| Index to Financial Statement Section                                                                                                                                        | F-1              |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|
| Report of Independent Registered Public Accounting Firm                                                                                                                     | F-2              |
| Consolidated Balance Sheets                                                                                                                                                 |
| December 31, 2010 and 2009                                                                                                                                                  | F-3              |
| Consolidated Statements of Operations for the Years                                                                                                                         |
| Ended December 31, 2010, 2009 and 2008                                                                                                                                      | F-4              |
| Consolidated Statements of Changes in Shareholders'                                                                                                                         |
| Equity for the Years Ended December 31, 2010, 2009 and 2008                                                                                                            | F-5              |
| Consolidated Statements of Cash Flows for the Years                                                                                                                         |
| Ended December 31, 2010, 2009 and 2008                                                                                                                                      | F-6              |
| Notes to Consolidated Financial Statements                                                                                                                                  | F-7              |
| Management’s Discussion and Analysis of Financial                                                                                                                     |
| Condition and Results of Operations                                                                                                                                         | F-33             |
| Selected Five-Year Financial Data – 2006-2010                                                                                                                         |
| Selected Financial Condition Highlights                                                                                                                                     | F-33             |
| Selected Operating Highlights                                                                                                                                               | F-34             |
| Selected Quarterly Data                                                                                                                                                     | F-35             |
| Market for Registrant's Common Equity and                                                                                                                                   |
| Related Shareholder Matters                                                                                                                                                 | F-35             |
| Stock Performance Graph                                                                                                                                                     | F-36             |
|                 Introduction                                                                     | F-37             |
|                Critical Accounting Estimates                                                          | F-38             |
|                Results of Operations                                                             |
|          2010 Compared with 2009                                                                                                    | F-42             |
|                          2009 Compared with 2008    | F-43             |
|                Financial Condition and Capital Resources                                         | F-44             |
|                Loan Concentrations                                                          |  F-44       |
|                Liquidity and Interest Rate Sensitivity Management                           |  F-46  |
|                Off-Balance Sheet Arrangements                                                    |  F-46       |
|                Forward Looking Statements                                                   |  F-47       |
|               Cash Flow/Maturity Gap and Repricing Data                                     |  F-48  |
|               Average Balance Sheet and Rate/Volume Analysis – 2010 and 2009     |  F-49  |
|               Average Balance Sheet and Rate/Volume Analysis – 2009 and 2008     |  F-50  |

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|                                                                                                   |               December 31, |
|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|
|                                                                                                   | 2010                                                                                             |   | 2009 |
| Assets                                                                                                 |                                                                                             |   |   |
| Cash and due from banks                                                                                | $     17,990                                                            |   | $     19,253 |
| Federal funds sold                                                                                     | 110                                                                                              |   | 8,575 |
| Interest-bearing deposits in banks                                                                     | 40,836                                                                                           |   | 12,707 |
|      Cash and cash equivalents                                                | 58,936                                                                                           |   | 40,535 |
| Securities available for sale, at fair value (amortized                                                |                                                                                             |   |   |
|    cost of $136,980 and $86,596)                                                        | 138,099                                                                                          |   | 87,919 |
| Loans, net of allowance for loan losses of $20,350   and $17,678                        | 806,212                                                                                          |   | 866,208 |
| Premises and equipment, net                                                                            | 15,056                                                                                           |   | 15,574 |
| Other real estate owned                                                                                | 13,199                                                                                           |   | 8,329 |
| Bank-owned life insurance                                                                              | 6,309                                                                                            |   | 6,434 |
| Goodwill and other intangible assets, net                                                              | 3,786                                                                                            |   | 2,498 |
| Other assets                                                                                           | 25,333                                                                                           |   | 23,011 |
|           Total assets                               | $ 1,066,930                                                                                      |   | $ 1,050,508 |
|                                                                                                   |                                                                                             |   |   |
| Liabilities                                                                                            |                                                                                             |   |   |
| Deposits:                                                                                              |                                                                                             |   |   |
|    Noninterest-bearing                                                                  | $     95,725                                                            |   | $     82,557 |
|    Interest-bearing demand                                                              | 140,531                                                                                          |   | 143,559 |
|    Savings                                                                              | 20,117                                                                                           |   | 16,893 |
|    Money market                                                                         | 265,840                                                                                          |   | 228,124 |
|    Time deposits                                                                        | 401,532                                                                                          |   | 413,436 |
|           Total deposits                             | 923,745                                                                                          |   | 884,569 |
| Short-term borrowings                                                                                  | 15,075                                                                                           |   | 23,553 |
| Other borrowings                                                                                       | 10,536                                                                                           |   | 15,988 |
| Federal Home Loan Bank advances                                                                        | 17,658                                                                                           |   | 31,664 |
| Subordinated debt to nonconsolidated subsidiaries                                                      | 10,310                                                                                           |   | 10,310 |
| Other liabilities                                                                                      | 3,803                                                                                            |   | 5,398 |
|           Total liabilities                          | 981,127                                                                                          |   | 971,482 |
|                                                                                                   |                                                                                             |   |   |
| Commitments and contingencies (Notes 17 and 20)                                                        |                                                                                             |   |   |
|                                                                                                   |                                                                                             |   |   |
| Shareholders' equity                                                                                   |                                                                                             |   |   |
| Preferred stock, par value $1 per share:                                                               |                                                                                             |   |   |
|    authorized 10,000,000 shares, none issued                                            | -                                                                                                |   | - |
| Common stock, par value $1 per share:  shares authorized                                     |                                                                                             |   |   |
|    20,000,000, issued 7,201,346 and 5,933,789                                           | 7,201                                                                                            |   | 5,934 |
| Additional paid-in capital                                                                             | 48,634                                                                                           |   | 38,605 |
| Retained earnings                                                                                      | 29,275                                                                                           |   | 33,383 |
| Treasury stock, at cost, 2,483 and 1,443 shares                                                        | (1)                                                                                              |   | (4) |
| Accumulated other comprehensive income, net                                                            | 694                                                                                              |   | 1,108 |
|           Total shareholders' equity                 | 85,803                                                                                           |   | 79,026 |
|           Total liabilities and shareholders' equity | $ 1,066,930                                                                                      |   | $ 1,050,508 |

----

|                                                                                           | For the Years Ended December 31,                                             |
|------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|
|                                                                                           |             2010 |   |             2009 |   |  2008  |
| Interest and dividend income                                                                   |                                                                         |   |   |   |   |
| Loans, including fees                                                                          | $ 45,001                                                                     |   | $ 47,081 |   | $ 53,259  |
| Loans held for sale                                                                            | -                                                                            |   | - |   | 60  |
| Investment securities:                                                                         |                                                                         |   |   |   |   |
|    Taxable                                                                      | 2,401                                                                        |   | 3,220 |   | 2,803  |
|    Tax-exempt                                                                   | 313                                                                          |   | 154 |   | 87  |
| Dividends                                                                                      | 47                                                                           |   | 45 |   | 191  |
| Deposits with banks                                                                            | 147                                                                          |   | 45 |   | 149  |
| Federal funds sold                                                                             | 20                                                                           |   | 18 |   | 133  |
|           Total interest and dividend income | 47,929                                                                       |   | 50,563 |   | 56,682  |
| Interest expense                                                                               |                                                                         |   |   |   |   |
| Deposits                                                                                       | 12,460                                                                       |   | 16,454 |   | 21,842  |
| Short-term and other borrowings                                                                | 1,138                                                                        |   | 1,045 |   | 596  |
| Federal Home Loan Bank advances                                                                | 458                                                                          |   | 397 |   | 1,359  |
| Subordinated debt                                                                              | 306                                                                          |   | 362 |   | 642  |
|           Total interest expense             | 14,362                                                                       |   | 18,258 |   | 24,439  |
| Net interest income                                                                            | 33,567                                                                       |   | 32,305 |   | 32,243  |
| Provision for loan losses                                                                      | 21,020                                                                       |   | 13,065 |   | 6,000  |
| Net interest income after provision for loan losses                                            | 12,547                                                                       |   | 19,240 |   | 26,243  |
| Noninterest income                                                                             |                                                                         |   |   |   |   |
| Trust and asset management fees                                                                | 2,599                                                                        |   | 2,351 |   | 2,832  |
| Service charges on deposit accounts                                                            | 1,788                                                                        |   | 1,809 |   | 1,881  |
| Mortgage related income, net                                                                   | 398                                                                          |   | 432 |   | 295  |
| Gain on sale of securities                                                                     | 608                                                                          |   | 2,119 |   | 163  |
| Gain on hedges                                                                                 | 2                                                                            |   | 873 |   | 1,288  |
| Other operating income                                                                         | 1,916                                                                        |   | 1,238 |   | 1,216  |
|           Total noninterest income           | 7,311                                                                        |   | 8,822 |   | 7,675  |
| Noninterest expense                                                                            |                                                                         |   |   |   |   |
| Salaries and employee benefits                                                                 | 11,948                                                                       |   | 12,146 |   | 13,584  |
| Occupancy and equipment                                                                        | 3,945                                                                        |   | 3,716 |   | 3,884  |
| Information technology                                                                         | 2,101                                                                        |   | 1,810 |   | 1,633 |
| FDIC deposit insurance                                                                         | 1,688                                                                        |   | 1,886 |   | 653  |
| Amortization of intangibles                                                                    | 171                                                                          |   | 144 |   | 144  |
| Loss on sale and write-downs of foreclosed assets                                              | 2,472                                                                        |   | 2,566 |   | 228  |
| Other operating expense                                                                        | 4,652                                                                        |   | 4,710 |   | 4,616  |
|           Total noninterest expense          | 26,977                                                                       |   | 26,978 |   | 24,742  |
| Income (loss) before income taxes                                                              | (7,119)                                                                      |   | 1,084 |   | 9,176  |
| Income tax expense (benefit)                                                                   | (3,130)                                                                      |   | 155 |   | 3,170 |
| Net income (loss)                                                                              | $    (3,989)                                             |   | $    929 |   | $   6,006  |
| Net income (loss) per share:                                                                   |                                                                         |   |   |   |   |
|    Basic                                                                        | $ (0.60)                                                                     |   | $ 0.16 |   | $ 1.01  |
|    Diluted                                                                      | $ (0.60)                                                                     |   | $ 0.16 |   | $ 1.01  |
| Dividends per share                                                                            | $ 0.02                                                                       |   | $ 0.185 |   | $ 0.50  |
| Average basic shares (000s)                                                                    | 6,625                                                                        |   | 5,933 |   | 5,930  |
| Average diluted shares (000s)                                                                  | 6,625                                                                        |   | 5,936 |   | 5,947  |

|  The accompanying notes are an integral part of these consolidated financial statements.  |
|-----------------------------------------------------------------------------------------------------|

