exhibit99-1_063010.htm

“Given the challenging economic environment in which we are operating, higher second quarter earnings represent another step in the right direction. Reported earnings were bolstered by our ongoing attention to costs. We are also encouraged by a second consecutive quarterly moderate decline in the level of non-performing loans, but remain cautious of a slowdown in the current regional recovery as we continue to focus on asset quality,” said Thomas F. Prisby, Chairman and CEO. “Furthermore, the small business sector has not yet regained its confidence in the economic recovery, and as a result, demand for loans and subsequent asset growth expectations remain tempered.”

The Company’s Strategic Growth and Diversification Plan is built around four core objectives: decreasing non-performing loans; ensuring costs are appropriate given the Company’s targeted future asset base; growing while diversifying by targeting small and mid-sized business owners for relationship-based banking opportunities; and expanding and deepening the Company’s relationships with its clients by meeting a higher percentage of the clients’ financial service needs.

The Company employs a dual strategy in managing its loan portfolio. The Company continues to make progress in its efforts to reduce non-performing loans, seeking to either restructure specific non-performing credits or liquidate the underlying collateral. For new loan originations, the Company continues to be conservative in its underwriting criteria, resulting in a higher quality loan origination process. Since peaking at 7.74% of total loans at December 31, 2009, the Company’s ratio of non-performing loans to total loans has decreased by 27 basis points at June 30, 2010. Overall, the economic outlook remains clouded. The Company anticipates that credit quality-costs, including the provision for loan losses, will continue to affect reported earnings even as management diligently works to reduce non-performing assets.

Efforts to grow while diversifying and to expand and deepen client relationships continue but remain constrained by current economic conditions. The Company has succeeded in increasing targeted growth segments in its portfolio, including commercial and industrial, commercial real estate – owner occupied, and multifamily, to comprise 48.1% of the commercial loan portfolio at June 30, 2010, up from 46.8%, 39.4%, and 35.6% at December 31, 2009, 2008, and 2007, respectively. The Company expects to benefit further from this diversification effort once business owners resume borrowing at their historical levels. The Company’s focus on deepening relationships has emphasized core deposit and relationship-oriented time deposit growth.

The Company’s pre-tax, pre-provision earnings from core operations totaled $2.8 million for the second quarter of 2010 compared to $2.9 million for the first quarter of 2010 and increased 14.5% from $2.5 million for the second quarter of 2009. Pre-tax, pre-provision earnings from core operations for the second quarter of 2010 increased from the second quarter of 2009 due to decreases in compensation and employee benefits and net occupancy expense. These reductions were partially offset by an increase in professional fees and higher Federal Deposit Insurance Corporation (FDIC) insurance expense.

	QE 6/30/10			QE 3/31/10			QE 6/30/09
	(Dollars in thousands)
Net interest margin		3.79	%		3.90	%		3.69	%
Interest rate spread		3.66			3.76			3.53
Net interest income	$	9,329		$	9,443		$	9,335
Average assets:
Yield on interest-earning assets		4.84	%		4.96	%		5.13	%
Yield on loans receivable		5.10			5.16			5.23
Yield on investment securities		4.24			4.54			5.13
Average interest-earning assets	$	987,801		$	982,630		$	1,014,576
Average liabilities:
Cost of interest-bearing liabilities		1.18	%		1.20	%		1.60	%
Cost of deposits		1.07			1.08			1.41
Cost of borrowed funds		2.34			2.14			2.72
Average interest-bearing liabilities	$	878,660		$	868,088		$	909,148

The net interest margin decreased 11 basis points to 3.79% for the second quarter of 2010 from 3.90% for the first quarter of 2010 and increased 10 basis points from 3.69% for the second quarter of 2009. Net interest income remained relatively stable during the second quarter of 2010 compared to the first quarter of 2010 and the second quarter of 2009. The net interest margin was negatively impacted compared to the first quarter of 2010 by lower yields on loans receivable and investment securities during the second quarter of 2010. The yield on loans receivable declined due to several large loan payoffs during 2010 along with the reduction in interest income related to new non-accrual loans. The yield on investment securities decreased due to reinvesting proceeds from maturing investment securities as market interest rates declined to new lows. The net interest margin for the second quarter of 2010 was favorably impacted by the downward repricing of certificates of deposit and borrowed funds when compared to the second quarter of 2009, which more than offset the impact of the decrease in the yield on investment securities.

