Balance Sheet Review

Total assets declined 6.1%, or $111.1 million, to $1.72 billion at December 31, 2010, from $1.84 billion at December 31, 2009. The Company’s loan portfolio decreased 7.8%, or $110.2 million, to $1.30 billion from $1.41 billion at December 31, 2009, due primarily to softness in loan demand and troubled loans moving through the collection, foreclosure, and disposition process. Deposits at December 31, 2010 decreased 4.1% to $1.47 billion from $1.53 billion at December 31, 2009, due primarily to fewer certificates of deposit.

Asset Quality

Non-performing loans increased to $60.4 million, or 4.63% of total loans, at December 31, 2010, compared with $45.8 million, or 3.45% of total loans, at September 30, 2010. Non-performing loans were down $24.5 million from $84.9 million, or 6.00% of total loans, at December 31, 2009, due primarily to troubled loans working their way through the collection, foreclosure and disposition process. Foreclosed properties at December 31, 2010, decreased to $67.6 million compared with $73.6 million at September 30, 2010, and increased in comparison with $14.5 million at December 31, 2009. Our ratio of non-performing assets to total assets increased during the quarter to 7.43% at December 31, 2010, compared with 6.71% at September 30, 2010, and 5.42% at December 31, 2009.

Our loan loss reserve as a percentage of total loans increased to 2.63% at December 31, 2010, compared with 1.87% at December 31, 2009. Net loan charge-offs for the fourth quarter of 2010 were $10.6 million, or 0.81% of average loans for the quarter.

Our provision for loan losses was $15.5 million in the fourth quarter of 2010, compared with $5.0 million in the third quarter of 2010, and $9.0 million in the prior year fourth quarter.

“We remain focused on improving loan quality and reducing our level of non-performing assets,” continued Ms. Bouvette. “We believe our active write-down of OREO to reflect declining values during the year, and the charge-offs made at year-end 2010 have better aligned our loan portfolio values with the current economic conditions in our markets.”