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|                                                                                       | For the Years Ended December 31,              |
|--------------------------------------------------------------------------------------------|-----------------------------------------------|
|                                                                                       | 2010                                          | 2009 | 2008 |
| Common shares issued                                                                       |                                          |   |   |
|    Shares, beginning of year                                                | 5,933,789                                     | 5,933,789 | 5,923,797  |
|    Common stock issued                                                      | 1,267,557                                     | - | 6,211  |
|    Exercise of options                                                      | -                                             | - | 3,781  |
|       Shares, end of year                                    | 7,201,346                                     | 5,933,789 | 5,933,789  |
| Treasury shares owned                                                                      |                                          |   |   |
|    Shares, beginning of year                                                | 1,443                                         | 318 | 318  |
|    Treasury stock issued                                                    | (943)                                         | - | -  |
|    Unredeemed common stock                                                  | 36                                            | - | -  |
|    Unvested restricted stock                                                | 1,947                                         | 1,125 | -  |
|       Shares, end of year                                    | 2,483                                         | 1,443 | 318  |
| Common stock                                                                               |                                          |   |   |
|    Balance, beginning of year                                               | $   5,934                      | $   5,934 | $   5,924  |
|    Common stock issued                                                      | 1,267                                         | - | 6  |
|    Exercise of options                                                      | -                                             | - | 4  |
|       Balance, end of year                                   | 7,201                                         | 5,934 | 5,934  |
| Additional paid-in capital                                                                 |                                          |   |   |
|    Balance, beginning of year                                               | 38,605                                        | 38,516 | 38,279  |
|    Common stock issued, net of issuance costs                               | 9,980                                         | - | 68  |
|    Stock-based compensation expense, net                                    | 49                                            | 89 | 137  |
|    Exercise of options                                                      | -                                             | - | 32  |
|       Balance, end of year                                   | 48,634                                        | 38,605 | 38,516  |
| Retained earnings                                                                          |                                          |   |   |
|    Balance, beginning of year                                               | 33,383                                        | 33,552 | 30,512  |
|    Net income (loss)                                                        | (3,989)                                       | 929 | 6,006  |
|    Dividends paid                                                           | (119)                                         | (1,098) | (2,966)  |
|       Balance, end of year                                   | 29,275                                        | 33,383 | 33,552  |
| Treasury stock                                                                             |                                          |   |   |
|    Balance, beginning of year                                               | (4)                                           | (4) | (4)  |
|    Treasury stock issued                                                    | 3                                             | - | -  |
|       Balance, end of year                                   | (1)                                           | (4) | (4)  |
| Accumulated other comprehensive income, net                                                |                                          |   |   |
|    Balance, beginning of year                                               | 1,108                                         | 2,934 | 1,561  |
|    Change in unrealized gains/losses on securities                          |                                          |   |   |
|       available for sale, net of reclassification adjustment | (127)                                         | (531) | 842  |
|    Change in fair value and gains on termination of                         |                                          |   |   |
|        derivative instruments, net of tax               | (287)                                         | (1,295) | 531  |
|       Balance, end of year                                   |        694 |        1,108 |        2,934  |
|   Total shareholders' equity                                                          | $ 85,803                                      | $ 79,026 | $ 80,932  |

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|                                                                                                            | For the Years Ended December 31,       |
|-----------------------------------------------------------------------------------------------------------------|----------------------------------------|
| ($ in thousands)                                                                                                | 2010                                   | 2009 | 2008  |
| Operating activities                                                                                            |                                   |   |   |
| Net income (loss)                                                                                               | $     (3,989) | $      929 | $   6,006  |
| Adjustments to reconcile net income (loss) to cash                                                              |                                   |   |   |
|   provided by operating activities:                                                                   |                                   |   |   |
|     Provision for loan losses                                                               | 21,020                                 | 13,065 | 6,000  |
|     Loans originated for sale                                                               | -                                      | - | (10,255)  |
|     Proceeds from sale of loans originated for sale                                         | -                                      | 291 | 10,202  |
|     Net amortization (accretion) of securities                                              | 1,922                                  | 432 | (95)  |
|     Depreciation and amortization                                                           | 1,454                                  | 1,513 | 1,383  |
|     Accretion of gain on termination of derivatives                                         | (453)                                  | (1,962) | (2,670)  |
|     Proceeds from termination of derivatives                                                | -                                      | 1,299 | 3,225  |
|     Non cash stock-based compensation expense                                               | 79                                     | 144 | 221  |
|     (Increase) decrease in deferred income taxes, net                                       | (1,759)                                | (1,748) | 621  |
|     Gain on sale of loans and securities, net                                               | (608)                                  | (2,119) | (221)  |
|     Loss on sale and write-downs of foreclosed assets                                       | 2,472                                  | 2,566 | 228  |
|     Equity in net loss (income) of nonconsolidated subsidiary                               | 50                                     | (43) | (94)  |
|     Gain on sale of partnership interest                                                    | (255)                                  | - | -  |
|     Increase in CSV of bank-owned life insurance policies                                   | (183)                                  | (218) | (231)  |
|     Decrease (increase) in prepaid FDIC deposit insurance assessment                        | 1,545                                  | (5,037) | -  |
|     (Increase) decrease in income taxes receivable/payable                                  | (3,758)                                | 1,068 | 59  |
|     Change in other assets and other liabilities, net                                       | (1,965)                                | (673) | 1,150  |
|           Net cash provided by operating activities           | 15,572                                 | 9,507 | 15,529  |
| Investing activities                                                                                            |                                   |   |   |
| Activity in available for sale securities                                                                       |                                   |   |   |
|    Purchases                                                                                     | (100,897)                              | (88,741) | (44,616)  |
|    Sales                                                                                         | 52,483                                 | 62,076 | 5,248  |
|    Maturities, calls and paydowns                                                                | 22,547                                 | 21,203 | 20,420  |
| Loan originations and principal collections, net                                                                | 22,644                                 | (35,442) | (71,955)  |
| Proceeds from sale of foreclosed assets                                                                         | 9,120                                  | 5,048 | 3,852  |
| Disposition of premises and equipment                                                                           | -                                      | 305 | -  |
| Proceeds from life insurance and sale of partnership interest                                                   | 1,002                                  | - | -  |
| Distribution from nonconsolidated subsidiary                                                                    | -                                      | - | 350  |
| Additions to premises and equipment                                                                             | (765)                                  | (6,141) | (5,516)  |
| Net cash received from FDIC-assisted transaction                                                                | 190,253                                | - | -  |
|           Net cash provided by (used in) investing activities | 196,387                                | (41,692) | (92,217)  |
| Financing activities                                                                                            |                                   |   |   |
| Net increase (decrease) in noninterest-bearing deposits                                                         | 4,837                                  | (166) | (5,780)  |
| Net (decrease) increase in interest-bearing deposits                                                            | (166,516)                              | 52,720 | 73,577  |
| Net (decrease) increase in short-term borrowings                                                                | (8,478)                                | (10,083) | 13,037  |
| Net (decrease) increase in other borrowings                                                                     | (5,452)                                | 3,837 | 12,151  |
| Net decrease in FHLB advances                                                                                   | (29,006)                               | (505) | (20,804)  |
| Payment on note payable                                                                                         | (74)                                   | (86) | (1,840)  |
| Dividends paid                                                                                                  | (119)                                  | (1,098) | (2,966)  |
| Issuance of common stock, treasury stock and exercise of options                                                | 11,250                                 | - | 110  |
|           Net cash (used in) provided by financing activities | (193,558)                              | 44,619 | 67,485  |
| Increase (decrease) in cash and cash equivalents                                                                | 18,401                                 | 12,434 | (9,203)  |
| Cash and cash equivalents, beginning of year                                                                    | 40,535                                 | 28,101 | 37,304  |
| Cash and cash equivalents, end of year                                                                          | $ 58,936                               | $ 40,535 | $ 28,101  |
| Supplemental disclosures of cash flow information                                                               |                                   |   |   |
| Cash paid during the year for:                                                                                  |                                   |   |   |
|    Interest on deposits and other borrowings                                                     | $ 14,881                               | $ 18,826 | $ 25,920  |
|    Income taxes                                                                                  | -                                      | 550 | 2,595  |
| Non cash investing activity:                                                                                    |                                   |   |   |
|    Transfer to other real estate owned from loans                                                | (16,462)                               | (7,843) | (10,068)  |

----

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----

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| (amounts in thousands)                                |   |
|-------------------------------------------------------|--------|
| Years Ended December 31,                              | 2010   | 2009 | 2008 |
| Average number of common shares outstanding - basic   | 6,625  | 5,933 | 5,930 |
| Effect of dilutive options                            | -      | 3 | 17 |
| Average number of common shares outstanding - diluted | 6,625  | 5,936 | 5,947 |

----

| ($ in thousands)                                                                     | 2010                       | 2009                         | 2008    |
|--------------------------------------------------------------------------------------|----------------------------|------------------------------|---------|
| Net income (loss)                                                                    | $   (3,989) | $    929 | $ 6,006 |
| Change in unrealized gains/losses on securities                                      |                       |                         |    |
|      available for sale, net of reclassification adjustment | (127)                      | (531)                        | 842     |
| Change in fair value and gains on termination of                                     |                       |                         |    |
|      derivative instruments, net of tax                     | (287)                      | (1,295)                      | 531     |
| Other comprehensive income (loss)                                                    | $ (4,403)                  | $ (897)                      | $ 7,379 |

| ($ in thousands)                                   | 2010            | 2009            | 2008  |
|----------------------------------------------------|-----------------|-----------------|-------|
| Salaries and employee benefits                     | $  52 | $  94 | $ 189 |
| Directors' stock-based compensation                | 27              | 50              | 32    |
| Pre-tax stock-based compensation expense           | 79              | 144             | 221   |
| Income tax benefit                                 | (30)            | (55)            | (84)  |
| Total stock-based compensation expense, net of tax | $  49 | $  89 | $ 137 |

----

|                                           | 2010      | 2009      | 2008      |
|------------------------------------------------|-----------|-----------|-----------|
| Weighted average fair value of options granted | $ 3.41    | $ 1.87    | $ 4.29    |
| Expected volatility                            | 45%       | 39.1%     | 31.4%     |
| Dividend yield                                 | 1.47%     | 2.67%     | 2.87%     |
| Risk-free interest rate                        | 2.43%     | 1.82%     | 2.48%     |
| Expected life                                  | 6.0 years | 6.0 years | 6.0 years |

----

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| ($ in thousands)                       | June 25, 2010                                          |
|----------------------------------------|--------------------------------------------------------|
| Assets acquired                        |                                                   |
| Cash and due from banks                | $       7,330  |
| Interest-bearing deposits in banks     | 8,851                                             |
| Securities available for sale          | 25,937                                            |
| Loans                                  | 131                                               |
| Premises and equipment                 | 11                                                |
| Deposit premium intangible             | 387                                               |
| Other assets                           | 128                                               |
| Total assets acquired                  | 42,775                                            |
| Liabilities assumed                    |                                                   |
| Deposits                               | 200,843                                           |
| Federal Home Loan Bank advances        | 15,271                                            |
| Due to the FDIC                        | 266                                               |
| Accrued interest and other liabilities | 432                                               |
| Total liabilities assumed              | 216,812                                           |
| Net liabilities assumed                | $ (174,037)                                       |

----

|                                                                        | 2010                                 |
|-----------------------------------------------------------------------------|--------------------------------------|
| ($ in thousands)                                                            | Amortized                            | Unrealized  | Unrealized | Fair |
|                                                                        | Cost                                 | Gains | Losses | Value |
| Investment securities:                                                      |                                 |   |   |   |
|    U.S. government-sponsored enterprises (“GSE”) | $     1,821 | $        4 | $         - | $     1,825  |
|    Mortgage-backed securities - GSE                          | 120,998                              | 1,628 | (435) | 122,191  |
|    State and municipal securities                            | 10,285                               | 76 | (154) | 10,207  |
|     Restricted equity securities                        | 3,876                                | - | - | 3,876  |
| Total investment securities                                                 | $ 136,980                            | $ 1,708 | $ (589) | $ 138,099  |
|                                                                        |                                 |
|                                                                        |   2009                          |
| ($ in thousands)                                                            | Amortized                            | Unrealized | Unrealized | Fair |
|                                                                        | Cost                                 | Gains | Losses | Value |
| Investment securities:                                                      |                                 |   |   |   |
|    U.S. government-sponsored enterprises                     | $   1,727             | $    136 | $         - | $   1,863  |
|    Mortgage-backed securities - GSE                          | 73,203                               | 1,205 | (120) | 74,288  |
|    State and municipal securities                            | 7,906                                | 108 | (6) | 8,008  |
|    Restricted equity securities                              | 3,760                                | - | - | 3,760  |
| Total investment securities                                                 | $ 86,596                             | $ 1,449 | $ (126) | $ 87,919  |

| ($ in thousands)                                         | AmortizedCost                                        |  Fair Value                                     |
|----------------------------------------------------------|------------------------------------------------------|------------------------------------------------------|
| Securities available for sale:                           |                                                 |                                                 |
|    Due in one year or less                | $        100 | $        102 |
|    Due after one year through five years  | 2,331                                                | 2,357                                                |
|    Due after five years through ten years | 3,625                                                | 3,548                                                |
|    Due after ten years                    | 6,050                                                | 6,025                                                |
|    Mortgage-backed securities - GSE       | 120,998                                              | 122,191                                              |
|    Restricted equity securities           | 3,876                                                | 3,876                                                |
| Total investment securities                              | $ 136,980                                            | $ 138,099                                            |

| ($ in thousands)   | 2010  | 2009    | 2008  |
|--------------------|-------|---------|-------|
| Gross gains        | $ 684 | $ 2,170 | $ 163 |
| Gross losses       | (76)  | (51)    | -     |
| Net realized gains | $ 608 | $ 2,119 | $ 163 |

