage                                |   |       |   |   |   |   |   |   |   |
|    Non-jumbo                         |   |       | 4,533 |   |   |   | 1,023 |   | Fair value of collateral |
|                                                |   |       | 753 |   |   |   | 639 |   | Discounted cash flow |
|    Jumbo                             |   |       | 17,296 |   |   |   | 682 |   | Fair value of collateral |
|    Home equity                       |   |       | 213 |   |   |   | 300 |   | Fair value of collateral |
| Total                                               |   | $          | 56,881 |   |   | $ | 85,333 |   |   |

|                                                      |   | At December 31, 2010 |   |
|-----------------------------------------------------------|--------|----------------------|--------|
|                                                      |   |                 |   |   |   |   |   |   |   |   | Average |   |   | Interest Income |   |
|                                                      |   | Recorded             |   |   | Unpaid |   |   | Related |   |   | Impaired |   |   | Recognized |   |
| Dollars in thousands                                      |   | Investment           |   |   | Principal Balance |   |   | Allowance |   |   | Balance |   |   | while impaired |   |
|                                                      |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Without a related allowance                               |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Commercial                                    |   | $                    | 629    |   |   | $ | 630 |   |   | $ | - |   |   | $ | 232 |   |   | $ | 9 |   |
|   Commercial real estate                        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Owner-occupied              |   |                 | 7,538  |   |   |   | 7,556 |   |   |   | - |   |   |   | 9,052 |   |   |   | 440 |   |
|      Non-owner occupied          |   |                 | 3,314  |   |   |   | 3,321 |   |   |   | - |   |   |   | 12,852 |   |   |   | 734 |   |
|   Construction and development                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Land & land development |   |                 | 9,213  |   |   |   | 9,214 |   |   |   | - |   |   |   | 12,852 |   |   |   | 468 |   |
|      Construction                |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Residential real estate                       |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Non-jumbo                   |   |                 | 2,161  |   |   |   | 2,696 |   |   |   | - |   |   |   | 2,074 |   |   |   | 76 |   |
|      Jumbo                       |   |                 | 14,822 |   |   |   | 14,822 |   |   |   | - |   |   |   | 7,887 |   |   |   | 547 |   |
|      Home equity                 |   |                 | 165    |   |   |   | 165 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total without a related allowance                         |   | $                    | 37,842 |   |   | $ | 38,404 |   |   | $ | - |   |   | $ | 44,949 |   |   | $ | 2,274 |   |
|                                                      |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With a related allowance                                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Commercial                                    |   | $                    | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|   Commercial real estate                        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Owner-occupied              |   |                 | 3,933  |   |   |   | 3,933 |   |   |   | 265 |   |   |   | 670 |   |   |   | - |   |
|      Non-owner occupied          |   |                 | 2,130  |   |   |   | 2,130 |   |   |   | 267 |   |   |   | 1,953 |   |   |   | 88 |   |
|   Construction and development                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Land & land development |   |                 | 7,301  |   |   |   | 7,301 |   |   |   | 2,575 |   |   |   | 3,183 |   |   |   | 7 |   |
|      Construction                |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Residential real estate                       |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Non-jumbo                   |   |                 | 2,589  |   |   |   | 2,591 |   |   |   | 843 |   |   |   | 1,242 |   |   |   | 22 |   |
|      Jumbo                       |   |                 | 2,474  |   |   |   | 2,474 |   |   |   | 877 |   |   |   | 1,343 |   |   |   | 31 |   |
|      Home equity                 |   |                 | 48     |   |   |   | 48 |   |   |   | 48 |   |   |   | 12 |   |   |   | 1 |   |
| Total with a related allowance                            |   | $                    | 18,475 |   |   | $ | 18,477 |   |   | $ | 4,875 |   |   | $ | 8,403 |   |   | $ | 149 |   |
|                                                      |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                     |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial                              |   | $                    | 34,058 |   |   | $ | 34,085 |   |   | $ | 3,107 |   |   | $ | 40,794 |   |   | $ | 1,746 |   |
|    Residential                             |   |                 | 22,259 |   |   |   | 22,796 |   |   |   | 1,768 |   |   |   | 12,558 |   |   |   | 677 |   |
|                                                      |   | $                    | 56,317 |   |   | $ | 56,881 |   |   | $ | 4,875 |   |   | $ | 53,352 |   |   | $ | 2,423 |   |

----

Table of Contents

|                                                      |   | At December 31, 2009 |   |
|-----------------------------------------------------------|--------|----------------------|--------|
|                                                      |   |                 |   |   |   |   |   |   |   |   | Average |   |   | Interest Income |   |
|                                                      |   | Recorded             |   |   | Unpaid |   |   | Related |   |   | Impaired |   |   | Recognized |   |
| Dollars in thousands                                      |   | Investment           |   |   | Principal Balance |   |   | Allowance |   |   | Balance |   |   | while impaired |   |
|                                                      |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Without a related allowance                               |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Commercial                                    |   | $                    | 30     |   |   | $ | 30 |   |   | $ | - |   |   | $ | 498 |   |   | $ | 11 |   |
|   Commercial real estate                        |   |                 |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
|      Owner-occupied              |   |                 | 7,573  |   |   |   | 7,602 |   |   |   | - |   |   |   | 3,354 |   |   |   | 88 |   |
|      Non-owner occupied          |   |                 | 28,827 |   |   |   | 28,860 |   |   |   | - |   |   |   | 18,690 |   |   |   | 142 |   |
|   Construction and development                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Land & land development |   |                 | 8,992  |   |   |   | 8,992 |   |   |   | - |   |   |   | 20,124 |   |   |   | - |   |
|      Construction                |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 1,247 |   |   |   | - |   |
|   Residential real estate                       |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Non-jumbo                   |   |                 | 639    |   |   |   | 639 |   |   |   | - |   |   |   | 3,325 |   |   |   | 45 |   |
|      Jumbo                       |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 2,613 |   |   |   | - |   |
|      Home equity                 |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 561 |   |   |   | - |   |
|   Consumer                                      |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 83 |   |   |   | 3 |   |
|   Other                                         |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total without a related allowance                         |   | $                    | 46,061 |   |   | $ | 46,123 |   |   | $ | - |   |   | $ | 50,495 |   |   | $ | 289 |   |
|                                                      |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With a related allowance                                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Commercial                                    |   | $                    | 271    |   |   | $ | 271 |   |   | $ | 217 |   |   | $ | 202 |   |   | $ | 1 |   |
|   Commercial real estate                        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Owner-occupied              |   |                 | 1,308  |   |   |   | 1,312 |   |   |   | 542 |   |   |   | 485 |   |   |   | - |   |
|      Non-owner occupied          |   |                 | 13,470 |   |   |   | 13,522 |   |   |   | 2,698 |   |   |   | 9,592 |   |   |   | - |   |
|   Construction and development                  |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Land & land development |   |                 | 16,623 |   |   |   | 16,624 |   |   |   | 5,036 |   |   |   | 8,086 |   |   |   | 1 |   |
|      Construction                |   |                 | 5,462  |   |   |   | 5,476 |   |   |   | 415 |   |   |   | 5,963 |   |   |   | - |   |
|   Residential real estate                       |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Non-jumbo                   |   |                 | 1,018  |   |   |   | 1,023 |   |   |   | 501 |   |   |   | 517 |   |   |   | - |   |
|      Jumbo                       |   |                 | 678    |   |   |   | 682 |   |   |   | 502 |   |   |   | 171 |   |   |   | - |   |
|      Home equity                 |   |                 | 300    |   |   |   | 300 |   |   |   | 300 |   |   |   | 187 |   |   |   | 7 |   |
|   Consumer                                      |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Other                                         |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total with a related allowance                            |   | $                    | 39,130 |   |   | $ | 39,210 |   |   | $ | 10,211 |   |   | $ | 25,203 |   |   | $ | 9 |   |
|                                                      |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                     |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial                              |   | $                    | 82,556 |   |   | $ | 82,689 |   |   | $ | 8,908 |   |   | $ | 68,241 |   |   | $ | 243 |   |
|    Consumer                                |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 83 |   |   |   | 3 |   |
|    Residential                             |   |                 | 2,635  |   |   |   | 2,644 |   |   |   | 1,303 |   |   |   | 7,374 |   |   |   | 52 |   |
|                                                      |   | $                    | 85,191 |   |   | $ | 85,333 |   |   | $ | 10,211 |   |   | $ | 75,698 |   |   | $ | 298 |   |