Interest expense was stable at $2.6 million for the second quarter of 2010 compared to the first quarter of 2010 and decreased 28.8% from $3.6 million for the second quarter of 2009. Interest expense was positively affected by continued disciplined pricing on deposits, the repricing of certificates of deposit at lower interest rates, and a reduction in average balances of Federal Home Loan Bank (FHLB) borrowed funds. Interest expense for the second quarter of 2010 was also positively affected by a 37.8%

Excluding net gain on sale of investment securities, non-interest income increased $160,000, or 7.7%, from the first quarter of 2010 due to increased business analysis charges of $27,000, retail overdraft activity totaling $27,000, and loan fees totaling $40,000 related to renewed credit enhancements and new loan originations. Non-interest income, excluding net gain on sale of investment securities, increased $125,000, or 5.9%, from the second quarter of 2009 primarily due to higher income from the Company’s bank-owned life insurance policy as a result of the repositioning of the underlying investment portfolio in the fourth quarter of 2009 into higher yielding assets and the reduction in the face amount of insurance coverage during the first quarter of 2010.

Non-interest expense for the second quarter of 2010 increased 1.4% to $9.6 million compared to $9.5 million for the first quarter of 2010 primarily due to $437,000 of separation and early retirement severance expense incurred during the second quarter of 2010 primarily due to the separation of the prior chief financial officer. Exclusive of these severance costs, non-interest expense decreased $306,000. In addition, the second quarter of 2010 included $151,000 of increased professional fees related to various corporate matters and the recently completed proxy contest and annual meeting. These increases were partially offset by reduced costs and valuation allowances totaling $374,000 related to other real estate owned (OREO) properties.

Non-interest expense for the second quarter of 2010 decreased 3.4% to $9.6 million compared to $9.9 million for the second quarter of 2009. Efforts to control discretionary costs have resulted in significant reductions in certain non-interest expense categories. Excluding separation and early retirement severance costs of $437,000, compensation and employee benefits expense decreased $528,000 from the second quarter of 2009 due to $180,000 of reduced pension maintenance expense, $89,000 of lower incentive accruals, $40,000 of reduced medical benefit costs, and a decrease in full time equivalent employees (FTEs) from 318 at June 30, 2009 to 316 at June 30, 2010. In addition, net occupancy expense decreased $99,000 as the Bank vacated leased space during 2009 and more fully utilized space in existing buildings. Despite successful cost control initiatives, non-interest expense continues to be impacted by varying degrees of professional fees, OREO related expenses, and FDIC insurance premiums. Professional fees increased $231,000 during the second quarter of 2010 compared to the comparable 2009 quarter as a result of various corporate matters and costs associated with the recently completed proxy contest and annual meeting. OREO related expense increased $50,000 due to the establishment of additional valuation allowances during the second quarter of 2010. FDIC insurance premiums increased $99,000 primarily due to an increase in the average balance of deposits.

	6/30/10			3/31/10			6/30/09
	(Dollars in thousands)
Non-performing loans (NPL)	$	56,482		$	57,816		$	52,897
Non-performing assets (NPA)		68,307			68,432			60,268
NPL / total loans		7.47	%		7.57	%		7.04	%
NPA / total assets		6.24			6.27			5.51
Allowance for loan losses (ALL)	$	17,608		$	20,402		$	14,934
ALL / total loans		2.33	%		2.67	%		1.99	%
ALL / NPL		31.17			35.29			28.23
Provision for loan losses for the quarter ended	$	817		$	1,710		$	713
Net charge-offs for the quarter ended		3,611			769			1,251

Net charge-offs during the current quarter included $2.6 million of non-owner occupied commercial real estate loans primarily due to a $2.3 million partial charge-off that had been previously identified as a specific impairment reserve related to a purchased participation loan. Net charge-offs during the current quarter also included a partial charge-off of $696,000 related to a purchased participation commercial land development loan and $224,000 in charge-offs of one-to-four family residential loans. The decrease in the provision for loan losses in the current quarter compared to the first quarter is due to the stabilization in the level of non-performing loans and the change in the loan portfolio mix as the higher risk targeted contraction portfolios of commercial construction and land development and non-owner occupied commercial real estate loans continue to decrease as a percentage of the portfolio.