----

| ($ in thousands) | 2010    | 2009    |
|------------------|---------|---------|
| FHLB stock       | $ 3,054 | $ 3,205 |
| FRB stock        | 822     | 555     |
| Total            | $ 3,876 | $ 3,760 |

|                                  | Less Than 12 Months | 12 Months or More | Total |
|---------------------------------------|---------------------|-------------------|-------|
|                                  | Fair                | Unrealized        | Fair  | Unrealized | Fair | Unrealized |
| ($ in thousands)                      | Value               | Losses            | Value | Losses | Value | Losses |
| Mortgage-backed securities - GSE      | $ 37,606            | $ (435)           | $ -   | $ - | $ 37,606 | $ (435) |
| State and municipal securities        | 3,853               | (154)             | -     | - | 3,853 | (154) |
| Total temporarily impaired securities | $ 41,459            | $ (589)           | $ -   | $ - | $ 41,459 | $ (589) |

| ($ in thousands)                               |                      | Percent                                                   |                            | Percent                                                    |
|------------------------------------------------|---------------------------|-----------------------------------------------------------|---------------------------------|------------------------------------------------------------|
|                                           | 2010                      | of Total                                                  | 2009                            | of Total                                                   |
| Commercial real estate                         |                      |                                                      |                            |                                                       |
|    Construction and development | $   20,819 | 2.5%                                                      | $   61,476  | 7.0%                                                       |
|    Owner-occupied               | 120,797                   |     14.6               | 102,942                    |     11.6                |
|    Non owner-occupied           | 231,641                   |     28.0               | 233,767                    |      26.5          |
| Residential real estate - mortgage             | 363,390                   |     44.0               | 381,350                    |     43.1                |
| Commercial                                     | 74,889                    |       9.1    | 89,380                     |     10.1                |
| Installment and other consumer                 | 15,026                    |       1.8    |  14,971               |       1.7     |
| Gross loans                                    | 826,562                   |  100.0%                                              | 883,886                         |  100.0%                                               |
| Allowance for loan losses                      | (20,350)                  |                                                      | (17,678)                        |                                                       |
| Net loans                                      | $ 806,212                 |                                                      | $ 866,208                       |                                                       |

----

| ($ in thousands)           |     2010 |     2009 |     2008 |
|----------------------------|------------------------------|------------------------------|------------------------------|
| Balance, beginning of year | $ 17,678                     | $ 13,300                     | $ 12,864                |
| Provision for loan losses  | 21,020                       | 13,065                       | 6,000                   |
| Charge-offs                | (18,765)                     | (8,893)                      | (5,714)                 |
| Recoveries                 | 417                          | 206                          | 150                     |
| Balance, end of year       | $ 20,350                     | $ 17,678                     | $ 13,300                |

| ($ in thousands)                                                                                                      | Commercial Real Estate | Residential Real Estate | Commercial                         | Consumer         | Unallocated                | Total           |
|-----------------------------------------------------------------------------------------------------------------------|------------------------|-------------------------|------------------------------------|------------------|----------------------------|-----------------|
| Allowance for loan losses                                                                                             |                   |                    |                               |             |                       |            |
|    Beginning balance                                                                                   | $ 5,740                | $ 10,690                | $     977 | $  227 | $  44            | $ 17,678   |
|       Charge-offs                                                                       | (5,840)                | (11,729)                | (1,080)                            | (116)            | -                          | (18,765)   |
|       Recoveries                                                                        | 20                     | 352                     | 17                                 | 28               | -                          | 417        |
|       Provision                                                                         | 4,802                  | 14,269                  | 1,614                              | 379              | (44)                       | 21,020     |
|    Ending balance                                                                                      | $ 4,722                | $ 13,582                | $ 1,528                            | $  518 | $    - | $ 20,350   |
|    Ending balance:  individually      evaluated for impairment | $ 285                  | $ 4,055                 | $ 540                              | $ 257            | $    - | $ 5,137    |
| Loans                                                                                                                 |                   |                    |                               |             |                       |            |
|    Ending balance                                                                                      | $ 373,257              | $ 363,390               | $ 74,889                           | $ 15,026         | $   -       | $ 826,562  |
|    Ending balance:  individually      evaluated for impairment | $ 3,865                | $ 25,669                | $ 596                              | $ 257            | $   -       | $ 30,387   |

----

| ($ in thousands)                                                 | Recorded Investment                 | Unpaid Principal Balance                 | Related Allowance                                              |
|------------------------------------------------------------------|------------------------------------------|------------------------------------------|----------------------------------------------------------------|
| Impaired loans without a valuation allowance                     |                                     |                                     |                                                           |
|    Commercial real estate                         |                                     |                                     |                                                           |
|       Construction and development | $      152 | $      177 | $         -  |
|       Owner-occupied               | 1,075                                    | 1,374                                    | -                                                         |
|       Non owner-occupied           | 301                                      | 3,979                                    | -                                                         |
|    Residential real estate - mortgage             | 12,906                                   | 18,476                                   | -                                                         |
|    Commercial                                     | -                                        | -                                        | -                                                         |
|    Installment and other consumer                 | -                                        | -                                        | -                                                         |
| Total impaired loans without a valuation allowance               | 14,434                                   | 24,006                                   | -                                                         |
| Impaired loans with a valuation allowance                        |                                     |                                     |                                                           |
|    Commercial real estate                         |                                     |                                     |                                                           |
|       Construction and development | 2,218                                    | 3,218                                    | 265                                                       |
|       Owner-occupied               | 1,647                                    | 1,667                                    | 186                                                       |
|       Non owner-occupied           | 2,926                                    | 3,353                                    | 372                                                       |
|    Residential real estate - mortgage             | 30,634                                   | 33,471                                   | 6,316                                                     |
|    Commercial                                     | 1,196                                    | 1,425                                    | 619                                                       |
|    Installment and other consumer                 | 814                                      | 818                                      | 349                                                       |
| Total impaired loans with a valuation allowance                  | 39,435                                   | 43,952                                   | 8,107                                                     |
| Total impaired loans                                             | $ 53,869                                 | $ 67,958                                 | $ 8,107                                                   |
| Average investment in impaired loans                             | $ 53,962                                 |                                     |                                                           |
| Interest income recognized on impaired loans                     | $      821 |                                     |                                                           |

| ($ in thousands)                               | 30-59 days past due                                | 60-89 days past due                     | Accruing greater than 90 days past due              | Nonaccrual                     | Total past due and nonaccrual  |
|------------------------------------------------|----------------------------------------------------|----------------------------------------------|----------------------------------------------------------|--------------------------------|--------------------------------|
| Commercial real estate                         |                                               |                                         |                                                     |                           |                           |
|    Construction and development | $        - | $       - | $         - | $    2,370 | $    2,370 |
|    Owner-occupied               | 1,471                                              | -                                            | 251                                                      | 1,194                          | 2,916                          |
|    Non owner-occupied           | 309                                                | 12                                           | 803                                                      | 1,595                          | 2,719                          |
| Residential real estate - mortgage             | 4,114                                              | 4,894                                        | 1,855                                                    | 26,446                         | 37,309                         |
| Commercial                                     | 120                                                | 85                                           | 151                                                      | 760                            | 1,116                          |
| Installment and other consumer                 | 147                                                | 12                                           | 4                                                        | 471                            | 634                            |
| Total                                          | $ 6,161                                            | $ 5,003                                      | $ 3,064                                                  | $ 32,836                       | $ 47,064                       |

----

| ($ in thousands)                               | Pass(1-4)                 | Special Mention(5)                       | Sub-standard(6)          | Doubtful(7)                                              | Loss(8)              | Total                     |
|------------------------------------------------|---------------------------|------------------------------------------|--------------------------|----------------------------------------------------------|----------------------|---------------------------|
| Commercial real estate                         |                      |                                     |                     |                                                     |                 |                      |
|    Construction and development | $   17,792 | $      577 | $   2,450 | $         - | $   - | $   20,819 |
|    Owner-occupied               | 114,603                   | 1,851                                    | 4,343                    | -                                                        | -                    | 120,797                   |
|    Non owner-occupied           | 216,744                   | 9,017                                    | 5,880                    | -                                                        | -                    | 231,641                   |
| Residential real estate - mortgage             | 290,894                   | 19,936                                   | 51,317                   | 1,243                                                    | -                    | 363,390                   |
| Commercial                                     | 71,361                    | 666                                      | 2,562                    | 300                                                      | -                    | 74,889                    |
| Installment and other consumer                 | 14,011                    | 78                                       | 762                      | 175                                                      | -                    | 15,026                    |
| Total                                          | $ 725,405                 | $ 32,125                                 | $ 67,314                 | $ 1,718                                                  | $   - | $ 826,562                 |

| ($ in thousands)                                                            | Depreciable Lives | 2010                     | 2009                           |
|-----------------------------------------------------------------------------|------------------------|--------------------------|--------------------------------|
| Land                                                                        | -                      | $   2,635 | $   2,635  |
| Buildings and improvements                                                  | 5 - 50                 | 11,419                   | 11,334                    |
| Furniture and banking equipment                                             | 3 - 15                 | 8,039                    | 7,637                     |
| Leasehold improvements                                                      | 5 - 32                 | 1,972                    | 1,710                     |
| Total cost                                                                  |                   | 24,065                   | 23,316                    |
| Less accumulated depreciation and     amortization |                   |  9,009              |  7,742               |
| Premises and equipment, net                                                 |                   | $ 15,056                 | $ 15,574                  |

----

| ($ in thousands)           |     2010 |     2009 |
|----------------------------|------------------------------|------------------------------|
| Balance, beginning of year | $  8,329           | $  8,100           |
| Additions                  | 16,462                       | 7,843                        |
| Disposals                  | (10,167)                     | (6,772)                      |
| Additional write-downs     | (1,425)                      | (842)                        |
| Balance, end of year       | $ 13,199                     | $  8,329           |

|                        | As of December 31, 2010                                |                                                               | As of December 31, 2009 |
|-----------------------------|--------------------------------------------------------|--------------------------------------------------------------------|-------------------------|
|                        |          Gross |           Accumulated |                    |           Gross |           Accumulated |
| ($ in thousands)            |    Amount                                    | Amortization                                                       |                    |        Amount |         Amortization |
| Amortized intangible assets |                                                   |                                                               |                    |   |   |
| Client list                 | $ 1,400                                                | $ 480                                                              |                    | $ 1,400 | $ 336 |
| Core deposit premium        | 387                                                    | 27                                                                 |                    | - | - |
| Total carrying value        | $ 1,787                                                | $ 507                                                              |                    | $ 1,400 | $ 336 |

| ($ in thousands)           |     2010 |     2009 |
|----------------------------|------------------------------|------------------------------|
| Balance, beginning of year | $ 1,434                      | $ 1,434                      |
| Goodwill acquired          | 1,072                        | -                            |
| Balance, end of year       | $ 2,506                      | $ 1,434                      |