----

Table of Contents

| Loan Risk Profile by Internal Risk Rating |                                                                                                          |                                                                                                                                        |         |                                                                                                    |                                                                                                                                  |                   |                                                                                  |                                                                                                           |               |                                                                                                                 |                                                                                                           |   |
|------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|------------------------|---------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|--------------------|----------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|--------|
|                                           |                                                                                                          |                                                                                                                                        |         |                                                                                                    |                                                                                                                                  |                   |                                                                                  |                                                                                                           |               |                                                                                                                 |                                                                                                           |   |   |   |
|                                           | Construction and Development                                                                                  |                                                                                                                                        |         |                                                                                                    |                                                                                                                                  | Commercial Real Estate |
|                                           | Land and land development                                                                                     |                                                                                                                                        | Construction |                                                                                                    | Commercial                                                                                                                            |                   | Owner Occupied                                                                        |                                                                                                           | Non-Owner Occupied |
| Dollars in thousands                           | 2010                                                                                                          | 2009                                                                                                                                        |         | 2010                                                                                                    | 2009                                                                                                                                  |                   | 2010                                                                                  | 2009                                                                                                           |               | 2010                                                                                                                 | 2009                                                                                                           |   | 2010 | 2009 |
| Pass                                           |  $                63,061 |  $                     87,826 |         |  $               13,321 |  $                   35,036  |                   |  $           89,129  |  $                116,580 |               |  $                 167,048 |  $                164,551 |   |  $                 218,555 |  $                258,120 |
| OLEM (Special Mention)                         |  19,509                                                                                                  |  14,101                                                                                                                                |         |  249                                                                                               |  -                                                                                                                               |                   |  6,481                                                                           |  5,157                                                                                                    |               |  4,417                                                                                                          |  6,927                                                                                                    |   |  14,154 |  15,472 |
| Substandard                                    |  15,796                                                                                                  |  6,029                                                                                                                                 |         |  121                                                                                               |  5,791                                                                                                                           |                   |  1,449                                                                           |  370                                                                                                      |               |  15,633                                                                                                         |  733                                                                                                      |   |  2,628 |  50 |
| Doubtful                                       |  719                                                                                                     |  13,171                                                                                                                                |         |  -                                                                                                 |  -                                                                                                                               |                   |  -                                                                               |  142                                                                                                      |               |  -                                                                                                              |  627                                                                                                      |   |  - |  17,795 |
| Loss                                           |  -                                                                                                       |  -                                                                                                                                     |         |  -                                                                                                 |  -                                                                                                                               |                   |  -                                                                               |  -                                                                                                        |               |  -                                                                                                              |  -                                                                                                        |   |  - |  - |
|      Total            |  $          99,085                                          |  $               121,127                                         |         |  $           13,691                         |  $            40,827                                                      |                   |  $           97,059            |  $             122,249                   |               |  $              187,098                        |  $             172,838                        |   |  $              235,337 |  $               291,437 |

|                          |   | Performing |    |   | Nonperforming |   |
|-------------------------------|--------|------------|---------|--------|---------------|--------|
| Dollars in thousands          |   | 2010       |    |   | 2009          |   |   | 2010 |   |   | 2009 |   |
| Residential real estate       |   |       |    |   |          |   |   |   |   |   |   |   |
|    Non-jumbo   |   | $          | 233,857 |   |          | $      | 250,202 |   |   | $ | 5,433 |   |   | $ | 3,745 |   |
|    Jumbo       |   |       | 59,307  |   |          |   | 66,621 |   |   |   | 2,033 |   |   |   | 682 |   |
|    Home Equity |   |       | 50,936  |   |          |   | 50,676 |   |   |   | 51 |   |   |   | 136 |   |
| Consumer                      |   |       | 24,003  |   |          |   | 28,069 |   |   |   | 142 |   |   |   | 401 |   |
| Other                         |   |       | 4,511   |   |          |   | 5,326 |   |   |   | - |   |   |   | - |   |
| Total                         |   | $          | 372,614 |   |          | $      | 400,894 |   |   | $ | 7,659 |   |   | $ | 4,964 |   |

| Dollars in thousands                                   |   | 2010   |   |   | 2009   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|   Balance, beginning                         |   | $      | 4,076  |   |   | $      | 13,401 |   |
|       Additions          |   |   | 5,582  |   |   |   | 974 |   |
|       Amounts collected  |   |   | (3,450 | )      |   |   | (10,299 | ) |
|       Other changes, net |   |   | 11     |   |   |   | - |   |
|   Balance, ending                            |   | $      | 6,219  |   |   | $      | 4,076 |   |

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Table of Contents

| Dollars in thousands                                             |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                             |   |   |   |   |   |   |   |   |   |
|   Balance, beginning of year                           |   | $      | 17,000 |   |   | $      | 16,933 |   |   | $ | 9,192 |   |
|   Losses:                                              |   |   |   |   |   |   |   |   |   |   |   |   |
|       Commercial                   |   |   | 601    |   |   |   | 479    |   |   |   | 198 |   |
|       Commercial real estate       |   |   | 9,239  |   |   |   | 469    |   |   |   | 1,131 |   |
|       Construction and development |   |   | 7,937  |   |   |   | 16,946 |   |   |   | 4,529 |   |
|       Residential real estate      |   |   | 3,836  |   |   |   | 3,921  |   |   |   | 1,608 |   |
|       Consumer                     |   |   | 279    |   |   |   | 214    |   |   |   | 375 |   |
|       Other                        |   |   | 233    |   |   |   | 231    |   |   |   | 203 |   |
|   Total                                                |   |   | 22,125 |   |   |   | 22,260 |   |   |   | 8,044 |   |
|   Recoveries:                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|       Commercial                   |   |   | 38     |   |   |   | 129    |   |   |   | 4 |   |
|       Commercial real estate       |   |   | 273    |   |   |   | 23     |   |   |   | 17 |   |
|       Construction and development |   |   | 331    |   |   |   | 1,615  |   |   |   | - |   |
|       Residential real estate      |   |   | 164    |   |   |   | 29     |   |   |   | 64 |   |
|       Consumer                     |   |   | 87     |   |   |   | 90     |   |   |   | 72 |   |
|       Other                        |   |   | 106    |   |   |   | 116    |   |   |   | 128 |   |
|   Total                                                |   |   | 999    |   |   |   | 2,002  |   |   |   | 285 |   |
|   Net losses                                           |   |   | 21,126 |   |   |   | 20,258 |   |   |   | 7,759 |   |
|   Provision for loan losses                            |   |   | 21,350 |   |   |   | 20,325 |   |   |   | 15,500 |   |
|   Balance, end of year                                 |   | $      | 17,224 |   |   | $      | 17,000 |   |   | $ | 16,933 |   |

|                                          |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |
|-----------------------------------------------|--------|-------------------------------------|--------|--------|--------------|---------|--------|------------------------|--------|--------|-------------------------|--------|--------|--------------------|---------|--------|-----------|--------|---------|--------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
|                                          |   | Construction & Land Development |   |   |         |    |   | Commercial Real Estate |   |   | Residential Real Estate |   |   |               |    |   |      |   |    |   |   |
| Dollars in thousands                          |   | Land & land development         |   |   | Construction |    |   | Commercial             |   |   | Owner Occupied          |   |   | Non-owner Occupied |    |   | Non-jumbo |   |    | Jumbo  |   |   | Home Equity |   |   | Consumer |   |   | Other  |   |   | Total  |   |
|                                          |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |
| Allowance for loan losses                     |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |
| Beginning balance                             |   | $                                   | 8,100  |   |         | $       | 652    |                   |   | $      | 401                     |   |   | $                  | 713     |   |      | $      | 3,225   |   |   | $      | 1,923       |   |   | $        | 1,198  |   |   | $      | 505    |   |   | $ | 249 |   |   | $ | 34 |   |   | $ | 17,000 |   |
|    Charge-offs                 |   |                                | 6,974  |   |         |    | 963    |                   |   |   | 601                     |   |   |               | 2,266   |   |      |   | 6,973   |   |   |   | 2,063       |   |   |     | 975    |   |   |   | 798    |   |   |   | 470 |   |   |   | 42 |   |   |   | 22,125 |   |
|    Recoveries                  |   |                                | 330    |   |         |    | 1      |                   |   |   | 38                      |   |   |               | 5       |   |      |   | 268     |   |   |   | 64          |   |   |     | 15     |   |   |   | 84     |   |   |   | 162 |   |   |   | 32 |   |   |   | 999 |   |
|    Provision                   |   |                                | 6,445  |   |         |    | 632    |                   |   |   | 485                     |   |   |               | 2,655   |   |      |   | 6,421   |   |   |   | 2,496       |   |   |     | 1,077  |   |   |   | 809    |   |   |   | 322 |   |   |   | 8 |   |   |   | 21,350 |   |
| Ending balance                                |   | $                                   | 7,901  |   |         | $       | 322    |                   |   | $      | 323                     |   |   | $                  | 1,107   |   |      | $      | 2,941   |   |   | $      | 2,420       |   |   | $        | 1,315  |   |   | $      | 600    |   |   | $ | 263 |   |   | $ | 32 |   |   | $ | 17,224 |   |
|                                          |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually                            |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    evaluated for impairment    |   |                                | 2,575  |   |         |    | -      |                   |   |   | -                       |   |   |               | 265     |   |      |   | 267     |   |   |   | 843         |   |   |     | 876    |   |   |   | 48     |   |   |   | - |   |   |   | - |   |   |   | 4,874 |   |
| Loans collectively                            |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    evaluated for impairment    |   |                                | 5,326  |   |         |    | 322    |                   |   |   | 323                     |   |   |               | 842     |   |      |   | 2,674   |   |   |   | 1,577       |   |   |     | 439    |   |   |   | 552    |   |   |   | 263 |   |   |   | 32 |   |   |   | 12,350 |   |
| Loans acquired with                           |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    deteriorated credit quality |   |                                | -      |   |         |    | -      |                   |   |   | -                       |   |   |               | -       |   |      |   | -       |   |   |   | -           |   |   |     | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
|  Total                                   |   | $                                   | 7,901  |   |         | $  | 322    |                   |   | $      | 323                     |   |   | $                  | 1,107   |   |      | $      | 2,941   |   |   | $      | 2,420       |   |   | $        | 1,315  |   |   | $      | 600    |   |   | $ | 263 |   |   | $ | 32 |   |   | $ | 17,224 |   |
|                                          |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                         |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually                            |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    evaluated for impairment    |   |                                | 16,515 |   |         |    | -      |                   |   |   | 630                     |   |   |               | 11,489  |   |      |   | 5,452   |   |   |   | 5,802       |   |   |     | 16,781 |   |   |   | 213    |   |   |   | - |   |   |   | - |   |   |   | 56,882 |   |
| Loans collectively                            |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    evaluated for impairment    |   |                                | 82,570 |   |         |    | 13,691 |                   |   |   | 96,429                  |   |   |               | 175,609 |   |      |   | 229,885 |   |   |   | 233,488     |   |   |     | 44,559 |   |   |   | 50,774 |   |   |   | 24,145 |   |   |   | 4,511 |   |   |   | 955,661 |   |
| Loans acquired with                           |   |                                |   |   |         |    |   |                   |   |   |                    |   |   |               |    |   |      |   |    |   |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    deteriorated credit quality |   |                                | -      |   |         |    | -      |                   |   |   | -                       |   |   |               | -       |   |      |   | -       |   |   |   | -           |   |   |     | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Total                             |   | $                                   | 99,085 |   |         | $       | 13,691 |                   |   | $      | 97,059                  |   |   | $                  | 187,098 |   |      | $      | 235,337 |   |   | $      | 239,290     |   |   | $        | 61,340 |   |   | $      | 50,987 |   |   | $ | 24,145 |   |   | $ | 4,511 |   |   | $ | 1,012,543 |   |