The ratio of allowance for loan losses to total loans decreased to 2.33% at June 30, 2010 compared to 2.67% at March 31, 2010 as a result of the aforementioned charge-off that had previously been identified through an impairment reserve. When management determines a non-performing collateral dependent loan has a collateral shortfall, management will immediately charge off the collateral shortfall. As a result, the Company is not required to maintain an allowance for loan losses on these loans as the loan balance has already been written down to its net realizable value (fair value less estimated costs to sell the collateral). As such, the ratio of the allowance for loan losses to total loans and the ratio of the allowance for loan losses to non-performing loans have been affected by partial charge-offs of $12.1 million recorded on $24.7 million of collateral dependent non-performing loans through June 30, 2010 and impairment reserves totaling $7.5 million on other non-performing loans at June 30, 2010.

	6/30/10					3/31/10					12/31/09
	Amount		% of Total			Amount		% of Total			Amount		% of Total
	(Dollars in thousands)
Commercial loans:
Commercial and industrial	$	70,208		9.3	%	$	75,713		9.9	%	$	78,600		10.3	%
Commercial real estate – owner occupied		95,989		12.7			100,083		13.1			99,559		13.1
Commercial real estate – non-owner occupied		214,452		28.4			217,491		28.5			218,329		28.6
Commercial real estate – multifamily		79,382		10.5			70,767		9.3			63,008		8.3
Commercial construction and land development		50,951		6.7			53,081		6.9			55,733		7.3
Total commercial loans		510,982		67.6			517,135		67.7			515,229		67.6

Retail loans:
One-to-four family residential		183,823		24.3			185,253		24.3			185,293		24.3
Home equity lines of credit		56,016		7.4			56,029		7.3			56,911		7.5
Retail construction and land development		3,513		0.5			4,034		0.5			3,401		0.4
Other		1,718		0.2			1,316		0.2			1,552		0.2
Total retail loans		245,070		32.4			246,632		32.3			247,157		32.4

Total loans receivable, net of unearned fees	$	756,052		100.0	%	$	763,767		100.0	%	$	762,386		100.0	%

Total loan fundings during the six months ended June 30, 2010 were $31.5 million, which were more than offset by loan payoffs and repayments of $29.4 million, gross charge-offs of $4.5 million, and transfers to OREO of $4.0 million. Through the execution of our Strategic Growth and Diversification Plan, we continue to diversify our loan portfolio and reduce loans not meeting our current defined risk tolerance. The Company has increased its targeted segments of the loan portfolio, including commercial and industrial, commercial real estate – owner occupied, and multifamily, to comprise 48.1% of the commercial loan portfolio at June 30, 2010. During 2010, these targeted segments were impacted by loan payoffs including two commercial and industrial payoffs totaling $5.5 million and a commercial real estate – owner occupied payoff totaling $3.2 million. Since December 31, 2009, commercial

	6/30/10		3/31/10		12/31/09
	(Dollars in thousands)
Core deposits:
Non-interest bearing checking	$	84,137	$	97,735	$	89,261
Interest bearing checking		105,107		104,856		106,013
Money market accounts		145,533		144,216		136,411
Savings accounts		119,029		118,121		113,865
Subtotal core deposits		453,806		464,928		445,550
Certificates of deposit		392,639		370,454		354,401
Subtotal non-municipal deposits		846,445		835,382		799,951
Municipal core deposits		40,206		40,758		38,993
Municipal certificates of deposit		12,831		10,997		10,814
Subtotal municipal deposits		53,037		51,755		49,807
Total deposits	$	899,482	$	887,137	$	849,758

The Company has had success in growing deposits through many channels including enhancing our brand recognition within our communities, offering attractive deposit products, bringing in new client relationships by meeting all of their banking needs, and holding our experienced sales team accountable for growing deposits and relationships. The decrease in the Company’s core deposits in the current quarter was primarily due to a $14.7 million reduction in the balances of a large commercial customer. Excluding this decrease, core deposits increased $3.6 million from March 31, 2010. As previously mentioned, increasing core deposits is reflective of our success in deepening our client relationships, one of our core Strategic Plan objectives. The increase in certificates of deposit from December 31, 2009 is primarily related to successful marketing efforts for these products.