----

| ($ in thousands)    | Total           |
|---------------------|-----------------|
| 2011                | $ 331,876  |
| 2012                | 33,853     |
| 2013                | 7,712      |
| 2014                | 11,874     |
| 2015 and thereafter | 16,217     |
| Total               | $ 401,532       |

|    ($ in thousands)         | Federal Funds Purchased | Securities Sold Under Repurchase Agreements | FRBShort-Term Advances                                                           |
|--------------------------------------------|-------------------------|---------------------------------------------|----------------------------------------------------------------------------------|
| 2010                                       |                    |                                        |                                                                             |
| Balance at December 31                     | $   295  | $ 14,780                                    | $            -  |
| Maximum indebtedness at any month end      | 1,320                   | 17,225                                      | 6,000                                                                       |
| Daily average indebtedness outstanding     | 805                     | 14,847                                      | 1,099                                                                       |
| Average rate paid for the year             | 0.26%                   | 0.50%                                       | 0.55%                                                                       |
| Average rate paid on period-end borrowings | 0.20%                   | 0.50%                                       | 0.00%                                                                       |
| 2009                                       |                    |                                        |                                                                             |
| Balance at December 31                     | $ 1,320                 | $ 12,233                                    | $ 10,000                                                                    |
| Maximum indebtedness at any month end      | 3,247                   | 18,459                                      | 17,000                                                                      |
| Daily average indebtedness outstanding     | 1,045                   | 14,835                                      | 8,564                                                                       |
| Average rate paid for the year             | 0.34%                   | 0.53%                                       | 0.52%                                                                       |
| Average rate paid on period-end borrowings | 0.20%                   | 0.50%                                       | 0.50%                                                                       |

----

----

| ($ in thousands)                       | 2010  | 2009              | 2008  |
|----------------------------------------|------------|------------------------|------------|
| Current federal                        | $ (1,092)  | $ 1,861                | $ 2,757    |
| Current state                          | (279)      | 42                     | 310        |
|     Total current  | (1,371)    | 1,903                  | 3,067      |
| Deferred federal                       | (1,528)    | (1,417)                | 88         |
| Deferred state                         | (231)      | (331)                  | 15         |
|     Total deferred | (1,759)    | (1,748)                | 103        |
| Income tax expense (benefit)           | $ (3,130)  | $   155 | $ 3,170    |

| ($ in thousands)                      | 2010      | 2009  | 2008    |
|---------------------------------------|-----------|-------|---------|
| Tax provision at 34%                  | $ (2,421) | $ 369 | $ 3,120 |
| State tax, net of federal tax benefit | (300)     | 46    | 196     |
| Benefit of tax-exempt income, net     | (197)     | (141) | (127)   |
| Other                                 | (212)     | (119) | (19)    |
| Income tax expense (benefit)          | $ (3,130) | $ 155 | $ 3,170 |

| ($ in thousands)                                       |    2010 |    2009 |
|--------------------------------------------------------|------------------------|------------------------|
| Deferred tax assets:                                   |                   |                   |
|   Allowance for loan losses                  | $ 7,676                | $ 6,455                |
|   Tax-deductible goodwill                    | 1,317                  | 741                    |
|   Write-down of foreclosed assets            | 306                    | 319                    |
|   Unamortized loan fees                      | 49                     | 179                    |
|   Unamortized non-compete costs              | 17                     | 23                     |
|   Deferred compensation expense              | 469                    | 452                    |
|   Stock-based compensation expense           | 140                    | 114                    |
|   Other                                      | 112                    | 84                     |
|     Total deferred tax assets      | 10,086                 | 8,367                  |
| Deferred tax liabilities:                              |                   |                   |
|   Depreciation                               | 624                    | 616                    |
|   Unrealized gains on securities             | 425                    | 502                    |
|   Deferred costs on loans and deposits       | 72                     | 129                    |
|   Unrealized gains on derivatives            | -                      | 177                    |
|   Other                                      | 25                     | 16                     |
|     Total deferred tax liabilities | 1,146                  | 1,440                  |
| Net deferred tax assets                                | $ 8,940                | $ 6,927                |

----

|                            | 2010                     | 2009                         | 2008                     |
|---------------------------------|--------------------------|------------------------------|--------------------------|
|                            |    Shares | WeightedAverageExercisePrice |    Shares | WeightedAverageExercisePrice |    Shares | WeightedAverageExercisePrice |
| Outstanding at beginning        |                     |                         |                     |   |   |   |
|     of year | 194,814             | $ 17.09                      | 192,022             | $ 18.28 | 210,484  | $ 17.76 |
| Granted                         | 7,915               | 11.25                        | 19,291              | 8.74 | 9,850  | 17.44 |
| Exercised                       | -                   | -                            | -                   | - | (3,781)  | 10.23 |
| Forfeited                       | (28,401)            | 14.55                        | (16,499)            | 21.12 | (24,531)  | 14.72 |
| Outstanding at end of year      | 174,328             | $ 17.24                      | 194,814             | $ 17.09 | 192,022  | $ 18.28 |
| Exercisable at end of year      | 163,355             | $ 16.87                      | 175,625             | $ 16.75 | 150,307  | $ 17.30 |

|                       | Outstanding                  | Exercisable         |
|----------------------------|------------------------------|---------------------|
| Outstanding Common Options | Remaining Contractual Number | WeightedAverageLife | WeightedAveragePrice |   Number | WeightedAveragePrice |
| Range of exercise prices   |                         |                |   |   |   |
| $6.85 - $12.00             | 36,660                  | 6.46                | $   9.67 | 34,687  | $   9.58 |
| $12.01 - $15.00            | 15,466                  | 1.54                | 13.02 | 15,466  | 13.02 |
| $15.01 - $20.00            | 70,195                  | 3.64                | 16.91 | 70,195  | 16.91 |
| $20.01 - $25.00            | 28,707                  | 4.15                | 22.33 | 28,707  | 22.33 |
| $25.00 - $28.56            | 23,300                  | 6.00                | 26.71 | 14,300  | 27.59 |
| Total outstanding          | 174,328                 | 4.44                | $ 17.24 | 163,355  | $ 16.87 |

----

| ($ in thousands)                       |      Company |   |      Savannah |   |      Bryan |
|----------------------------------------|----------------------------------|--------|-----------------------------------|--------|--------------------------------|
|                                   | 2010                             |   | 2009                              |   | 2010                           |   | 2009 |   | 2010 |   | 2009 |
| Qualifying Capital                     |                             |   |                              |   |                           |   |   |   |   |   |
| Tier 1 capital                         | $ 87,623                         |   | $ 85,420                          |   | $ 64,193                       |   | $ 60,461 |   | $ 21,294 |   | $ 21,672 |
| Total capital                          | 97,589                           |   | 95,880                            |   | 71,450                         |   | 68,061 |   | 23,826 |   | 24,255 |
| Leverage Ratios                        |                             |   |                              |   |                           |   |   |   |   |   |   |
| Tier 1 capital to average assets       | 8.12%                            |   | 8.25%                             |   | 7.97%                          |   | 7.93% |   | 8.20% |   | 8.57% |
| Risk-based Ratios                      |                             |   |                              |   |                           |   |   |   |   |   |
| Tier 1 capital to risk-weighted assets | 11.13%                           |   | 10.30%                            |   | 11.18%                         |   | 10.02% |   | 10.67% |   | 10.57% |
| Total capital to risk-weighted assets  | 12.40%                           |   | 11.56%                            |   | 12.44%                         |   | 11.28% |   | 11.93% |   | 11.83% |

|                                   |    | Well-       |
|----------------------------------------|---------|-------------|
| Required Regulatory Capital Ratios:    | Minimum | Capitalized |
| Tier 1 capital to average assets       | 4.00%   | 5.00%       |
| Tier 1 capital to risk-weighted assets | 4.00%   | 6.00%       |
| Total capital to risk-weighted assets  | 8.00%   | 10.00%      |

----

| ($ in thousands)                      |   2010 |   2009 |   2008            |
|---------------------------------------|------------------|------------------|-----------------------------|
| Loan and collection costs             | $ 1,046          | $ 1,107          | $ 605                  |
| Professional and directors fees       |  873        |  1,114      |    957  |
| Regulatory assessments and audit fees | 545              | 592              | 536                    |
| Advertising and sales promotion       | 377              | 233              | 425                    |
| Postage and courier                   | 297              | 310              | 321                    |
| Taxes and licenses                    | 273              | 244              | 237                    |
| Stationery and supplies               | 198              | 253              | 332                    |
| Telephone                             | 172              | 175              | 209                    |
| Insurance                             | 147              | 95               | 65                     |
| Dues and subscriptions                | 111              | 115              | 135                    |
| Correspondent bank charges            | 39               | 50               | 101                    |
| Other expense                         | 574              | 422              | 693                    |
| Total other operating expense         | $ 4,652          | $ 4,710          | $ 4,616                |

|                                               |   |   | 2010                                   | 2009                                   |
|----------------------------------------------------|--------|--------|----------------------------------------|----------------------------------------|
|                                               |   |   | Fair Value                             | Fair Value                             |
| ($ in thousands)                                   |   |   | Asset                                  | Liability                              | Asset | Liability |
| Derivatives designated as hedging instruments:     |   |   |                                   |                                   |
| Interest rate products                             |   |   | $      - | $      - | $    - | $    - |
|                                               |   |   |                                   |                                   |   |   |
| Derivatives not designated as hedging instruments: |   |   |                                   |                                   |
| Interest rate products                             |   |   | 136                                    | 135                                    | 32 | 20 |
| Total                                              |   |   | $ 136                                  | $ 135                                  | $ 32 | $ 20 |

----

|                            | 2010                                                     | 2009                                   |                                                                               |                                                                        | 2010   | 2009     |
|---------------------------------|----------------------------------------------------------|----------------------------------------|------------------------------------------------------------------------------------|-----------------------------------------------------------------------------|--------|---------------|
| Cash Flow Hedging Relationships | Gain Recognized in OCI on Derivative (Effective Portion) |                                   | Location of Gain Reclassified from Accumulated OCI into Income (Effective Portion) | Gain Reclassified from Accumulated OCI into Income (Effective Portion) |
|                            |                                                     |                                   |                                                                               |                                                                        |   |          |
| Interest Rate Products          | $    -                               | $    -   |                                                                               | Interest income                                                             | $ 450  | $ 1,205  |
|                            |                                                     |                                   |                                                                               | Noninterest income                                                          | 14     | 794      |
| Total                           | $    -                               | $    -   |                                                                               |                                                                        | $ 464  | $ 1,999  |

----

----

----

|                           |                                                            | Fair Value Measurements at December 31, 2010 Using |
|--------------------------------|-----------------------------------------------------------------|----------------------------------------------------|
|                           |                                                            | Quoted Prices in                                   | Significant Other | Significant |
|                           |                                                            | Active Markets for                                 | Observable | Unobservable |
|                           |           Carrying | Identical Assets                                   | Inputs | Inputs |
| ($ in thousands)               |        Value                      | (Level 1)                                          | (Level 2) | (Level 3) |
| Investment securities          | $ 138,099                                                  | $        - | $ 134,223  | $ 3,876  |
| Derivative asset positions     | 136                                                        | -                                                  | 136  | - |
| Derivative liability positions | 135                                                        | -                                                  | 135  | - |

|                           |            Carrying | Fair Value Measurements at December 31, 2009 Using |
|--------------------------------|-----------------------------------------------------------------------|----------------------------------------------------|
| ($ in thousands)               |         Value                      | Level 1                                            | Level 2 | Level 3 |
| Investment securities          | $ 87,919                                                         | $        - | $ 84,159  | $ 3,760  |
| Derivative asset positions     | 32                                                               | -                                                  | 32  | - |
| Derivative liability positions | 20                                                               | -                                                  | 20  | - |

|             |          | Carrying Values at December 31, 2010    |                             |
|------------------|---------------|-----------------------------------------|----------------------------------|
| ($ in thousands) | Total         | Level 1                                 | Level 2                          | Level 3 | Totalgain (loss) |
| Impaired loans   | $ 7,236  | $       - | $     - | $ 7,236  | $ (5,073)  |
| OREO             | 5,423    | -                                       | -                                | 5,423  | (1,424)  |

|             |           | Carrying Values at December 31, 2009 |                             |
|------------------|----------------|--------------------------------------|----------------------------------|
| ($ in thousands) | Total          | Level 1                              | Level 2                          | Level 3 | Totalgain (loss) |
| Impaired loans   | $ 14,021  | $     -     | $     - | $ 14,021  | $ (5,613)  |
| OREO             | 3,390     | -                                    | -                                | 3,390  |       (841)  |