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| Dollars in thousands     |   | 2010   |    |   | 2009   |   |
|--------------------------|--------|--------|---------|--------|--------|--------|
| Beginning balance        |   | $      | 40,293  |   |   | $      | 8,110 |   |
| Acquisitions             |   |   | 48,951  |   |   |   | 34,971 |   |
| Capitalized improvements |   |   | 1,852   |   |   |   | 605 |   |
| Dispositions             |   |   | (17,460 | )      |   |   | (3,393 | ) |
| Valuation adjustments    |   |   | (3,401  | )      |   |   | - |   |
| Balance at year end      |   | $      | 70,235  |   |   | $      | 40,293 |   |

| Dollars in thousands                    |   | 2010   |   |   | 2009   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|
|  Land                              |   | $      | 6,308  |   |   | $      | 6,308 |   |
|  Buildings and improvements        |   |   | 20,059 |   |   |   | 19,937 |   |
|  Furniture and equipment           |   |   | 12,245 |   |   |   | 13,107 |   |
|                                    |   |   | 38,612 |   |   |   | 39,352 |   |
|  Less accumulated depreciation     |   |   | 15,520 |   |   |   | 15,118 |   |
|                                    |   |   |   |   |   |   |   |   |
|  Total premises and equipment, net |   | $      | 23,092 |   |   | $      | 24,234 |   |

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|                                     |   | Goodwill Activity |   |
|------------------------------------------|--------|-------------------|--------|
|                                     |   | Community         |   |   | Insurance |   |   |   |   |
|  Dollars in thousands               |   | Banking           |   |   | Services |   |   | Total |   |
| Balance, January 1, 2010                 |   | $                 | 1,488  |   |   | $ | 4,710 |   |   | $ | 6,198 |   |
|    Acquired goodwill, net |   |              | -      |   |   |   | - |   |   |   | - |   |
|                                     |   |              |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010               |   | $                 | 1,488  |   |   | $ | 4,710 |   |   | $ | 6,198 |   |

|                                                                |   | Other Intangible Assets |   |
|---------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                |   | December 31,2010        |   |   | December 31, 2009 |   |
|                                                                |   | Community               |   |   | Insurance |   |   |   |   |   | Community |   |   | Insurance |   |   |   |   |
|  Dollars in thousands                                          |   | Banking                 |   |   | Services |   |   | Total |   |   | Banking |   |   | Services |   |   | Total |   |
|  Unidentifiable intangible assets                              |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Gross carrying amount                       |   | $                       | 2,267  |   |   | $ | - |   |   | $ | 2,267 |   |   | $ | 2,267 |   |   | $ | - |   |   | $ | 2,267 |   |
|     Less:  accumulated amortization   |   |                    | 1,763  |   |   |   | - |   |   |   | 1,763 |   |   |   | 1,612 |   |   |   | - |   |   |   | 1,612 |   |
|         Net carrying amount |   | $                       | 504    |   |   | $ | - |   |   | $ | 504 |   |   | $ | 655 |   |   | $ | - |   |   | $ | 655 |   |
|                                                                |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Identifiable intangible assets                                |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Gross carrying amount                       |   | $                       | -      |   |   | $ | 3,000 |   |   | $ | 3,000 |   |   | $ | - |   |   | $ | 3,000 |   |   | $ | 3,000 |   |
|     Less:  accumulated amortization   |   |                    | -      |   |   |   | 700 |   |   |   | 700 |   |   |   | - |   |   |   | 500 |   |   |   | 500 |   |
|         Net carrying amount |   | $                       | -      |   |   | $ | 2,300 |   |   | $ | 2,300 |   |   | $ | - |   |   | $ | 2,500 |   |   | $ | 2,500 |   |

| Dollars in thousands                                  |   | 2010   |    |   | 2009   |   |
|-------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|  Demand deposits, interest bearing               |   | $      | 150,291 |   |   | $      | 148,587 |   |
|  Savings deposits                                |   |   | 177,053 |   |   |   | 188,419 |   |
|  Retail time deposits                            |   |   | 404,704 |   |   |   | 364,399 |   |
|  Wholesale deposits                              |   |   | 230,287 |   |   |   | 241,814 |   |
|         Total |   | $      | 962,335 |   |   | $      | 943,219 |   |

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Table of Contents

| Dollars in thousands                                        |   | Amount |    |   | Percent |   |
|-------------------------------------------------------------|--------|--------|---------|--------|---------|--------|
|  Three months or less                                  |   | $      | 52,093  |   |    |   | 12.6 | % |
|  Three through six months                              |   |   | 37,571  |   |    |   | 9.1 | % |
|  Six through twelve months                             |   |   | 84,822  |   |    |   | 20.5 | % |
|  Over twelve months                                    |   |   | 238,450 |   |    |   | 57.8 | % |
|          Total |   | $      | 412,936 |   |    |   | 100.0 | % |

| Dollars in thousands |   | Amount |    |
|----------------------|--------|--------|---------|
|  2011           |   | $      | 302,433 |   |
|  2012           |   |   | 113,389 |   |
|  2013           |   |   | 83,285  |   |
|  2014           |   |   | 46,410  |   |
|  2015           |   |   | 39,865  |   |
|  Thereafter     |   |   | 49,609  |   |
|  Total          |   | $      | 634,991 |   |

|                                                     |   | 2010       |   |
|----------------------------------------------------------|--------|------------|--------|
|                                                     |   |       |   |   |   |   |   | Federal Funds |   |
|                                                     |   | Short-term |   |   | Short-term |   |   | Purchased |   |
|                                                     |   | FHLB       |   |   | Repurchase |   |   | and Lines |   |
|  Dollars in thousands                               |   | Advances   |   |   | Agreements |   |   | of Credit |   |
|  Balance at December 31                             |   | $          | -      |   |   | $ | 629 |   |   | $ | 953 |   |
|  Average balance outstanding                        |   |       |   |   |   |   |   |   |   |   |   |   |
|      for the year               |   |       | 13,724 |   |   |   | 1,084 |   |   |   | 1,364 |   |
|  Maximum balance outstanding                        |   |       |   |   |   |   |   |   |   |   |   |   |
|      at any month end           |   |       | 45,000 |   |   |   | 1,787 |   |   |   | 3,617 |   |
|  Weighted average interest                          |   |       |   |   |   |   |   |   |   |   |   |   |
|      rate for the year          |   |       | 0.42   | % |   |   | 0.34 | % |   |   | 1.39 | % |
|  Weighted average interest                          |   |       |   |   |   |   |   |   |   |   |   |   |
|      rate for balances          |   |       |   |   |   |   |   |   |   |   |   |   |
|      outstanding at December 31 |   |       | 0.00   | % |   |   | 0.15 | % |   |   | 0.25 | % |

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|                                                     |   | 2009       |    |
|----------------------------------------------------------|--------|------------|---------|
|                                                     |   |       |    |   |   |   |   | Federal Funds |   |
|                                                     |   | Short-term |    |   | Short-term |   |   | Purchased |   |
|                                                     |   | FHLB       |    |   | Repurchase |   |   | and Lines |   |
|  Dollars in thousands                               |   | Advances   |    |   | Agreements |   |   | of Credit |   |
|  Balance at December 31                             |   | $          | 45,000  |   |   | $ | 1,123 |   |   | $ | 3,616 |   |
|  Average balance outstanding                        |   |       |    |   |   |   |   |   |   |   |   |   |
|      for the year               |   |       | 92,326  |   |   |   | 1,079 |   |   |   | 6,092 |   |
|  Maximum balance outstanding                        |   |       |    |   |   |   |   |   |   |   |   |   |
|      at any month end           |   |       | 184,825 |   |   |   | 2,433 |   |   |   | 9,663 |   |
|  Weighted average interest                          |   |       |    |   |   |   |   |   |   |   |   |   |
|      rate for the year          |   |       | 0.50    | % |   |   | 0.38 | % |   |   | 1.83 | % |
|  Weighted average interest                          |   |       |    |   |   |   |   |   |   |   |   |   |
|      rate for balances          |   |       |    |   |   |   |   |   |   |   |   |   |
|      outstanding at December 31 |   |       | 0.32    | % |   |   | 0.49 | % |   |   | 3.01 | % |

|                                    |   | Balance at December 31, |    |
|-----------------------------------------|--------|-------------------------|---------|
| Dollars in thousands                    |   | 2010                    |    |   | 2009 |   |
| Long-term FHLB advances                 |   | $                       | 182,375 |   |   | $ | 258,855 |   |
| Long-term reverse repurchase agreements |   |                    | 110,000 |   |   |   | 110,000 |   |
| Term loan                               |   |                    | 11,734  |   |   |   | 12,637 |   |
| Total                                   |   | $                       | 304,109 |   |   | $ | 381,492 |   |