Non-interest income totaled $4.8 million for the six months ended June 30, 2010 compared to $5.1 million for the 2009 period. Higher card-based fees and income from bank-owned life insurance was more than offset by lower gains on sale of investment securities, service charges and other fees, and other income. Service charges and other fees were impacted by lower retail overdraft activity and credit enhancement fee income as the Company is not actively pursuing this product. Other income was down primarily due to income related to certain viatical investments recorded in the 2009 period.

Non-interest expense decreased 1.5% to $19.1 million for the six months ended June 30, 2010 from $19.4 million for the comparable 2009 period. The Company’s successful cost control initiatives resulted in decreases in almost all operating expense categories including a 10.1% reduction in compensation and employee benefits. These operating expense improvements were partially offset by higher professional fees related to certain corporate matters including the current year’s proxy contest and OREO related expenses which were primarily related to the establishment of additional valuation reserves and higher maintenance expenses.

Income tax expense totaled $287,000 during the six months ended June 30, 2010 which equals an effective tax rate of 14.6%, compared to $747,000, or 26.0%, reported for the 2009 period. The decrease in the effective tax rate compared to the previous year was attributable in part due to an increase in income from tax advantaged BOLI investments and the larger impact of low-income housing credits in combination with the lower pre-tax income in the 2010 period.

This press release contains certain forward-looking statements and information relating to the Company that is based on the beliefs of management as well as assumptions made by and information currently available to management. These forward-looking statements include but are not limited to statements regarding successful execution of the Company’s strategy and its Strategic Growth and Diversification Plan, current regulatory capital and equity ratios, diversification of the loan portfolio, deepening client relationships, levels of core deposits, non-performing asset levels, credit-related costs, revenue growth and levels of earning assets, general economic and competitive conditions nationally and within our core market area, reduction of discretionary costs and cost savings initiatives, levels of non-discretionary costs, levels of provision for the allowance for loan losses and charge-offs, loan and deposit growth, interest on loans, asset yields and cost of funds, net interest income, net interest margin, non-interest income, non-interest expense, interest rate environment, and other risk factors identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as amended, and other filings with the Securities and Exchange Commission. In addition, the words “anticipate,” “believe,” “estimate,” “expect,” “indicate,” “intend,” “should,” and similar expressions, or the negative thereof, as well as statements that include future events, tense, or dates, or are not historical or current facts, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties, assumptions, and changes in circumstances. Forward-looking statements are not guarantees of future performance or outcomes, and actual results or events may differ materially from those included in these statements. The Company does not intend to update these forward-looking statements unless required to under the federal securities laws.

CFS BANCORP, INC.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)

	Three Months Ended							Six Months Ended
	June 30, 2010		March 31, 2010		June 30, 2009			June 30, 2010		June 30, 2009
Interest income:
Loans	$	9,626	$	9,678	$	9,807		$	19,304	$	19,752
Investment securities		2,163		2,213		3,020			4,376		6,063
Other		123		124		137			247		380
Total interest income		11,912		12,015		12,964			23,927		26,195

Interest expense:
Deposits		2,146		2,053		2,749			4,199		5,845
Borrowed funds		437		519		880			956		1,840
Total interest expense		2,583		2,572		3,629			5,155		7,685
Net interest income		9,329		9,443		9,335			18,772		18,510
Provision for loan losses		817		1,710		713			2,527		1,337
Net interest income after provision for loan losses		8,512		7,733		8,622			16,245		17,173

Non-interest income:
Service charges and other fees		1,320		1,220		1,376			2,540		2,675
Card-based fees		486		437		432			923		820
Commission income		46		54		70			100		141
Net gain on sale of investment securities		–		456		–			456		720
Net gain (loss) on sale of other assets		11		1		(6	)		12		(6	)
Income from bank-owned life insurance		262		223		156			485		334
Other income		125		155		97			280		392
Total non-interest income		2,250		2,546		2,125			4,796		5,076