----

|                                              | 2010                      |                      | 2009   |
|---------------------------------------------------|---------------------------|---------------------------|--------|
| ($ in thousands)                                  |                      | Estimated                 |   |   | Estimated |
|                                              | Carrying                  | Fair                      |   | Carrying | Fair |
|                                              | Value                     | Value                     |   | Value | Value |
| Financial assets:                                 |                      |                      |   |   |   |
| Cash and federal funds sold                       | $   18,100 | $   18,100 |   | $   27,828 | $   27,828 |
| Interest-bearing deposits                         | 40,836                    | 40,836                    |   | 12,707 | 12,707 |
| Securities available for sale                     | 138,099                   | 138,099                   |   | 87,919 | 87,919 |
| Loans, net of allowance for loan losses           | 806,212                   | 800,785                   |   | 866,208 | 873,705 |
| Accrued interest receivable                       | 3,789                     | 3,789                     |   | 3,923 | 3,923 |
| Derivative asset positions                        | 136                       | 136                       |   | 32 | 32 |
|                                              |                      |                      |   |   |   |
| Financial liabilities:                            |                      |                      |   |   |   |
| Deposits                                          | 923,745                   | 929,271                   |   | 884,569 | 887,969 |
| Short-term borrowings                             | 15,075                    | 15,075                    |   | 23,553 | 23,553 |
| Other borrowings                                  | 10,536                    | 10,536                    |   | 15,988 | 15,988 |
| FHLB advances                                     | 17,658                    | 18,214                    |   | 31,664 | 32,094 |
| Subordinated debt to nonconsolidated subsidiaries | 10,310                    | 10,310                    |   | 10,310 | 10,310 |
| Accrued interest payable                          | 1,108                     | 1,108                     |   | 1,628 | 1,628 |
| Derivative liability positions                    | 135                       | 135                       |   | 20 | 20 |

----

|                                                           | 2010                                                | 2009                                                |
|----------------------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|
| Assets                                                         |                                                |                                                |
| Cash on deposit                                                | $        60 | $        65 |
| Interest-bearing deposits                                      | 1,542                                               | 197                                                 |
| Investment in subsidiaries                                     | 92,031                                              | 86,399                                              |
| Premises and equipment                                         | 554                                                 | 831                                                 |
| Investment in nonconsolidated                                  |                                                |                                                |
|    subsidiary                                   | 905                                                 | 1,394                                               |
| Other assets                                                   | 2,625                                               | 1,953                                               |
|      Total assets                     | $ 97,717                                            | $ 90,839                                            |
| Liabilities                                                    |                                                |                                                |
| Subordinated debt                                              |    $ 10,310                          |    $ 10,310                          |
| Other liabilities                                              | 1,604                                               | 1,503                                               |
|      Total liabilities                | 11,914                                              | 11,813                                              |
| Shareholders' equity                                           |                                                |                                                |
| Common stock                                                   | 7,201                                               | 5,934                                               |
| Additional paid-in capital                                     | 48,634                                              | 38,605                                              |
| Retained earnings                                              | 29,275                                              | 33,383                                              |
| Treasury stock                                                 | (1)                                                 | (4)                                                 |
| Accumulated other                                              |                                                |                                                |
|    comprehensive income, net                    | 694                                                 | 1,108                                               |
|      Total shareholders’ equity | 85,803                                              | 79,026                                              |
|      Total liabilities and equity     | $ 97,717                                            | $ 90,839                                            |

----

|                                          | 2010                               | 2009                   | 2008    |
|-----------------------------------------------|------------------------------------|------------------------|---------|
| Dividends from subsidiaries                   | $     950 | $ 4,200                | $ 3,450 |
| Interest income                               | 31                                 | 4                      | 15      |
| Interest expense                              | 306                                | 362                    | 642     |
| Net interest and dividend income              | 675                                | 3,842                  | 2,823   |
| Other income                                  | 289                                | 29                     | 35      |
| Processing / management fees                  | 4,996                              | 5,267                  | 5,468   |
|      Total income    | 5,960                              | 9,138                  | 8,326   |
| Corporate expenses                            | 535                                | 733                    | 669     |
| Processing / management costs                 | 5,111                              | 5,342                  | 5,543   |
|      Other expenses  | 5,646                              | 6,075                  | 6,212   |
| Income before income taxes and                |                               |                   |    |
|   (distributions in excess of       |                               |                   |    |
|   earnings) equity in undistributed |                               |                   |    |
|   net income of subsidiaries        | 314                                | 3,063                  | 2,114   |
| Income tax benefit                            | 175                                | 395                    | 415     |
| Income before (distributions in               |                               |                   |    |
|   excess of earnings) equity in     |                               |                   |    |
|   undistributed net income          |                               |                   |    |
|   of subsidiaries                   | 489                                | 3,458                  | 2,529   |
| (Distributions in excess of                   |                               |                   |    |
|   earnings) equity in undistributed |                               |                   |    |
|   net income of subsidiaries        | (4,478)                            | (2,529)                | 3,477   |
| Net income (loss)                             | $(3,989)                           | $   929 | $ 6,006 |

----

|                                                                      | 2010                     | 2009                         | 2008    |
|---------------------------------------------------------------------------|--------------------------|------------------------------|---------|
| Operating activities                                                      |                     |                         |    |
| Net income (loss)                                                         | $  (3,989)     | $    929 | $ 6,006 |
| Adjustments to reconcile net                                              |                     |                         |    |
|  income (loss) to cash provided                                      |                     |                         |    |
|  by operating activities:                                            |                     |                         |    |
|      Distributions in excess of                  |                     |                         |    |
|         earnings (equity in       |                     |                         |    |
|         undistributed net income) |                     |                         |    |
|         of subsidiaries           | 4,478                    | 2,529                        | (3,477) |
|      Depreciation of equipment                   | 343                      | 449                          | 445     |
|      Gain on sale of partnership                 |                     |                         |    |
|         interest                  | (255)                    | -                            | -       |
|      Non cash stock-based                        |                     |                         |    |
|         compensation expense      | 79                       | 144                          | 221     |
|      Change in other assets and                  |                     |                         |    |
|         liabilities, net          | (601)                    | (477)                        | 60      |
| Net cash provided by                                                      |                     |                         |    |
|    operating activities                                    | 55                       | 3,574                        | 3,255   |
| Investing activities                                                      |                     |                         |    |
| Distribution from                                                         |                     |                         |    |
|    nonconsolidated subsidiary                              | -                        | -                            | 350     |
| Proceeds from sale of                                                     |                     |                         |    |
|    partnership interest                                    | 694                      | -                            | -       |
| Purchase of equipment and                                                 |                     |                         |    |
|    software                                                | (65)                     | (108)                        | (545)   |
| Capital contribution to                                                   |                     |                         |    |
|    consolidated subsidiaries                               | (10,475)                 | (3,390)                      | -       |
| Net cash used in                                                          |                     |                         |    |
|    investing activities                                    | (9,846)                  | (3,498)                      | (195)   |
| Financing activities                                                      |                     |                         |    |
| Dividends paid                                                            | (119)                    | (1,098)                      | (2,966) |
| Issuance of common stock                                                  |                     |                         |    |
|    and exercise of options                                 | 11,247                   | -                            | 110     |
| Issuance of treasury stock                                                | 3                        | -                            | -       |
| Net cash provided by (used in)                                            |                     |                         |    |
|    financing activities                                    | 11,131                   | (1,098)                      | (2,856) |
| Increase (decrease) in cash                                               |                     |                         |    |
|    and cash equivalents                                    | 1,340                    | (1,022)                      | 204     |
| Cash, beginning of year                                                   | 262                      | 1,284                        | 1,080   |
| Cash, end of year                                                         | $   1,602 | $    262 | $ 1,284 |

----

| ($ in thousands, except share data)                      | 2010                    | 2009                    | 2008                    | 2007      | 2006      |
|----------------------------------------------------------|-------------------------|-------------------------|-------------------------|-----------|-----------|
| Selected Average Balances                                |                    |                    |                    |      |      |
|  Assets                                             | $ 1,078,464             | $ 1,018,470             | $ 960,260               | $ 869,026 | $ 769,917 |
|  Total interest-earning assets                      | 979,436                 | 935,617                 | 898,295                 | 830,900   | 734,470   |
|  Loans held for sale                                | -                       | -                       | 765                     | 1,299     | 7,842     |
|  Loans, net of unearned fees                        | 810,484                 | 841,033                 | 821,673                 | 754,490   | 658,750   |
|  Securities                                         | 111,753                 | 81,282                  | 62,019                  | 58,910    | 50,600    |
|  Other interest-earning assets                      | 57,199                  | 13,302                  | 13,838                  | 16,201    | 17,278    |
|  Interest-bearing deposits                          | 840,077                 | 777,763                 | 701,045                 | 628,310   | 542,375   |
|  Borrowed funds                                     | 62,140                  | 71,967                  | 88,553                  | 70,939    | 62,255    |
|  Total interest-bearing liabilities                 | 902,217                 | 849,730                 | 789,598                 | 699,249   | 604,630   |
|  Noninterest-bearing deposits                       | 86,458                  | 82,406                  | 83,678                  | 91,367    | 96,113    |
|  Total deposits                                     | 926,535                 | 860,169                 | 784,723                 | 719,677   | 638,488   |
|  Shareholders' equity                               | 84,319                  | 79,804                  | 78,998                  | 71,516    | 61,766    |
|  Loan to deposit ratio – average              | 87%                     | 98%                     | 105%                    | 105%      | 103%      |
|                                                     |                    |                    |                    |      |      |
| Selected Financial Data at Year-End                      |                    |                    |                    |      |      |
|  Assets                                             | $ 1,066,930             | $ 1,050,508             | $ 1,007,284             | $ 932,459 | $ 843,514 |
|  Interest-earning assets                            | 971,653                 | 959,219                 | 931,448                 | 878,992   | 803,927   |
|  Loans held for sale                                | -                       | -                       | 291                     | 180       | 914       |
|  Loans, net of unearned fees                        | 826,562                 | 883,886                 | 864,974                 | 808,651   | 720,918   |
|  Deposits                                           | 923,745                 | 884,569                 | 832,015                 | 764,218   | 706,824   |
|  Interest-bearing liabilities                       | 881,599                 | 883,527                 | 837,558                 | 759,597   | 669,974   |
|  Shareholders' equity                               | 85,803                  | 79,026                  | 80,932                  | 76,272    | 66,574    |
|  Loan to deposit ratio                              | 89%                     | 100%                    | 104%                    | 106%      | 102%      |
|  Shareholders' equity to total assets               | 8.04%                   | 7.52%                   | 8.03%                   | 8.18%     | 7.89%     |
|  Dividend payout ratio                              | NM                      | 118.19%                 | 49.38%                  | 36.73%    | 25.92%    |
|  Risk-based capital ratios:                         |                    |                    |                    |      |      |
|    Tier 1 capital to risk-weighted assets | 11.13%                  | 10.30%                  | 10.28%                  | 10.49%    | 11.09%    |
|    Total capital to risk-weighted assets  | 12.40%                  | 11.56%                  | 11.54%                  | 11.74%    | 12.34%    |
|                                                     |                    |                    |                    |      |      |
| Loan Quality Data                                        |                    |                    |                    |      |      |
|  Nonperforming assets                               | $ 49,099                | $ 42,444                | $ 35,703                | $ 19,535  | $ 2,776   |
|  Nonperforming loans                                | 35,900                  | 34,115                  | 27,603                  | 17,424    | 2,231     |
|  Nonaccruing loans                                  | 32,836                  | 32,545                  | 26,277                  | 14,663    | 825       |
|  Loans past due 90 days - accruing                  | 3,064                   | 1,570                   | 1,326                   | 2,761     | 1,406     |
|  Net charge-offs                                    | 18,348                  | 8,687                   | 5,564                   | 765       | 444       |
|  Allowance for loan losses                          | 20,350                  | 17,678                  | 13,300                  | 12,864    | 8,954     |
|  Allowance for loan losses to total loans           | 2.46%                   | 2.00%                   | 1.54%                   | 1.59%     | 1.24%     |
|  Nonperforming loans to loans                       | 4.34%                   | 3.86%                   | 3.19%                   | 2.15%     | 0.31%     |
|  Nonperforming assets to assets                     | 4.60%                   | 4.04%                   | 3.54%                   | 2.09%     | 0.33%     |
|  Net charge-offs to average loans                   | 2.26%                   | 1.03%                   | 0.68%                   | 0.10%     | 0.07%     |
|                                                     |                    |                    |                    |      |      |
| Per Share Data at Year-End                               |                    |                    |                    |      |      |
|  Book value                                         | $ 11.92                 | $ 13.32                 | $ 13.64                 | $ 12.88   | $ 11.52   |
|  Tangible book value                                | $ 11.39                 | $ 12.90                 | $ 13.19                 | $ 12.40   | $ 11.52   |
|  Common stock closing price (NASDAQ)                | $   7.00 | $   8.00 | $   8.85 | $ 17.14   | $ 27.25   |
|  Common shares outstanding (000s)                   | 7,200                   | 5,932                   | 5,934                   | 5,924     | 5,781     |