----

Table of Contents

| Dollars in thousands |   | Amount |    |
|----------------------|--------|--------|---------|
| 2011                 |   | $      | 35,395  |   |
| 2012                 |   |   | 66,720  |   |
| 2013                 |   |   | 41,885  |   |
| 2014                 |   |   | 83,416  |   |
| 2015                 |   |   | 11,894  |   |
| Thereafter           |   |   | 101,188 |   |
| Total                |   | $      | 340,498 |   |

| Dollars in thousands                  |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  Current                         |   |   |   |   |   |   |   |   |   |
|      Federal |   | $      | 1,463  |   |   | $      | (5,915 | )      |   | $ | 5,110 |   |
|      State   |   |   | 6      |   |   |   | (22    | )      |   |   | 344 |   |
|                                  |   |   | 1,469  |   |   |   | (5,937 | )      |   |   | 5,454 |   |
|  Deferred                        |   |   |   |   |   |   |   |   |   |   |   |   |
|      Federal |   |   | (3,984 | )      |   |   | 4,018  |   |   |   | (5,268 | ) |
|      State   |   |   | (440   | )      |   |   | (246   | )      |   |   | (477 | ) |
|                                  |   |   | (4,424 | )      |   |   | 3,772  |   |   |   | (5,745 | ) |
|  Total                           |   | $      | (2,955 | )      |   | $      | (2,165 | )      |   | $ | (291 | ) |

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|                                           |   | 2010   |   |   | 2009    |   |   | 2008   |   |
|------------------------------------------------|--------|--------|--------|--------|---------|--------|--------|--------|--------|
|  Dollars in thousands                     |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
|  Computed tax at applicable               |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       statutory rate  |   | $      | (1,676 | )      |    |   | 34     |   |   | $ | (980 | ) |   |   | 34 |   |   | $ | 683 |   |   |   | 34 |   |
|  Increase (decrease) in taxes             |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       resulting from: |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Tax-exempt interest                      |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     and dividends, net     |   |   | (706   | )      |    |   | 9      |   |   |   | (856 | ) |   |   | 30 |   |   |   | (846 | ) |   |   | (42 | ) |
|  State income taxes, net                  |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     of Federal income tax  |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     benefit                |   |   | (286   | )      |    |   | 4      |   |   |   | (177 | ) |   |   | 6 |   |   |   | (88 | ) |   |   | (4 | ) |
|  Other, net                               |   |   | (287   | )      |    |   | (9     | )      |   |   | (152 | ) |   |   | 5 |   |   |   | (40 | ) |   |   | (2 | ) |
|  Applicable income taxes                  |   | $      | (2,955 | )      |    |   | 37     |   |   | $ | (2,165 | ) |   |   | 75 |   |   | $ | (291 | ) |   |   | (14 | ) |

|                                                                              |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|  Dollars in thousands                                                        |   | 2010   |   |   | 2009   |   |
|  Deferred tax assets                                                         |   |   |   |   |   |   |
|      Allowance for loan losses                           |   | $      | 6,373  |   |   | $      | 4,143 |   |
|      Deferred compensation                               |   |   | 1,440  |   |   |   | 1,166 |   |
|      Other deferred costs and accrued expenses           |   |   | 601    |   |   |   | 744 |   |
|      WV net operating loss carryforward                  |   |   | 683    |   |   |   | 373 |   |
|      Net unrealized loss on securities and               |   |   |   |   |   |   |   |   |
|          other financial instruments |   |   | 3,041  |   |   |   | 1,931 |   |
|                                                                              |   |   | 12,138 |   |   |   | 8,357 |   |
|  Deferred tax liabilities                                                    |   |   |   |   |   |   |   |   |
|      Depreciation                                        |   |   | 145    |   |   |   | 204 |   |
|      Accretion on tax-exempt securities                  |   |   | 14     |   |   |   | 21 |   |
|      Net unrealized loss on securities                   |   |   | 364    |   |   |   | - |   |
|      Purchase accounting adjustments                     |   |   |   |   |   |   |   |   |
|         and goodwill                      |   |   | 1,058  |   |   |   | 1,121 |   |
|                                                                              |   |   | 1,581  |   |   |   | 1,346 |   |
|  Net deferred tax assets                                                     |   | $      | 10,557 |   |   | $      | 7,011 |   |

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|                                      |   |    |    |   | Weighted-Average |   |
|-------------------------------------------|--------|---------|---------|--------|------------------|--------|
|                                      |   | Options |    |   | Exercise Price   |   |
|  Outstanding, December 31, 2007      |   |    | 337,580 |   |             | $      | 18.28 |   |
|      Granted     |   |    | -       |   |             |   | - |   |
|      Exercised   |   |    | (1,850  | )      |             |   | 4.81 |   |
|      Forfeited   |   |    | -       |   |             |   | - |   |
|  Outstanding, December 31, 2008      |   |    | 335,730 |   |             | $      | 18.36 |   |
|      Granted     |   |    | -       |   |             |   | - |   |
|      Exercised   |   |    | (8,000  | )      |             |   | 5.36 |   |
|      Forfeited   |   |    | (16,950 | )      |             |   | 22.46 |   |
|      Expired     |   |    | (1,600  | )      |             |   | 5.21 |   |
|  Outstanding, December 31, 2009      |   |    | 309,180 |   |             | $      | 18.54 |   |
|      Granted     |   |    | 8,000   |   |             | $      | 3.92 |   |
|      Exercised   |   |    | -       |   |             |   | - |   |
|      Forfeited   |   |    | -       |   |             |   | - |   |
|      Expired     |   |    | -       |   |             |   | - |   |
|  Outstanding, December 31, 2010      |   |    | 317,180 |   |             | $      | 18.17 |   |
|                                      |   |    |    |   |             |   |   |   |
|  Exercisable Options:                |   |    |    |   |             |   |   |   |
|     December 31, 2010 |   |    | 309,580 |   |             | $      | 18.51 |   |
|     December 31, 2009 |   |    | 308,880 |   |             | $      | 18.54 |   |
|     December 31, 2008 |   |    | 335,330 |   |             | $      | 18.36 |   |

|           |          |   | Options Outstanding |   |    | Options Exercisable |   |
|----------------|---------------|--------|---------------------|--------|---------|---------------------|--------|
|           |          |   |                |   |    |                |   |   | Wted. Avg. |   |   | Aggregate |   |   |   |   |   |   |   |   | Aggregate |   |
|           |          |   |                |   |    |                |   |   | Remaining |   |   | Intrinsic |   |   |   |   |   |   |   |   | Intrinsic |   |
| Range of       |          |   | # of                |   |    |                |   |   | Contractual |   |   | Value |   |   | # of |   |   |   |   |   | Value |   |
| exercise price |          |   | shares              |   |    | WAEP                |   |   | Life (yrs) |   |   | (in thousands) |   |   | shares |   |   | WAEP |   |   | (in thousands) |   |
| $              | 2.54 - $6.00  |   |                |   | 64,150  |                |   | $ | 5.15 |   |   |   | 3.08 |   |   | $ | - |   |   |   | 59,150 |   |   | $ | 5.37 |   |   | $ | 8 |   |
|           | 6.01 - 10.00  |   |                |   | 33,680  |                |   |   | 9.20 |   |   |   | 5.59 |   |   |   | - |   |   |   | 31,280 |   |   |   | 9.43 |   |   |   | - |   |
|           | 10.01 - 17.50 |   |                |   | 2,300   |                |   |   | 17.43 |   |   |   | 3.17 |   |   |   | - |   |   |   | 2,300 |   |   |   | 17.43 |   |   |   | - |   |
|           | 17.51 - 20.00 |   |                |   | 51,300  |                |   |   | 17.79 |   |   |   | 6.00 |   |   |   | - |   |   |   | 51,100 |   |   |   | 17.79 |   |   |   | - |   |
|           | 20.01 - 25.93 |   |                |   | 165,750 |                |   |   | 25.15 |   |   |   | 4.78 |   |   |   | - |   |   |   | 165,750 |   |   |   | 25.15 |   |   |   | - |   |
|           |          |   |                |   |    |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           |          |   |                |   | 317,180 |                |   | $ | 18.17 |   |   |   |   |   |   | $ | - |   |   |   | 309,580 |   |   | $ | 18.51 |   |   | $ | 8 |   |

|                                                              |   | December 31, |    |
|-------------------------------------------------------------------|--------|--------------|---------|
|  Dollars in thousands                                        |   | 2010         |    |   | 2009 |   |
| Commitments to extend credit:                                     |   |         |    |   |   |   |
|     Revolving home equity and                 |   |         |    |   |   |   |
|         credit card lines |   | $            | 43,848  |   |   | $ | 44,923 |   |
|     Construction loans                        |   |         | 15,232  |   |   |   | 25,628 |   |
|     Other loans                               |   |         | 36,342  |   |   |   | 41,462 |   |
| Standby letters of credit                                         |   |         | 4,882   |   |   |   | 5,572 |   |
| Total                                                             |   | $            | 100,304 |   |   | $ | 117,585 |   |