Non-interest expense:
Compensation and employee benefits		4,550		4,669		5,078			9,219		10,253
Net occupancy expense		651		755		750			1,406		1,647
Professional fees		835		684		604			1,519		954
Furniture and equipment expense		526		533		520			1,059		1,055
FDIC insurance premiums		567		498		468			1,065		772
Data processing		443		430		420			873		839
Marketing		216		114		218			330		416
OREO related expense		262		636		212			898		411
Loan collection expense		153		169		230			322		528
Severance and early retirement costs		437		3		–			440		–
FDIC special assessment		–		–		495			–		495
Other		963		981		948			1,944		2,001
Total non-interest expense		9,603		9,472		9,943			19,075		19,371

Income before income taxes		1,159		807		804			1,966		2,878
Income tax expense		178		109		134			287		747

Net income	$	981	$	698	$	670		$	1,679	$	2,131

Basic earnings per share	$	0.09	$	0.07	$	0.06		$	0.16	$	0.20
Diluted earnings per share	$	0.09	$	0.07	$	0.06		$	0.16	$	0.20

Weighted-average common and common share
equivalents outstanding:
Basic		10,640,347		10,581,770		10,590,591			10,611,220		10,543,475
Diluted		10,721,909		10,673,776		10,697,387			10,697,976		10,663,333

CFS BANCORP, INC.
Consolidated Statements of Condition (Unaudited)
(Dollars in thousands)

	June 30, 2010			March 31, 2010			December 31, 2009			June 30, 2009

ASSETS
Cash and amounts due from depository institutions	$	22,232		$	26,170		$	24,041		$	20,553
Interest-bearing deposits		9,411			12,851			387			36
Federal funds sold		–			–			–			234
Cash and cash equivalents		31,643			39,021			24,428			20,823

Investment securities available-for-sale, at fair value		190,893			184,005			188,781			220,324
Investment securities held-to-maturity, at cost		12,206			5,000			5,000			6,000
Investment in Federal Home Loan Bank stock, at cost		23,944			23,944			23,944			23,944

Loans receivable, net of unearned fees		756,052			763,767			762,386			750,861
Allowance for loan losses		(17,608	)		(20,402	)		(19,461	)		(14,934	)
Net loans		738,444			743,365			742,925			735,927

Accrued interest receivable		3,486			3,478			3,469			3,902
Other real estate owned		11,825			10,616			9,242			7,371
Office properties and equipment		20,383			20,128			20,382			19,703
Investment in bank-owned life insurance		35,060			34,797			34,575			36,449
Net deferred tax assets		17,568			17,817			18,036			14,726
Prepaid expenses and other assets		9,828			9,956			10,733			5,510
Total assets	$	1,095,280		$	1,092,127		$	1,081,515		$	1,094,679

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits	$	899,482		$	887,137		$	849,758		$	831,104
Borrowed funds		73,106			83,440			111,808			132,302
Advance payments by borrowers for taxes and insurance		4,186			4,815			4,322			6,121
Other liabilities		5,733			5,542			5,254			9,702
Total liabilities		982,507			980,934			971,142			979,229

Shareholders' Equity:
Preferred stock, $0.01 par value; 15,000,000 shares authorized		–			–			–			–
Common stock, $0.01 par value; 85,000,000 shares authorized;
23,423,306 shares issued; 10,846,650, 10,819,635, 10,771,061 and
10,764,458 shares outstanding		234			234			234			234
Additional paid-in capital		187,221			188,740			188,930			189,004
Retained earnings		82,028			81,156			80,564			83,455
Treasury stock, at cost; 12,576,656, 12,603,671, 12,652,245 and
12,658,848 shares		(155,168	)		(156,852	)		(157,041	)		(157,508	)
Accumulated other comprehensive income (loss), net of tax		(1,542	)		(2,085	)		(2,314	)		265
Total shareholders' equity		112,773			111,193			110,373			115,450

Total liabilities and shareholders' equity	$	1,095,280		$	1,092,127		$	1,081,515		$	1,094,679

CFS BANCORP, INC.
Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)

					June 30, 2010			March 31, 2010			December 31, 2009			June 30, 2009

Book value per share					$	10.40		$	10.28		$	10.25		$	10.73
Shareholders' equity to total assets						10.30	%		10.18	%		10.21	%		10.55	%
Tangible capital ratio (Bank only)						9.05			8.92			8.88			9.53
Core capital ratio (Bank only)						9.05			8.92			8.88			9.53
Risk-based capital ratio (Bank only)						12.81			12.63			12.35			13.21
Common shares outstanding						10,846,650			10,819,635			10,771,061			10,764,458
Employees (FTE)						316			310			312			318
Number of branches						23			23			23			22