----

| ($ in thousands, except share data)                                                          | 2010                      | 2009                                     | 2008                     | 2007                     | 2006     |
|----------------------------------------------------------------------------------------------|---------------------------|------------------------------------------|--------------------------|--------------------------|----------|
| Summary of operations                                                                        |                      |                                     |                     |                     |     |
|  Interest income - taxable equivalent                                                   | $ 47,961                  | $ 50,595                                 | $ 56,714                 | $ 63,414                 | $ 55,347 |
|  Interest expense                                                                       | 14,362                    | 18,258                                   | 24,439                   | 30,282                   | 22,737   |
|  Net interest income - taxable equivalent                                               | 33,599                    | 32,337                                   | 32,275                   | 33,132                   | 32,610   |
|  Taxable equivalent adjustment                                                          | (32)                      | (32)                                     | (32)                     | (156)                    | (158)    |
|  Net interest income                                                                    | 33,567                    | 32,305                                   | 32,243                   | 32,976                   | 32,452   |
|  Provision for loan losses                                                              | 21,020                    | 13,065                                   | 6,000                    | 4,675                    | 1,585    |
|  Net interest income after      provision for loan losses | 12,547                    | 19,240                                   | 26,243                   | 28,301                   | 30,867   |
|  Noninterest income                                                                     |                      |                                     |                     |                     |     |
|     Trust and asset management fees                                      | 2,599                     | 2,351                                    | 2,832                    | 1,513                    | 658      |
|     Service charges on deposits accounts                                 | 1,788                     | 1,809                                    | 1,881                    | 1,383                    | 1,526    |
|     Mortgage related income, net                                         | 398                       | 432                                      | 295                      | 615                      | 886      |
|     Gain on sale of securities                                           | 608                       | 2,119                                    | 163                      | -                        | -        |
|     Gain on hedges                                                       | 2                         | 873                                      | 1,288                    | -                        | -        |
|     Other operating income                                               | 1,916                     | 1,238                                    | 1,216                    | 1,242                    | 1,233    |
|  Total noninterest income                                                               | 7,311                     | 8,822                                    | 7,675                    | 4,753                    | 4,303    |
|  Noninterest expense                                                                    |                      |                                     |                     |                     |     |
|     Salaries and employee benefits                                       | 11,948                    | 12,146                                   | 13,584                   | 11,846                   | 10,852   |
|     Occupancy and equipment                                              | 3,945                     | 3,716                                    | 3,884                    | 3,294                    | 2,920    |
|     Information technology                                               | 2,101                     | 1,810                                    | 1,633                    | 1,616                    | 1,525    |
|     FDIC deposit insurance                                               | 1,688                     | 1,886                                    | 653                      | 251                      | 78       |
|     Amortization of intangibles                                          | 171                       | 144                                      | 144                      | 48                       | -        |
|     Loss on sale and write-downs of                                      |                      |                                     |                     |                     |     |
|        foreclosed assets                                  | 2,472                     | 2,566                                    | 228                      | 44                       | -        |
|     Other operating expense                                              | 4,652                     | 4,710                                    | 4,616                    | 4,084                    | 4,578    |
|  Total noninterest expense                                                              | 26,977                    | 26,978                                   | 24,742                   | 21,183                   | 19,953   |
|  Income (loss) before income taxes                                                      | (7,119)                   | 1,084                                    | 9,176                    | 11,871                   | 15,217   |
|  Income tax expense (benefit)                                                           | (3,130)                   | 155                                      | 3,170                    | 4,235                    | 5,215    |
|  Net income (loss)                                                                      | $ (3,989)                 | $      929 | $   6,006 | $   7,636 | $ 10,002 |
|  Net income per share:                                                                  |                      |                                     |                     |                     |     |
|    Basic                                                                      | $   (0.60) | $   0.16                  | $ 1.01                   | $ 1.31                   | $ 1.73   |
|    Diluted                                                                    | $   (0.60) | $   0.16                  | $ 1.01                   | $ 1.29                   | $ 1.70   |
|  Cash dividends paid per share                                                          | $ 0.02                    | $ 0.185                                  | $ 0.50                   | $ 0.48                   | $ 0.45   |
|  Average basic shares outstanding (000s)                                                | 6,625                     | 5,933                                    | 5,930                    | 5,850                    | 5,765    |
|  Average diluted shares outstanding (000s)                                              | 6,625                     | 5,936                                    | 5,947                    | 5,922                    | 5,876    |
|                                                                                         |                      |                                     |                     |                     |     |
|  Performance ratios (averages)                                                          |                      |                                     |                     |                     |     |
|  Net interest margin                                                                    | 3.43%                     | 3.46%                                    | 3.58%                    | 3.99%                    | 4.44%    |
|  Return on average assets                                                               | (0.37)%                   | 0.09%                                    | 0.63%                    | 0.88%                    | 1.30%    |
|  Return on average equity                                                               | (4.73)%                   | 1.16%                                    | 7.60%                    | 10.68%                   | 16.19%   |
|  Efficiency ratio                                                                       | 66.00%                    | 65.60%                                   | 61.98%                   | 56.15%                   | 54.29%   |

----

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

|                                               | 2010                                         |                                         | 2009                                         |
|----------------------------------------------------|----------------------------------------------|----------------------------------------------|----------------------------------------------|
|                                               | Fourth                                       | Third                                        | Second                                       | First |   | Fourth | Third | Second | First |
| Net interest income                                | $8,833                                       | $8,029                                       | $8,276                                       | $8,429 |   | $8,315 | $8,240 | $8,084 | $7,666 |
| Provision for loan losses                          | 6,725                                        | 5,230                                        | 3,745                                        | 5,320 |   | 2,560 | 3,560 | 3,225 | 3,720 |
| Net interest income after                          |                                         |                                         |                                         |   |   |   |   |   |   |
|    provision for loan losses        | 2,108                                        | 2,799                                        | 4,531                                        | 3,109 |   | 5,755 | 4,680 | 4,859 | 3,946 |
| Noninterest income                                 | 1,767                                        | 1,538                                        | 1,726                                        | 2,280 |   | 2,680 | 2,227 | 1,906 | 2,009 |
| Noninterest expense                                | 6,701                                        | 7,310                                        | 6,539                                        | 6,427 |   | 7,288 | 6,476 | 6,739 | 6,475 |
| Income (loss) before   income taxes |    (2,826)                    | (2,973)                                      | (282)                                        | (1,038) |   | 1,147 | 431 | 26 | (520) |
| Income tax expense   (benefit)      | (950)                                        | (1,410)                                      | (220)                                        | (550) |   | 385 | 85 | (80) | (235) |
| Net income (loss)                                  | $(1,876)                                     |  $(1,563)                               | $  (62)                            | $ (488) |   | $  762 | $  346 | $  106 | $ (285) |
|                                               |                                         |                                         |                                         |   |   |   |   |   |   |
| Per share:  (a)                          |                                         |                                         |                                         |   |   |   |   |   |   |
|   Net income (loss) – basic        | $ (0.26)                                     | $ (0.22)                                     | $(0.01)                                      | $ (0.08) |   | $ 0.13 | $ 0.06 | $ 0.02 | $ (0.05) |
|   Net income (loss) – diluted      | $ (0.26)                                     | $ (0.22)                                     | $(0.01)                                      | $ (0.08) |   | $ 0.13 | $ 0.06 | $ 0.02 | $ (0.05) |
|   Dividends                              | $       - | $       - | $       - |  $ 0.02 |   | $ 0.02 | $ 0.02 | $ 0.02 | $ 0.125 |
| Average shares (000s)                              |                                         |                                         |                                         |   |   |   |   |   |   |
|   Basic                                  | 7,200                                        | 7,200                                        | 6,146                                        | 5,938 |   | 5,932 | 5,932 | 5,932 | 5,933 |
|   Diluted                                | 7,200                                        | 7,200                                        | 6,146                                        | 5,938 |   | 5,937 | 5,936 | 5,936 | 5,933 |

|   | (a)   The summation of quarterly earnings per share may not agree with annual earnings per share. |
|--------|------------------------------------------------------------------------------------------------------------------|

|                          | 2010              |    | 2009    |
|-------------------------------|-------------------|---------|---------|
| Closing Market Prices         | Fourth            | Third   | Second  | First |   | Fourth | Third | Second | First |
|                          |              |    |    |   |   |   |   |   |   |
|     High  | $  9.11 | $ 10.05 | $ 12.20 | $ 11.09 |   | $  9.25 | $ 8.50 | $ 10.93 | $ 10.00 |
|     Low   | 6.85              | 8.86    | 9.03    | 7.50 |   | 7.00 | 6.65 | 6.65 | 6.00 |
|     Close | 7.00              | 9.30    | 9.76    | 10.61 |   | 8.00 | 8.10 | 6.65 | 7.01 |

----

|                       |                                                                                                                        | For the Years Ended December 31, |   |
|----------------------------|-----------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------|
| Index                      | 2005                                                                                                                        | 2006                             | 2007   | 2008 | 2009 | 2010 |
| The Savannah Bancorp, Inc. | 100.00                                                                                                                      | 97.52                            | 62.54  | 33.42 | 30.86 | 27.07 |
| NASDAQ Composite           | 100.00                                                                                                                      | 110.39                           | 122.15 | 73.32 | 106.57 | 125.91 |
| SNL Bank $500M-$1B         | 100.00                                                                                                                      | 113.73                           | 91.14  | 58.40 | 55.62 | 60.72 |
|                       |  Source : SNL Financial LC, Charlottesville, VA          © 2010 |                             |   |   |   |   |

----

----

----

| ($ in thousands)                          | 2010     | 2009     | 2008     | 2007               | 2006          |
|-------------------------------------------|----------|----------|----------|--------------------|---------------|
| Balance at the beginning of the year      | $ 17,678 | $ 13,300 | $ 12,864 | $  8,954 | $ 7,813  |
| Charge-offs – commercial            | (1,080)  | (459)    | (387)    | (150)         | -        |
| Charge-offs – consumer              | (116)    | (210)    | (85)     | (103)              | (125)    |
| Charge-offs – real estate           | (17,569) | (8,224)  | (5,242)  | (621)              | (381)    |
| Charge-offs – total                 | (18,765) | (8,893)  | (5,714)  | (874)              | (506)         |
| Recoveries – commercial             | 17       | 22       | 13       | 6                  | 6        |
| Recoveries – consumer               | 28       | 29       | 28       | 43                 | 54       |
| Recoveries – real estate            | 372      | 155      | 109      | 60                 | 2        |
| Recoveries – total                  | 417      | 206      | 150      | 109                | 62       |
| Net charge-offs                           | (18,348) | (8,687)  | (5,564)  | (765)              | (444)    |
| Provision for loan losses                 | 21,020   | 13,065   | 6,000    | 4,675              | 1,585    |
| Balance at the end of the year            | $ 20,350 | $ 17,678 | $ 13,300 | $ 12,864           | $ 8,954  |
| Ratio of net charge-offs to average loans | 2.26%    | 1.03%    | 0.68%    | 0.10%              | 0.07%    |

| ($ in thousands)                        | 2010                     | 2009                               | 2008                         | 2007                         | 2006                   |
|-----------------------------------------|--------------------------|------------------------------------|------------------------------|------------------------------|------------------------|
| Commercial                              | $   1,528 | $     977 | $    760 | $    750 | $   900 |
| Real estate-construction                |                     |                               |                         |                         |                   |
|     and development | 671                      | 2,556                              | 5,291                        | 4,150                        | 4,350                  |
| Real estate-mortgage                    | 17,633                   | 13,874                             | 7,061                        | 6,750                        | 2,350                  |
| Consumer                                | 518                      | 227                                | 188                          | 200                          | 400                    |
| Unallocated                             | -                        | 44                                 | -                            | 1,014                        | 954                    |
| Total allowance for                     |                     |                               |                         |                         |                   |
|     loan losses     | $ 20,350                 | $ 17,678                           | $ 13,300                     | $ 12,864                     | $ 8,954                |