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| NOTE 16. |  REGULATORY MATTERS |
|----------|--------------------------|

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Table of Contents

|                                           |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |
|------------------------------------------------|--------|--------|---------|--------|--------------------|--------|--------|-------------------|--------|--------|-------------------------|--------|--------|------------------------|--------|--------|--------|--------|
|                                           |   |   |    |   |               |   |   |              |   |   |                    |   |   | To be Well Capitalized |   |
|                                           |   |   |    |   |               |   |   | Minimum Required  |   |   | under Prompt Corrective |   |
|                                           |   | Actual |    |   | Regulatory Capital |   |   | Action Provisions |   |
|  Dollars in thousands                     |   | Amount |    |   | Ratio              |   |   | Amount            |   |   | Ratio                   |   |   | Amount                 |   |   | Ratio  |   |
|  As of December 31, 2010                  |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |
|  Total Capital (to risk-weighted assets)  |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |
|      Summit           |   | $      | 129,610 |   |               |   | 11.8   | %                 |   | $      | 87,543                  |   |   |                   | 8.0    | %      |   | $      | 109,428 |   |   |   | 10.0 | % |
|      Summit Community |   |   | 138,164 |   |               |   | 12.6   | %                 |   |   | 87,558                  |   |   |                   | 8.0    | %      |   |   | 109,447 |   |   |   | 10.0 | % |
|  Tier 1 Capital (to risk-weighted assets) |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|      Summit           |   |   | 100,840 |   |               |   | 9.2    | %                 |   |   | 43,771                  |   |   |                   | 4.0    | %      |   |   | 65,657 |   |   |   | 6.0 | % |
|      Summit Community |   |   | 124,192 |   |               |   | 11.3   | %                 |   |   | 43,779                  |   |   |                   | 4.0    | %      |   |   | 65,668 |   |   |   | 6.0 | % |
|  Tier 1 Capital (to average assets)       |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|      Summit           |   |   | 100,840 |   |               |   | 6.9    | %                 |   |   | 43,869                  |   |   |                   | 3.0    | %      |   |   | 73,116 |   |   |   | 5.0 | % |
|      Summit Community |   |   | 124,192 |   |               |   | 8.5    | %                 |   |   | 43,851                  |   |   |                   | 3.0    | %      |   |   | 73,085 |   |   |   | 5.0 | % |
|                                           |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|  As of December 31, 2009                  |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|  Total Capital (to risk-weighted assets)  |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|      Summit           |   | $      | 133,931 |   |               |   | 11.3   | %                 |   | $      | 95,186                  |   |   |                   | 8.0    | %      |   | $      | 118,983 |   |   |   | 10.0 | % |
|      Summit Community |   |   | 134,874 |   |               |   | 11.4   | %                 |   |   | 94,666                  |   |   |                   | 8.0    | %      |   |   | 118,332 |   |   |   | 10.0 | % |
|  Tier 1 Capital (to risk-weighted assets) |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|      Summit           |   |   | 102,232 |   |               |   | 8.6    | %                 |   |   | 47,593                  |   |   |                   | 4.0    | %      |   |   | 71,390 |   |   |   | 6.0 | % |
|      Summit Community |   |   | 120,055 |   |               |   | 10.1   | %                 |   |   | 47,333                  |   |   |                   | 4.0    | %      |   |   | 70,999 |   |   |   | 6.0 | % |
|  Tier 1 Capital (to average assets)       |   |   |    |   |               |   |   |              |   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|      Summit           |   |   | 102,232 |   |               |   | 6.5    | %                 |   |   | 47,463                  |   |   |                   | 3.0    | %      |   |   | 79,106 |   |   |   | 5.0 | % |
|      Summit Community |   |   | 120,055 |   |               |   | 7.6    | %                 |   |   | 47,257                  |   |   |                   | 3.0    | %      |   |   | 78,762 |   |   |   | 5.0 | % |

| ·   | The Bank achieving and maintaining a minimum Tier 1 leverage capital ratio of at least 8% and a total risk-based capital ratio of at least 11%; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Bank providing 30 days prior notice of any declaration of intent to pay cash dividends to  provide the Bank’s regulatory authorities an opportunity to object; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Summit suspending all cash dividends on its common stock until further notice.  Dividends on all preferred stock, as well as interest payments on subordinated notes underlying Summit’s trust preferred securities, continue to be permissible; and, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Summit not incurring any additional debt, other than trade payables, without the prior written consent of the principal banking regulators. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                |   | December 31, 2010 |      |
|-----------------------------------------------------|--------|-------------------|-----------|
|                                                |   | Community         |      |   | Insurance |   |   |   |   |   |   |   |   |   |   |
| Dollars in thousands                                |   | Banking           |      |   | Services |   |   | Parent |   |   | Eliminations |   |   | Total |   |
|                                                |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                 |   | $                 | 42,069    |   |   | $ | - |   |   | $ | (1,917 | ) |   | $ | - |   |   | $ | 40,152 |   |
| Provision for loan losses                           |   |              | 21,350    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 21,350 |   |
| Net interest income after provision for loan losses |   |              | 20,719    |   |   |   | - |   |   |   | (1,917 | ) |   |   | - |   |   |   | 18,802 |   |
| Other income                                        |   |              | 2,204     |   |   |   | 4,674 |   |   |   | 1,426 |   |   |   | (1,083 | ) |   |   | 7,221 |   |
| Other expenses                                      |   |              | 26,054    |   |   |   | 4,258 |   |   |   | 1,724 |   |   |   | (1,083 | ) |   |   | 30,953 |   |
| Income (loss) before income taxes                   |   |              | (3,131    | ) |   |   | 416 |   |   |   | (2,215 | ) |   |   | - |   |   |   | (4,930 | ) |
| Income tax expense (benefit)                        |   |              | (2,293    | ) |   |   | 167 |   |   |   | (829 | ) |   |   | - |   |   |   | (2,955 | ) |
| Net income                                          |   |              | (838      | ) |   |   | 249 |   |   |   | (1,386 | ) |   |   | - |   |   |   | (1,975 | ) |
| Dividends on preferred shares                       |   |              | -         |   |   |   | - |   |   |   | 297 |   |   |   | - |   |   |   | 297 |   |
| Net income applicable to common shares              |   | $                 | (838      | ) |   | $ | 249 |   |   | $ | (1,683 | ) |   | $ | - |   |   | $ | (2,272 | ) |
| Intersegment revenue (expense)                      |   | $                 | (969      | ) |   | $ | (114 | ) |   | $ | 1,083 |   |   | $ | - |   |   | $ | - |   |
| Average assets                                      |   | $                 | 1,560,002 |   |   | $ | 6,910 |   |   | $ | 141,550 |   |   | $ | (196,320 | ) |   | $ | 1,512,142 |   |

|                                                |   | December 31, 2009 |      |
|-----------------------------------------------------|--------|-------------------|-----------|
|                                                |   | Community         |      |   | Insurance |   |   |   |   |   |   |   |   |   |   |
| Dollars in thousands                                |   | Banking           |      |   | Services |   |   | Parent |   |   | Eliminations |   |   | Total |   |
|                                                |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                 |   | $                 | 45,433    |   |   | $ | - |   |   | $ | (1,891 | ) |   | $ | - |   |   | $ | 43,542 |   |
| Provision for loan losses                           |   |              | 20,325    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 20,325 |   |
| Net interest income after provision for loan losses |   |              | 25,108    |   |   |   | - |   |   |   | (1,891 | ) |   |   | - |   |   |   | 23,217 |   |
| Other income                                        |   |              | 1,029     |   |   |   | 4,938 |   |   |   | 6,409 |   |   |   | (6,576 | ) |   |   | 5,800 |   |
| Other expenses                                      |   |              | 26,994    |   |   |   | 4,530 |   |   |   | 6,950 |   |   |   | (6,576 | ) |   |   | 31,898 |   |
| Income (loss) before income taxes                   |   |              | (857      | ) |   |   | 408 |   |   |   | (2,432 | ) |   |   | - |   |   |   | (2,881 | ) |
| Income tax expense (benefit)                        |   |              | (1,420    | ) |   |   | 160 |   |   |   | (905 | ) |   |   | - |   |   |   | (2,165 | ) |
| Net income                                          |   |              | 563       |   |   |   | 248 |   |   |   | (1,527 | ) |   |   | - |   |   |   | (716 | ) |
| Dividends on preferred shares                       |   |              | -         |   |   |   | - |   |   |   | 74 |   |   |   | - |   |   |   | 74 |   |
| Net income applicable to common shares              |   | $                 | 563       |   |   | $ | 248 |   |   | $ | (1,601 | ) |   | $ | - |   |   | $ | (790 | ) |
| Intersegment revenue (expense)                      |   | $                 | (6,462    | ) |   | $ | (114 | ) |   | $ | 6,576 |   |   | $ | - |   |   | $ | - |   |
| Average assets                                      |   | $                 | 1,592,969 |   |   | $ | 7,323 |   |   | $ | 138,003 |   |   | $ | (141,493 | ) |   | $ | 1,596,802 |   |

