RESULTS OF OPERATIONS

Consolidated net income for 2005 was $15.8 million, an increase of $2.4 million or 17.8% compared to $13.4 million for 2004. Basic and diluted net income per share were $2.31 and $2.30, respectively, for the current twelve month period. This represents an increase of $.32 or 16.1% and 16.2% on a basic and diluted basis, respectively. The increase in net income for the twelve months ended December 31, 2005 is attributed to an increase in net interest income and a lower provision for loan losses partially offset by higher net noninterest expenses (noninterest expenses in excess of noninterest income). Net interest income for the current twelve-month period was $46.3 million, an increase of $3.6 million or 8.4% compared to $42.7 million for the same twelve months in 2004. The increase in net interest income can be attributed to higher interest income, primarily as a result of both loan growth and higher average interest rates earned on loans, which offset the increase in interest expense, primarily attributed to higher rates paid on deposits.

The return on assets (“ROA”) was 1.08% in 2005, an increase of 9 basis points from the prior year-end. The return on equity (“ROE”) increased 128 basis points to 11.74% compared to 10.46% in the prior year. The increase in ROE is a result of the $2.4 million increase in net income and a 35 basis point increase in financial leverage from 10.5% to 10.9% as of December 31, 2005. Financial leverage represents the degree in which borrowed funds, as opposed to equity, are used in the funding of assets.