----

| ($ in thousands)                        | 2010   | 2009   | 2008   | 2007   | 2006   |
|-----------------------------------------|--------|--------|--------|--------|--------|
| Commercial                              | 9.1%   | 10.1%  | 9.5%   | 8.8%   | 8.0%   |
| Real estate-construction                |   |   |   |   |   |
|     and development | 2.5    | 7.0    | 11.5   | 16.6   | 23.1   |
| Real estate-mortgage                    | 86.6   | 81.2   | 77.0   | 72.3   | 66.6   |
| Consumer                                | 1.8    | 1.7    | 2.0    | 2.3    | 2.3    |
| Total loans                             | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |

----

|                                               |                          December 31, |
|----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ($ in thousands)                                   | 2010                                                                                                                                                          | 2009 |
|                                               |                                                                                                                                                          |   |
| Allowance for loan losses                          |                                                                                                                                                          |   |
| Balance at beginning of period                     | $ 17,678                                                                                                                                                      | $ 13,300 |
| Provision for loan losses                          | 21,020                                                                                                                                                        | 13,065 |
| Net charge-offs                                    | (18,348)                                                                                                                                                      | (8,687) |
| Balance at end of period                           | $ 20,350                                                                                                                                                      | $ 17,678 |
|                                               |                                                                                                                                                          |   |
| As a % of loans                                    | 2.46%                                                                                                                                                         | 2.00% |
| As a % of nonperforming loans                      | 56.69%                                                                                                                                                        | 51.77% |
| As a % of nonperforming assets                     | 41.45%                                                                                                                                                        | 41.62% |
|                                               |                                                                                                                                                          |   |
| Risk element assets                                |                                                                                                                                                          |   |
| Nonaccruing loans                                  | $ 32,836                                                                                                                                                      | $ 32,545 |
| Loans past due 90 days – accruing            | 3,064                                                                                                                                                         | 1,570 |
| Total nonperforming loans                          | 35,900                                                                                                                                                        | 34,115 |
| Other real estate owned                            | 13,199                                                                                                                                                        | 8,329 |
|     Total nonperforming assets | $ 49,099                                                                                                                                                      | $ 42,444 |
|                                               |                                                                                                                                                          |   |
| Loans past due 30-89 days                          | $ 11,164                                                                                                                                                      | $ 5,182 |
|                                               |                                                                                                                                                          |   |
| Nonperforming loans as a % of loans                | 4.34%                                                                                                                                                         | 3.86% |
| Nonperforming assets as a % of loans               |                                                                                                                                                          |   |
|    and other real estate owned      | 5.85%                                                                                                                                                         | 4.76% |
| Nonperforming assets as a % of assets              | 4.60%                                                                                                                                                         | 4.04% |

----

----

----

| ($ in thousands)                                              | 2010      | % of Total | 2009      | % of Total | % Change ($) |
|---------------------------------------------------------------|-----------|------------|-----------|------------|--------------|
| Non-residential real estate                                   |      |       |      |       |         |
|     Owner-occupied                        | $ 122,753 | 15         | $ 108,069 | 12         | 14           |
|     Non owner-occupied                    | 191,255   | 23         | 188,460   | 22         | 1.5          |
|     Construction                          | 3,157     | -          | 5,352     | 1          | (41)         |
|     Commercial land and lot development   | 39,882    | 5          | 47,080    | 5          | (15)         |
| Total non-residential real estate                             | 357,047   | 43         | 348,961   | 40         | 2.3          |
| Residential real estate                                       |      |       |      |       |         |
|     Owner-occupied – 1-4 family     | 81,293    | 10         | 95,741    | 11         | (15)         |
|     Non owner-occupied – 1-4 family | 160,426   | 19         | 158,172   | 18         | 1.4          |
|     Construction                          | 13,502    | 2          | 27,061    | 3          | (50)         |
|     Residential land and lot development  | 68,681    | 8          | 92,346    | 10         | (26)         |
|     Home equity lines                     | 55,917    | 7          | 57,527    | 6          | (2.8)        |
| Total residential real estate                                 | 379,819   | 46         | 430,847   | 48         | (12)         |
| Total real estate loans                                       | 736,866   | 89         | 779,808   | 88         | (5.5)        |
| Commercial                                                    | 74,889    | 9          | 89,380    | 10         | (16)         |
| Consumer                                                      | 15,026    | 2          | 14,971    | 2          | -            |
| Unearned fees, net                                            | (219)     | -          | (273)     | -          | 20           |
| Total loans, net of unearned fees                             | $ 826,562 | 100        | $ 883,886 | 100        | (6.5)        |

----

----

----

|  * | The strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on our loan portfolio and allowance for loan losses; |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|  * | Inflation, interest rate, market and monetary fluctuations; |
|---------|-------------------------------------------------------------|

|  * | Increases in regulatory capital requirements for banking organizations generally, which may adversely affect the Company’s ability to expand its business or could cause it to shrink its business; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  * | The risks of changes in interest rates and the yield curve on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest rate sensitive assets and liabilities; |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| * | Risks related to loans secured by real estate, including further adverse developments in the real estate markets that would decrease the value and marketability of collateral; |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| * | Adverse conditions in the stock market and other capital markets and the impact of those conditions on our capital markets and capital management activities, including our investment and wealth management advisory businesses; |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  * | Changes in the cost and availability of funding due to changes in the deposit market and credit market, or the way in which the Company is perceived in such markets; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  * | The effects of harsh weather conditions, including hurricanes; |
|---------|----------------------------------------------------------------|

|  * |  Changes in U.S. foreign or military policy; |
|---------|---------------------------------------------------|

|  * | The failure to attract or retain key personnel; |
|---------|-------------------------------------------------|

|  * | The timely development of competitive new products and services by us and the acceptance of those products and services by new and existing customers; |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|  * | The willingness of customers to accept third-party products marketed by us; |
|---------|-----------------------------------------------------------------------------|

|  * | The willingness of customers to substitute competitors' products and services for our products and services and vice versa; |
|---------|-----------------------------------------------------------------------------------------------------------------------------|

|  * | The impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities and insurance); |
|---------|----------------------------------------------------------------------------------------------------------------------------------------|

|  * |  Technological changes; |
|---------|------------------------------|

|  * | Changes in consumer spending and saving habits; |
|---------|-------------------------------------------------|

|  * | The effect of corporate restructuring, acquisitions or dispositions, including the actual restructuring and other related charges and the failure to achieve the expected gains, revenue growth or expense savings from such corporate restructuring, acquisitions or dispositions; |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  * | The growth and profitability of our noninterest or fee income being less than expected; |
|---------|-----------------------------------------------------------------------------------------|

|  * |  Unanticipated regulatory or judicial proceedings; |
|---------|---------------------------------------------------------|

|  * | The impact of changes in accounting policies by the SEC or the Financial Accounting Standards Board; |
|---------|------------------------------------------------------------------------------------------------------|

|  * | The limited trading activity or our common stock; |
|---------|---------------------------------------------------|

|  * | The effects of our lack of a diversified loan portfolio, including the risks of geographic concentrations; |
|---------|------------------------------------------------------------------------------------------------------------|

|  * | Adverse changes in the financial performance and/or condition of our borrowers, which could impact the repayment of those borrowers' outstanding loans; and  |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  * | Our success at managing the risks involved in the foregoing. |
|---------|--------------------------------------------------------------|

| ($ in thousands)                   |                                                                 | 0 - 3                           | 3 - 12                    | 1 - 3                     | 3 - 5               | Over 5       |                       |
|------------------------------------|----------------------------------------------------------------------|---------------------------------|---------------------------|---------------------------|---------------------|--------------|----------------------------|
|                               | Immediate                                                            | Months                          | Months                    | Years                     | Years               | Years        | Total                      |
| Interest-earning assets            |                                                                 |                            |                      |                      |                |         |                       |
| Investment securities              | $           - | $    11,019 | $   22,832 | $   44,718 | $  27,537 | $ 31,993     | $  138,099  |
| Federal funds sold                 | 110                                                                  | -                               | -                         | -                         | -                   | -            | 110                   |
| Interest-bearing deposits          | 39,391                                                               | 246                             | 655                       | 544                       | -                   | -            | 40,836                |
| Loans - fixed rates                | -                                                                    | 117,357                         | 160,807                   | 163,677                   | 33,624              |  22,167 | 497,632               |
| Loans - variable rates             | -                                                                    | 283,015                         | 7,798                     | 4,408                     | 356                 | 1,242        | 296,819               |
| Total interest-earning assets      | 39,501                                                               | 411,637                         | 192,092                   | 213,347                   | 61,517              | 55,402       | 973,496               |
| Interest-bearing liabilities       |                                                                 |                            |                      |                      |                |         |                       |
| NOW and savings **                 | -                                                                    | 8,033                           | 16,065                    | 40,162                    | 48,194              | 48,194       | 160,648               |
| Money market accounts **           | -                                                                    | 76,004                          | 78,168                    | 44,667                    | 67,001              | -            | 265,840               |
| Time deposits                      | -                                                                    | 105,297                         | 229,322                   | 37,116                    | 23,290              | 6,507        | 401,532               |
| Short-term borrowings              | 15,075                                                               | -                               | -                         | -                         | -                   | -            |  15,075          |
| Other borrowings                   | -                                                                    | 1,505                           | 4,517                     | 4,514                     | -                   | -            | 10,536                |
| FHLB advances                      | 2,000                                                                | -                               | 2,001                     | 3,511                     | 11                  | 10,135       | 17,658                |
| Subordinated debt                  | -                                                                    | 10,310                          | -                         | -                         | -                   | -            | 10,310                |
| Total interest-bearing liabilities | 17,075                                                               | 201,149                         | 330,073                   | 129,970                   | 138,496             | 64,836       | 881,599               |
| GAP-Excess assets (liabilities)    | 22,426                                                               | 210,488                         | (137,981)                 | 83,377                    | (76,979)            | (9,434)      | 91,897                |
| GAP-Cumulative                     | $ 22,426                                                             | $ 232,914                       | $   94,933 | $ 178,310                 | $ 101,331           | $ 91,897     | $ 91,897              |
| Cumulative sensitivity ratio *     | 2.31                                                                 | 2.07                            | 1.17                      | 1.26                      | 1.12                | 1.10         | 1.10                  |