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|                                                |   | December 31, 2008 |      |
|-----------------------------------------------------|--------|-------------------|-----------|
|                                                |   | Community         |      |   | Insurance |   |   |   |   |   |   |   |   |   |   |
| Dollars in thousands                                |   | Banking           |      |   | Services |   |   | Parent |   |   | Eliminations |   |   | Total |   |
|                                                |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                 |   | $                 | 46,181    |   |   | $ | - |   |   | $ | (2,106 | ) |   | $ | - |   |   | $ | 44,075 |   |
| Provision for loan losses                           |   |              | 15,500    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,500 |   |
| Net interest income after provision for loan losses |   |              | 30,681    |   |   |   | - |   |   |   | (2,106 | ) |   |   | - |   |   |   | 28,575 |   |
| Other income                                        |   |              | (1,480    | ) |   |   | 5,030 |   |   |   | 6,283 |   |   |   | (6,965 | ) |   |   | 2,868 |   |
| Other expenses                                      |   |              | 24,201    |   |   |   | 4,488 |   |   |   | 7,710 |   |   |   | (6,965 | ) |   |   | 29,434 |   |
| Income (loss) before income taxes                   |   |              | 5,000     |   |   |   | 542 |   |   |   | (3,533 | ) |   |   | - |   |   |   | 2,009 |   |
| Income tax expense (benefit)                        |   |              | 881       |   |   |   | 212 |   |   |   | (1,384 | ) |   |   | - |   |   |   | (291 | ) |
| Net income                                          |   | $                 | 4,119     |   |   | $ | 330 |   |   | $ | (2,149 | ) |   | $ | - |   |   | $ | 2,300 |   |
| Intersegment revenue (expense)                      |   | $                 | (6,851    | ) |   | $ | (114 | ) |   | $ | 6,965 |   |   | $ | - |   |   | $ | - |   |
| Average assets                                      |   | $                 | 1,497,159 |   |   | $ | 7,509 |   |   | $ | 128,658 |   |   | $ | (115,274 | ) |   | $ | 1,518,052 |   |

| NOTE 18. |  EARNINGS PER SHARE |
|----------|--------------------------|

|                                                                              |   | For the Year Ended December 31, |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                              |   | 2010                            |   |   | 2009 |   |   | 2008 |   |
|                                                                              |   |                            |   |   | Common |   |   |   |   |   |   |   |   | Common |   |   |   |   |   |   |   |   | Common |   |   |   |   |
| Dollars in thousands,                                                             |   | Income                          |   |   | Shares |   |   | Per |   |   | Income |   |   | Shares |   |   | Per |   |   | Income |   |   | Shares |   |   | Per |   |
| except per share amounts                                                          |   | (Numerator)                     |   |   | (Denominator) |   |   | Share |   |   | (Numerator) |   |   | (Denominator) |   |   | Share |   |   | (Numerator) |   |   | (Denominator) |   |   | Share |   |
| Net income (loss)                                                                 |   | $                               | (1,975 | ) |   |   |   |   |   |   |   | $ | (716 | ) |   |   |   |   |   |   |   | $ | 2,300 |   |   |   |   |   |   |   |
|  Less preferred stock dividends                                              |   |                            | (297   | ) |   |   |   |   |   |   |   |   | (74 | ) |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |
|                                                                              |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Basic EPS                                                                   |   | $                               | (2,272 | ) |   |   | 7,425,472 |   |   | $ | (0.31 | ) |   | $ | (790 | ) |   |   | 7,421,596 |   |   | $ | (0.11 | ) |   | $ | 2,300 |   |   |   | 7,411,715 |   |   | $ | 0.31 |   |
|                                                                              |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Effect of dilutive securities:                      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          Stock options               |   |                            | -      |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | 10,076 |   |   |   |   |   |   |   | - |   |   |   | 35,276 |   |   |   |   |   |
|          Convertible preferred stock |   |                            | -      |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |
|                                                                              |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted EPS                                                                       |   | $                               | (2,272 | ) |   |   | 7,425,472 |   |   | $ | (0.31 | ) |   | $ | (790 | ) |   |   | 7,431,672 |   |   | $ | (0.11 | ) |   | $ | 2,300 |   |   |   | 7,446,991 |   |   | $ | 0.31 |   |

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Table of Contents

| Balance Sheets                                                                                                           |   |         |    |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------|--------|
|                                                                                                                     |   | December 31, |    |
|  Dollars in thousands                                                                                               |   | 2010         |    |   | 2009   |   |
|  Assets                                                                                                             |   |         |    |   |   |   |
|  Cash                                                                                                               |   | $            | 4,608   |   |   | $      | 7,164 |   |
|  Investment in subsidiaries, eliminated in consolidation                                                            |   |         | 132,767 |   |   |   | 128,263 |   |
|  Securities available for sale                                                                                      |   |         | 1,173   |   |   |   | 114 |   |
|  Premises and equipment                                                                                             |   |         | 33      |   |   |   | 5,695 |   |
|  Accrued interest receivable                                                                                        |   |         | 6       |   |   |   | 19 |   |
|  Other assets                                                                                                       |   |         | 1,098   |   |   |   | 1,953 |   |
|              Total assets                               |   | $            | 139,685 |   |   | $      | 143,208 |   |
|  Liabilities and Shareholders' Equity                                                                               |   |         |    |   |   |   |   |   |
|  Short-term borrowings                                                                                              |   | $            | -       |   |   | $      | 2,666 |   |
|  Long-term borrowings                                                                                               |   |         | 11,734  |   |   |   | 12,637 |   |
|  Subordinated debentures                                                                                            |   |         | 16,800  |   |   |   | 16,800 |   |
|  Subordinated debentures owed to                                                                                    |   |         |    |   |   |   |   |   |
|     unconsolidated subsidiary trusts                                                                 |   |         | 19,589  |   |   |   | 19,589 |   |
|  Other liabilities                                                                                                  |   |         | 1,741   |   |   |   | 856 |   |
|          Total liabilities                                                  |   |         | 49,864  |   |   |   | 52,548 |   |
|   Preferred stock and related surplus, $1.00 par value, authorized                                             |   |         |    |   |   |   |   |   |
|      250,000 shares; 3,710 shares issued 2010 and 2009                                          |   |         | 3,519   |   |   |   | 3,519 |   |
|  Common stock and related surplus, $2.50 par value, authorized                                                      |   |         |    |   |   |   |   |   |
|      20,000,000 shares; issued 2010 and 2009 - 7,425,472 shares                                 |   |         | 24,508  |   |   |   | 24,508 |   |
|  Retained earnings                                                                                                  |   |         | 61,201  |   |   |   | 63,474 |   |
|   Accumulated other comprehensive income                                                                       |   |         | 593     |   |   |   | (841 | ) |
|          Total shareholders' equity                                         |   |         | 89,821  |   |   |   | 90,660 |   |
|                                                                                                                     |   |         |    |   |   |   |   |   |
|              Total liabilities and shareholders' equity |   | $            | 139,685 |   |   | $      | 143,208 |   |

| Statements of Income                                                                            |   |                            |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                            |   | For the Year Ended December 31, |   |
|  Dollars in thousands                                                                      |   | 2010                            |   |   | 2009   |   |   | 2008   |   |
|  Income                                                                                    |   |                            |   |   |   |   |   |   |   |
|  Dividends from subsidiaries                                                               |   | $                               | 500    |   |   | $      | 1,000  |   |   | $ | 2,000 |   |
|  Other dividends and interest income                                                       |   |                            | 17     |   |   |   | 25     |   |   |   | 40 |   |
|  Realized securities gains                                                                 |   |                            | 343    |   |   |   | -      |   |   |   | - |   |
|  Other-than-temporary impairment of securities                                             |   |                            | -      |   |   |   | (215   | )      |   |   | (693 | ) |
|  Management and service fees from subsidiaries                                             |   |                            | 1,083  |   |   |   | 6,624  |   |   |   | 6,976 |   |
|          Total income                              |   |                            | 1,943  |   |   |   | 7,434  |   |   |   | 8,323 |   |
|  Expense                                                                                   |   |                            |   |   |   |   |   |   |   |   |   |   |
|  Interest expense                                                                          |   |                            | 1,934  |   |   |   | 1,916  |   |   |   | 2,146 |   |
|  Operating expenses                                                                        |   |                            | 1,724  |   |   |   | 6,950  |   |   |   | 7,710 |   |
|          Total expenses                            |   |                            | 3,658  |   |   |   | 8,866  |   |   |   | 9,856 |   |
|  Income (loss) before income taxes and equity in                                           |   |                            |   |   |   |   |   |   |   |   |   |   |
|      undistributed income of subsidiaries                              |   |                            | (1,715 | )      |   |   | (1,432 | )      |   |   | (1,533 | ) |
|  Income tax (benefit)                                                                      |   |                            | (829   | )      |   |   | (905   | )      |   |   | (1,384 | ) |
|  Income (loss) before equity in undistributed income                                       |   |                            |   |   |   |   |   |   |   |   |   |   |
|      of subsidiaries                                                   |   |                            | (886   | )      |   |   | (527   | )      |   |   | (149 | ) |
|  Equity in (distributed) undistributed                                                     |   |                            |   |   |   |   |   |   |   |   |   |   |
|       income of subsidiaries                                      |   |                            | (1,089 | )      |   |   | (189   | )      |   |   | 2,449 |   |
|              Net income (loss) |   |                            | (1,975 | )      |   |   | (716   | )      |   |   | 2,300 |   |
|  Dividends on preferred shares                                                             |   |                            | 297    |   |   |   | 74     |   |   |   | - |   |
|  Net income (loss) applicable to common shares                                             |   | $                               | (2,272 | )      |   | $      | (790   | )      |   | $ | 2,300 |   |

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| Statements of Cash Flows                                                                                                                  |   |                            |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                      |   | For the Year Ended December 31, |   |
|  Dollars in thousands                                                                                                                |   | 2010                            |   |   | 2009   |   |   | 2008   |   |
|  CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                |   |                            |   |   |   |   |   |   |   |
|      Net income (loss)                                                                                           |   | $                               | (1,975 | )      |   | $      | (716   | )      |   | $ | 2,300 |   |
|      Adjustments to reconcile net earnings to                                                                    |   |                            |   |   |   |   |   |   |   |   |   |   |
|          net cash provided by operating activities:                                          |   |                            |   |   |   |   |   |   |   |   |   |   |
|          Equity in (undistributed) distributed net income of                                 |   |                            |   |   |   |   |   |   |   |   |   |   |
|              subsidiaries                                                |   |                            | 1,089  |   |   |   | 189    |   |   |   | (2,449 | ) |
|          Deferred tax expense (benefit)                                                      |   |                            | (120   | )      |   |   | (146   | )      |   |   | (242 | ) |
|          Depreciation                                                                        |   |                            | 113    |   |   |   | 612    |   |   |   | 654 |   |
|          OTTI on equity securities                                                           |   |                            | -      |   |   |   | 215    |   |   |   | 693 |   |
|          Realized security (gains) losses                                                    |   |                            | (343   | )      |   |   | -      |   |   |   | - |   |
|          Tax benefit of exercise of stock options                                            |   |                            | -      |   |   |   | -      |   |   |   | 6 |   |
|          Stock compensation expense                                                          |   |                            | -      |   |   |   | -      |   |   |   | 12 |   |
|          (Increase) decrease in other assets                                                 |   |                            | (740   | )      |   |   | (1,065 | )      |   |   | 2,337 |   |
|          Increase (decrease) in other liabilities                                            |   |                            | 883    |   |   |   | (178   | )      |   |   | 114 |   |
|              Net cash provided by (used in) by operating activities |   |                            | (1,093 | )      |   |   | (1,089 | )      |   |   | 3,425 |   |
|                                                                                                                                      |   |                            |   |   |   |   |   |   |   |   |   |   |
|  CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                |   |                            |   |   |   |   |   |   |   |   |   |   |
|      Investment in subsidiaries                                                                                  |   |                            | (4,824 | )      |   |   | (5,500 | )      |   |   | (10,500 | ) |
|      Proceeds from sales of available for sale securities                                                        |   |                            | 356    |   |   |   |   |   |   |   |   |   |
|      Purchase of available for sale securities                                                                   |   |                            | -      |   |   |   | (37    | )      |   |   | (142 | ) |
|      Proceeds from sales of  premises and equipment                                                    |   |                            | 5,552  |   |   |   | -      |   |   |   | - |   |
|      Purchases of premises and equipment                                                                         |   |                            | (4     | )      |   |   | (64    | )      |   |   | (463 | ) |
|      Proceeds from sale of other assets                                                                          |   |                            | 1,322  |   |   |   | -      |   |   |   | - |   |
|              Net cash provided  by (used in) investing activities   |   |                            | 2,402  |   |   |   | (5,601 | )      |   |   | (11,105 | ) |
|                                                                                                                                      |   |                            |   |   |   |   |   |   |   |   |   |   |
|  CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                |   |                            |   |   |   |   |   |   |   |   |   |   |
|      Dividends paid to shareholders                                                                              |   |                            | -      |   |   |   | (445   | )      |   |   | (2,668 | ) |
|      Dividends paid on preferred stock                                                                           |   |                            | (297   | )      |   |   | -      |   |   |   | - |   |
|      Exercise of stock options                                                                                   |   |                            | -      |   |   |   | 43     |   |   |   | 9 |   |
|      Reinvested dividends                                                                                        |   |                            | -      |   |   |   | 12     |   |   |   | 35 |   |
|      Net increase (decrease) in short-term borrowings                                                            |   |                            | (2,666 | )      |   |   | 467    |   |   |   | (318 | ) |
|      Proceeds from long-term borrowings                                                                          |   |                            | -      |   |   |   | -      |   |   |   | 3,782 |   |
|      Repayment of long-term borrowings                                                                           |   |                            | (902   | )      |   |   | -      |   |   |   | (2,000 | ) |
|      Proceeds from issuance of subordinated debentures                                                           |   |                            | -      |   |   |   | 6,762  |   |   |   | 10,000 |   |
|      Net proceeds from issuance of preferred stock                                                               |   |                            | -      |   |   |   | 3,519  |   |   |   | - |   |
|  Net cash provided by (used in) financing activities                                                                            |   |                            | (3,865 | )      |   |   | 10,358 |   |   |   | 8,840 |   |
|          Increase (decrease) in cash                                                         |   |                            | (2,556 | )      |   |   | 3,668  |   |   |   | 1,160 |   |
|      Cash:                                                                                                       |   |                            |   |   |   |   |   |   |   |   |   |   |
|          Beginning                                                                           |   |                            | 7,164  |   |   |   | 3,496  |   |   |   | 2,336 |   |
|          Ending                                                                              |   | $                               | 4,608  |   |   | $      | 7,164  |   |   | $ | 3,496 |   |
|                                                                                                                                      |   |                            |   |   |   |   |   |   |   |   |   |   |
|  SUPPLEMENTAL DISCLOSURES OF CASH                                                                                                    |   |                            |   |   |   |   |   |   |   |   |   |   |
|      FLOW INFORMATION                                                                                            |   |                            |   |   |   |   |   |   |   |   |   |   |
|      Cash payments for:                                                                                          |   |                            |   |   |   |   |   |   |   |   |   |   |
|          Interest                                                                            |   | $                               | 1,941  |   |   | $      | 1,936  |   |   | $ | 2,088 |   |

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|                                           |   | 2010       |   |
|------------------------------------------------|--------|------------|--------|
|                                           |   | First      |   |   | Second |   |   | Third |   |   | Fourth |   |
| Dollars in thousands, except per share amounts |   | Quarter    |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |
| Interest income                                |   | $          | 20,645 |   |   | $ | 20,208 |   |   | $ | 19,554 |   |   | $ | 19,266 |   |
| Net interest income                            |   |       | 10,232 |   |   |   | 9,936 |   |   |   | 9,548 |   |   |   | 10,437 |   |
| Net income (loss)                              |   |       | 120    |   |   |   | (2,878 | ) |   |   | (128 | ) |   |   | 910 |   |
| Net income applicable to common shares         |   |       | 836    |   |   |   | (202 | ) |   |   | (2,952 | ) |   |   | 46 |   |
| Basic earnings per share                       |   | $          | 0.11   |   |   | $ | (0.03 | ) |   | $ | (0.40 | ) |   | $ | 0.01 |   |
| Diluted earnings per share                     |   | $          | 0.11   |   |   | $ | (0.03 | ) |   | $ | (0.40 | ) |   | $ | 0.01 |   |
|                                           |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |  2009 |   |
|                                           |   | First      |   |   | Second |   |   | Third |   |   | Fourth |   |
| Dollars in thousands, except per share amounts |   | Quarter    |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |
| Interest income                                |   | $          | 22,991 |   |   | $ | 22,761 |   |   | $ | 22,417 |   |   | $ | 21,367 |   |
| Net interest income                            |   |       | 11,336 |   |   |   | 11,107 |   |   |   | 10,896 |   |   |   | 10,203 |   |
| Net income (loss)                              |   |       | 1,765  |   |   |   | (3,450 | ) |   |   | 1,403 |   |   |   | (434 | ) |
| Net income applicable to common shares         |   |       | 1,765  |   |   |   | (3,450 | ) |   |   | 1,403 |   |   |   | (508 | ) |
| Basic earnings per share                       |   | $          | 0.24   |   |   | $ | (0.47 | ) |   | $ | 0.19 |   |   | $ | (0.07 | ) |
| Diluted earnings per share                     |   | $          | 0.24   |   |   | $ | (0.46 | ) |   | $ | 0.19 |   |   | $ | (0.07 | ) |

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Table of Contents

Item 9.

Item 9A.

Item 9B.

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Table of Contents

PART III.

Item 10.

Item 11.

Item 12.

| Plan Category                                                |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) |    |   | Weighted-average exercise price of outstanding options, warrants and rights ($) |   |   | Number of securities remaining available for future issuance under equity compensation plans (#) |   |
|--------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|---------|--------|---------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------|--------|
|  Equity compensation plans approved by stockholders     |   |                                                                                            | 317,180 |   |                                                                            | $      | 18.17  |                                                                                             |   |   | 350,000 |   |
|  Equity compensation plans not approved by stockholders |   |                                                                                            | -       |   |                                                                            |   | -      |                                                                                             |   |   | - |   |
|  Total                                                  |   |                                                                                            | 317,180 |   |                                                                            | $      | 18.17  |                                                                                             |   |   | 350,000 |   |

Item 13.