----

|                                        |                          |   |   |             |                                    | Taxable-Equivalent                 |                                    | (a) Variance           |
|---------------------------------------------|-------------------------------|--------|--------|------------------|-----------------------------------------|------------------------------------|-----------------------------------------|------------------------|
| Average Balance                             | Average Rate                  |   |   | Interest (b)     | Vari-                                   | Attributable to                    |
| 2010                                        | 2009                          | 2010   | 2009   |             |                                    | 2010                               | 2009                                    | ance                   | Rate | Volume |
| ($ in thousands)                            | (%)                           |   |   | ($ in thousands) |                                    | ($ in thousands)                   |
|                                        |                          |   |   |             | Assets                                  |                               |                                    |                   |   |   |
| $      50,461 | $   5,963      | 0.29   | 0.75   |             | Interest-bearing deposits               | $     147 | $      45 | $   102 | $    (27) | $  129  |
| 104,367                                     | 77,844                        | 2.35   | 4.20   |             | Investments - taxable                   | 2,456                              | 3,273                                   | (817)                  | (1,440) | 623  |
| 7,386                                       | 3,438                         | 4.45   | 4.94   |             | Investments - non-taxable               | 329                                | 170                                     | 159                    |   (17) | 176  |
| 6,738                                       | 7,339                         | 0.30   | 0.25   |             | Federal funds sold                      | 20                                 | 18                                      | 2                      | 4 | (2)  |
| 810,484                                     | 841,033                       | 5.55   | 5.60   |             | Loans (c)                               | 45,009                             | 47,089                                  | (2,080)                | (421) | (1,659)  |
| 979,436                                     | 935,617                       | 4.90   | 5.41   |             | Total interest-earning assets           | 47,961                             | 50,595                                  | (2,634)                | (1,901) | (733)  |
| 99,028                                      | 82,853                        |   |   |             | Noninterest-earning assets              |                               |                                    |                   |   |   |
| $ 1,078,464                                 | $ 1,018,470                   |   |   |             | Total assets                            |                               |                                    |                   |   |   |
|                                        |                          |   |   |             |                                    |                               |                                    |                   |   |   |
|                                        |                          |   |   |             | Liabilities and equity                  |                               |                                    |                   |   |   |
|                                        |                          |   |   |             | Deposits                                |                               |                                    |                   |   |   |
| $   125,994                  | $123,715                      | 0.36   | 0.46   |             |    NOW accounts          | 450                                | 572                                     | (122)                  | (124) | 2  |
| 18,402                                      | 16,071                        | 0.39   | 0.65   |             |    Savings accounts      | 71                                 | 104                                     | (33)                   | (42) | 9  |
| 199,331                                     | 131,402                       | 1.49   | 1.74   |             |    Money market accounts | 2,974                              | 2,281                                   | 693                    | (329) | 1,022  |
| 54,927                                      | 86,044                        | 0.83   | 1.48   |             |    MMA - institutional   | 456                                | 1,272                                   | (816)                  | (559) | (257)  |
| 185,505                                     | 157,923                       | 2.20   | 3.32   |             |    CDs, $100M or more    | 4,081                              | 5,239                                   | (1,158)                | (1,769) | 611  |
| 86,523                                      | 117,120                       | 1.01   | 2.01   |             |    CDs, broker           | 877                                | 2,356                                   | (1,479)                | (1,171) | (308)  |
| 169,395                                     | 145,488                       | 2.10   | 3.18   |             |    Other time deposits   | 3,551                              | 4,630                                   | (1,079)                | (1,571) | 492  |
| 840,077                                     | 777,763                       | 1.48   | 2.12   |             | Total interest-bearing deposits         | 12,460                             | 16,454                                  | (3,994)                | (5,564) | 1,570  |
| 30,609                                      | 37,744                        | 3.72   | 2.77   |             | Short-term/other borrowings             | 1,138                              | 1,045                                   | 93                     | 359 | (266)  |
| 21,221                                      | 23,913                        | 2.16   | 1.66   |             | FHLB advances                           | 458                                | 397                                     | 61                     | 120 | (59)  |
| 10,310                                      | 10,310                        | 2.97   | 3.51   |             | Subordinated debt                       | 306                                | 362                                     | (56)                   | (56) | -  |
|                                        |                          |   |   |             | Total interest-bearing                  |                               |                                    |                   |   |   |
| 902,217                                     | 849,730                       | 1.59   | 2.15   |             |     liabilities     | 14,362                             | 18,258                                  | (3,896)                | (5,142) | 1,246  |
| 86,458                                      | 82,406                        |   |   |             | Noninterest-bearing deposits            |                               |                                    |                   |   |   |
| 5,470                                       | 6,530                         |   |   |             | Other liabilities                       |                               |                                    |                   |   |   |
| 84,319                                      | 79,804                        |   |   |             | Shareholders' equity                    |                               |                                    |                   |   |   |
| $ 1,078,464                                 |     $1,018,470 |   |   |             | Liabilities and equity                  |                               |                                    |                   |   |   |
|                                        |                          | 3.31   | 3.26   |             | Interest rate spread                    |                               |                                    |                   |   |   |
|                                        |                          | 3.43   | 3.46   |             | Net interest margin                     |                               |                                    |                   |   |   |
|                                        |                          |   |   |             | Net interest income                     | $33,599                            | $32,337                                 | $1,262                 | $  3,241 | $(1,979) |
| $   77,219                   | $  85,887           |   |   |             | Net earning assets                      |                               |                                    |                   |   |   |
| $ 926,535                                   | $860,169                      |   |   |             | Average deposits                        |                               |                                    |                   |   |   |
|                                        |                          | 1.34   | 1.91   |             | Average cost of deposits                |                               |                                    |                   |   |   |
| 87%                                         | 98%                           |   |   |             | Average loan to deposit ratio           |                               |                                    |                   |   |   |

|  (a) | This table shows the changes in interest income and interest expense for the comparative periods based on either changes in average volume or changes in average rates for interest-earning assets and interest-bearing liabilities. Changes which are not solely due to rate changes or solely due to volume changes are attributed to volume.  |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (b) | The taxable equivalent adjustment of $32 in 2010 and in 2009 results from tax exempt income less non-deductible TEFRA interest expense. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------|

|  (c) | Average nonaccruing loans have been excluded from total average loans and included in noninterest-earning assets. |
|-----------|-------------------------------------------------------------------------------------------------------------------|

----

|                                 |                           |   |   |             |                                    | Taxable-Equivalent                      |                               | (a) Variance                                  |
|--------------------------------------|--------------------------------|--------|--------|------------------|-----------------------------------------|-----------------------------------------|------------------------------------|-----------------------------------------------|
| Average Balance                      | Average Rate                   |   |   | Interest (b)     | Vari-                                   | Attributable to                         |
| 2009                                 | 2008                           | 2009   | 2008   |             |                                    | 2009                                    | 2008                               | ance                                          | Rate | Volume |
| ($ in thousands)                     | (%)                            |   |   | ($ in thousands) |                                    | ($ in thousands)                        |
|                                 |                           |   |   |             | Assets                                  |                                    |                               |                                          |   |   |
| $   5,963   | $   7,033  | 0.75   | 2.11   |             | Interest-bearing deposits               | $      45 | $     149 | $  (104)                            | $   (96) | $     (8)  |
| 77,844                               | 60,136                         | 4.20   | 4.98   |             | Investments - taxable                   | 3,273                                   | 3,002                              | 271                                           | (469) | 740 |
| 3,438                                | 1,883                          | 4.94   | 5.46   |             | Investments - non-taxable               | 170                                     | 103                                | 67                                            | (10) | 77 |
| 7,339                                | 6,805                          | 0.25   | 1.95   |             | Federal funds sold                      | 18                                      | 133                                | (115)                                         | (116) | 1 |
| -                                    | 765                            | -      | 7.82   |             | Loans held for sale                     | -                                       | 60                                 | (60)                                          | - | (60) |
| 841,033                              | 821,673                        | 5.60   | 6.47   |             | Loans (c)                               | 47,089                                  | 53,267                             | (6,178)                                       | (7,149) | 971 |
| 935,617                              | 898,295                        | 5.41   | 6.30   |             | Total interest-earning assets           | 50,595                                  | 56,714                             | (6,119)                                       | (7,995) | 1,876 |
| 82,853                               | 61,965                         |   |   |             | Noninterest-earning assets              |                                    |                               |                                          |   |   |
| $1,018,470                           | $960,260                       |   |   |             | Total assets                            |                                    |                               |                                          |   |   |
|                                 |                           |   |   |             |                                    |                                    |                               |                                          |   |   |
|                                 |                           |   |   |             | Liabilities and equity                  |                                    |                               |                                          |   |   |
|                                 |                           |   |   |             | Deposits                                |                                    |                               |                                          |   |   |
| $123,715                             | $120,661                       | 0.46   | 1.15   |             |    NOW accounts          | 572                                     | 1,396                              | (824)                                         | (833) | 9 |
| 16,071                               | 15,488                         | 0.65   | 0.88   |             |    Savings accounts      | 104                                     | 137                                | (33)                                          | (36) | 3 |
| 131,402                              | 128,826                        | 1.74   | 2.38   |             |    Money market accounts | 2,281                                   | 3,079                              | (798)                                         | (824) | 26 |
| 86,044                               | 68,464                         | 1.48   | 2.66   |             |    MMA - institutional   | 1,272                                   | 1,827                              | (555)                                         | (808) | 253 |
| 157,923                              | 147,576                        | 3.32   | 4.52   |             |    CDs, $100M or more    | 5,239                                   | 6,685                              | (1,446)                                       | (1,771) | 325 |
| 117,120                              | 85,790                         | 2.01   | 3.49   |             |    CDs, broker           | 2,356                                   | 2,998                              | (642)                                         | (1,270) | 628 |
| 145,488                              | 134,240                        | 3.18   | 4.25   |             |    Other time deposits   | 4,630                                   | 5,720                              | (1,090)                                       | (1,436) | 346 |
| 777,763                              | 701,045                        | 2.12   | 3.11   |             | Total interest-bearing deposits         | 16,454                                  | 21,842                             | (5,388)                                       | (6,940) | 1,152 |
| 37,744                               | 27,153                         | 2.77   | 2.19   |             | Short-term/other borrowings             | 1,045                                   | 597                                | 448                                           | 157 | 291 |
| 23,913                               | 51,090                         | 1.66   | 2.65   |             | FHLB advances                           | 397                                     | 1,358                              | (961)                                         | (506) | (455) |
| 10,310                               | 10,310                         | 3.51   | 6.21   |             | Subordinated debt                       | 362                                     | 642                                | (280)                                         | (278) | (2) |
|                                 |                           |   |   |             | Total interest-bearing                  |                                    |                               |                                          |   |   |
| 849,730                              | 789,598                        | 2.15   | 3.09   |             |     liabilities     | 18,258                                  | 24,439                             | (6,181)                                       | (7,422) | 1,241 |
| 82,406                               | 83,678                         |   |   |             | Noninterest-bearing deposits            |                                    |                               |                                          |   |   |
| 6,530                                | 7,986                          |   |   |             | Other liabilities                       |                                    |                               |                                          |   |   |
| 79,804                               | 78,998                         |   |   |             | Shareholders' equity                    |                                    |                               |                                          |   |   |
| $1,018,470                           | $960,260                       |   |   |             | Liabilities and equity                  |                                    |                               |                                          |   |   |
|                                 |                           | 3.26   | 3.21   |             | Interest rate spread                    |                                    |                               |                                          |   |   |
|                                 |                           | 3.46   | 3.58   |             | Net interest margin                     |                                    |                               |                                          |   |   |
|                                 |                           |   |   |             | Net interest income                     | $32,337                            | $ 32,275                 |  $      62 | $ (573) ) | $   6355 |
| $  85,887                  | $108,697                       |   |   |             | Net earning assets                      |                                    |                               |                                          |   |   |
| $860,169                             | $784,723                       |   |   |             | Average deposits                        |                                    |                               |                                          |   |   |
|                                 |                           | 1.91   | 2.78   |             | Average cost of deposits                |                                    |                               |                                          |   |   |
| 98%                                  | 105%                           |   |   |             | Average loan to deposit ratio           |                                    |                               |                                          |   |   |

|  (a) |  This table shows the changes in interest income and interest expense for the comparative periods based on either changes in average volume or changes in average rates for interest-earning assets and interest-bearing liabilities. Changes which are not solely due to rate changes or solely due to volume changes are attributed to volume.  |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (b) |  The taxable equivalent adjustment of $32 in 2009 and in 2008 results from tax exempt income less non-deductible TEFRA interest expense.  |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|  (c) | Average nonaccruing loans have been excluded from total average loans and included in noninterest-earning assets. |
|-----------|-------------------------------------------------------------------------------------------------------------------|