Item 14.

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Table of Contents

PART IV.

Item 15.

|                 |               |  Page(s) in Form 10-K                                                                    |
|----------------------|--------------------|-----------------------------------------------------------------------------------------------|
|  Exhibit Number |  Description  |  or Prior Filing Reference                                                               |
| (3)                  |               | Articles of Incorporation and By-laws:                                                        |   |   |
|                 |               |  (i)                                                                                     | Amended and Restated Articles of |   |
|                 |               |                                                                                          | Incorporation of Summit Financial Group, Inc. | (a) |
|                 |               | (ii)                                                                                          | Amended and Restated By-laws of |   |
|                 |               |                                                                                          | Summit Financial Group, Inc. | (b) |
|                 |               |                                                                                          |   |   |
| (10)                 | Material Contracts |                                                                                          |   |   |
|                 | (i)                | Amended and Restated Employment Agreement with  H. Charles Maddy, III               |   | (c) |
|                 | (ii)               | First Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III       |   | (d) |
|                 | (iii)              | Second Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III |   | (e) |
|                 | (iv)               | Change in Control Agreement with H. Charles Maddy, III                                        |   | (f) |
|                 | (v)                | Executive Salary Continuation Agreement with H. Charles Maddy, III                            |   | (g)  |
|                 | (vi)          | Form of Amended and Restated Employment Agreement entered into                                |   |   |
|                 |               |                                                                                          | with Robert S. Tissue, Patrick N. Frye and Scott C. Jennings | (h)  |
|                 | (vii)         | Form of Executive Salary Continuation Agreement entered into with                             |   |   |
|                 |               |                                                                                          | Robert S. Tissue, Patrick N. Frye and Scott C. Jennings | (i) |
|                 | (viii)             | Amended and Restated Employment Agreement with Ronald F. Miller                               |   | (j)  |

|   | (ix)         | Form of Executive Salary Continuation Agreement entered into with            |                                                                        |       |
|--------|--------------|------------------------------------------------------------------------------|-----------------------------------------------------------------------------|------------|
|   |         |                                                                         | Ronald F. Miller                                                            | (k)        |
|   | (x)          | Form of Indemnification Agreement between Summit and each Director of Summit |                                                                        | (l)        |
|   | (xi)         | 1998 Officers Stock Option Plan                                              |                                                                        | (m)        |
|   | (xii)        | Board Attendance and Compensation Policy, as amended                         |                                                                        |       |
|   | (xiii)       | Summit Financial Group, Inc. Directors Deferral Plan                         |                                                                        | (n)        |
|   | (xiv)        | Amendment No. 1 to Directors Deferral Plan                                   |                                                                        | (o)        |
|   | (xv)         | Amendment No. 2 to Directors Deferral Plan                                   |                                                                        | (p)        |
|   | (xvi)        | Summit Community Bank, Inc. Amended and Restated Directors Deferral Plan     |                                                                        | (q)        |
|   | (xvii)       | Rabbi Trust for The Summit Financial Group, Inc. Directors Deferral Plan     |                                                                        | (r)        |
|   | (xviii)      | Amendment No. One to Rabbi Trust for Summit Financial Group, Inc. Directors  |                                                                        |       |
|   |         |                                                                         | Deferral Plan                                                               | (s)   |
|   | (xix)        | Amendment No. One to Rabbi Trust for Summit Community Bank, Inc.             |                                                                        |       |
|   |         |                                                                         | (successor in interest to Capital State Bank, Inc.) Directors Deferral Plan | (t)        |
|   | (xx)         | Amendment No. One to Rabbi Trust for Summit Community Bank, Inc.             |                                                                        |       |
|   |         |                                                                         | (successor in interest to Shenandoah Valley National Bank, Inc.) Directors  |       |
|   |         |                                                                         | Deferral Plan                                                               | (u)   |
|   | (xxi)        | Amendment No. One to Rabbi Trust for Summit Community Bank, Inc.             |                                                                        |       |
|   |         |                                                                         | (successor in interest to South Branch Valley National Bank)                |       |
|   |         |                                                                         | Directors Deferral Plan                                                     | (v)   |
|   | (xxii)       | Summit Financial Group, Inc. Incentive Plan                                  |                                                                        | (w)        |
|   | (xxiii)      | Summit Community Bank Incentive Compensation Plan                            |                                                                        | (x)        |
|   | (xxiv)       | Form of Non-Qualified Stock Option Grant Agreement                           |                                                                        | (y)        |
|   | (xxv)        | Form of First Amendment to Non-Qualified Stock Option Grant Agreement        |                                                                        | (z)        |
|   | (xxvi)  | 2009 Officer Stock Option Plan                                               |                                                                        | (aa)  |

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|                 |                          |  Page(s) in Form 10-K      |
|----------------------|-------------------------------|---------------------------------|
|  Exhibit Number |    Description |  or Prior Filing Reference |

| (12)         |   | Statements Re:  Computation of Ratios                         | (bb) |
|--------------|--------|-------------------------------------------------------------------------|------|
| (21)         |   | Subsidiaries of Registrant                                              | (cc) |
| (23)    |   | Consent of Arnett & Foster, P.L.L.C                                 |
| (24)         |   | Power of Attorney                                                       |
| (31.1)  |   | Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer |
| (31.2)  |   | Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer |
| (32.1)       |   | Sarbanes-Oxley Act Section 906 Certification of Chief Executive Officer |
| (32.2)       |   | Sarbanes-Oxley Act Section 906 Certification of Chief Financial Officer |

|   | (a) | Incorporated by reference to Exhibit 3.i of Summit Financial Group, Inc.’s filing on Form 10-Q dated March 31, 2006.        |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------|
|   | (b) | Incorporated by reference to Exhibit 3.2 of Summit Financial Group Inc.’s filing on Form 10-Q dated June 30, 2006.          |
|   | (c) | Incorporated by reference to Exhibit 10.1 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.     |
|   | (d) | Incorporated by reference to Exhibit 10.1 of Summit Financial Group Inc.’s filing on Form 8-K dated February 4, 2010.       |
|   | (e) | Incorporated by reference to Exhibit 10.1 of Summit Financial Group Inc.’s filing on Form 8-K dated December 14, 2010.      |
|   | (f) | Incorporated by reference to Exhibit 10.2 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.     |
|   | (g) | Incorporated by reference to Exhibit 10.3 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.     |
|   | (h) | Incorporated by reference to Exhibit 10.4 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.     |
|   | (i) | Incorporated by reference to Exhibit 10.5 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.     |
|   | (j) | Incorporated by reference to Exhibit 10.6 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.     |
|   | (k) | Incorporated by reference to Exhibit 10.9 of Summit Financial Group, Inc.’s filing on Form 10-K dated December 31, 2008.    |
|   | (l) | Incorporated by reference to Exhibit 1.01 of Summit Financial Group Inc.’s filing on Form 8-K dated February 12, 2009. |
|   | (m) | Incorporated by reference to Exhibit 10 of South Branch Valley Bancorp, Inc.’s filing on Form 10-QSB dated June 30, 1998.   |
|   | (n) | Incorporated by reference to Exhibit 10.10 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2005.    |
|   | (o) | Incorporated by reference to Exhibit 10.11 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2005.    |
|   | (p) | Incorporated by reference to Exhibit 10.14 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.    |
|   | (q) | Incorporated by reference to Exhibit 10.15 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.    |
|   | (r) | Incorporated by reference to Exhibit 10.16 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.    |
|   | (s) | Incorporated by reference to Exhibit 10.17 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.    |

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|   | (t) | Incorporated by reference to Exhibit 10.18 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------|

|   | (u)  | Incorporated by reference to Exhibit 10.19 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.    |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------|
|   | (v)  | Incorporated by reference to Exhibit 10.20 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.    |
|   | (w)  | Incorporated by reference to Exhibit 10.2 of Summit Financial Group Inc.’s filing on Form 8-K dated December 14, 2007.      |
|   | (x)  | Incorporated by reference to Exhibit 10.4 of Summit Financial Group Inc.’s filing on Form 8-K dated December 14, 2007.      |
|   | (y)  | Incorporated by reference to Exhibit 10.3 of Summit Financial Group Inc.’s filing on Form 10-Q dated March 31, 2006.        |
|   | (z)  | Incorporated by reference to Exhibit 10.4 of Summit Financial Group Inc.’s filing on Form 10-Q dated March 31, 2006.        |
|   | (aa) | Incorporated by reference to Exhibit 12 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.       |
|   | (bb) | Incorporated by reference to Exhibit 10.1 of Summit Financial Group Inc.’s filing on Form 8-K dated May 14, 2009. |
|   | (cc) | Incorporated by reference to Exhibit 21 of Summit Financial Group Inc.’s filing on Form 10-K dated December 31, 2008.       |

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SIGNATURES

| By: /s/ H. Charles Maddy, III                                                      2/28/2011                                                        | By: /s/ Julie R. Cook                                         2/28/2011                                                             |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        H. Charles Maddy, III                                                            Date |       Julie R. Cook                                                Date |
|        President & Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                      |       Vice President &                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                              |       Chief Accounting Officer                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                             |
| By: /s/ Robert S. Tissue                                                      2/28/2011                                                             |                                                                                                                                                                                                                                                                                                                                             |
|        Robert S. Tissue                                                           Date       |                                                                                                                                                                                                                                                                                                                                             |
|        Senior Vice President &                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                             |
|        Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                             |

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