		Three Months Ended									Six Months Ended
		June 30, 2010			March 31, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Average Balance Data:
Total assets		$	1,089,864		$	1,083,314		$	1,099,750		$	1,086,607		$	1,107,087
Loans receivable, net of unearned fees			757,478			760,822			751,957			759,141			752,508
Interest-earning assets			987,801			982,630			1,014,576			985,230			1,022,634
Deposits			893,790			864,850			845,617			879,400			834,611
Interest-bearing deposits			804,876			771,230			781,108			788,146			770,431
Non-interest bearing deposits			88,914			93,620			64,509			91,254			64,180
Interest-bearing liabilities			878,660			868,088			909,148			873,404			916,694
Shareholders' equity			111,844			111,181			111,573			111,514			112,008
Performance Ratios (annualized):
Return on average assets			0.36	%		0.26	%		0.24	%		0.31	%		0.39	%
Return on average equity			3.52			2.55			2.41			3.04			3.84
Average yield on interest-earning assets			4.84			4.96			5.13			4.90			5.17
Average cost of interest-bearing liabilities			1.18			1.20			1.60			1.19			1.69
Interest rate spread			3.66			3.76			3.53			3.71			3.48
Net interest margin			3.79			3.90			3.69			3.84			3.65
Non-interest expense to average assets			3.53			3.55			3.63			3.54			3.53
Efficiency ratio (1)			83.01			82.14			86.72			82.58			84.69

Cash dividends declared per share			0.01			0.01			0.01			0.02			0.02
Market price per share of common stock
for the period ended:
	Closing	$	4.88		$	4.43		$	4.23		$	4.88		$	4.23
	High		6.24			4.99			4.33			6.24			4.80
	Low		4.50			3.02			3.50			3.02			1.75

(1) The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income, excluding net gain on sales of investment securities and other assets.

CFS BANCORP, INC.
Reconciliation of Income Before Income Taxes to Pre-Tax, Pre-Provision Earnings from Core Operations
(Unaudited)
(Dollars in thousands)

	Three Months Ended
	June 30, 2010			March 31, 2010			June 30, 2009

Income before income taxes	$	1,159		$	807		$	804
Provision for loan losses		817			1,710			713
Pre-tax, pre-provision earnings		1,976			2,517			1,517

Add back (subtract):
Net gain on sale of investment securities		–			(456	)		–
Net (gain) loss on sale of other assets		(11	)		(1	)		6
OREO related expense		262			636			212
Loan collection expense		153			169			230
Severance and early retirement expense		437			3			–
Special assessment - FDIC insurance		–			–			495

Pre-tax, pre-provision earnings from core operations	$	2,817		$	2,868		$	2,460

Pre-tax, pre-provision earnings from core operations
to average assets		1.03	%		1.06	%		0.89	%


				Six Months Ended
				June 30, 2010			June 30, 2009

Income before income taxes				$	1,966		$	2,878
Provision for loan losses					2,527			1,337
Pre-tax, pre-provision earnings					4,493			4,215

Add back (subtract):
Net gain on sale of investment securities					(456	)		(720	)
Net (gain) loss on sale of other assets					(12	)		6
OREO related expense					898			411
Loan collection expense					322			528
Severance and early retirement expense					440			–
Special assessment - FDIC insurance					–			495

Pre-tax, pre-provision earnings from core operations				$	5,685		$	4,935

Pre-tax, pre-provision earnings from core operations
to average assets					1.05	%		0.89	%

The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles (GAAP) and general practice within the banking industry. Management uses certain non-GAAP financial measures to evaluate the Company's financial performance and has provided the non-GAAP financial measures of pre-tax, pre-provision earnings from core operations and pre-tax, pre-provision earnings from core operations to average assets. In these non-GAAP financial measures, the provision for loan losses, OREO related expense, loan collection expense, and certain other items, such as gains and losses on sales of investment securities and other assets, severance and early retirement expense, and special assessment for FDIC insurance, are excluded from the determination of core operating results. Management believes that these measures are useful because they provide a more comparable basis for evaluating financial performance from core operations period to period and allows us and others to assess the Company's ability to generate earnings to cover credit costs. Although these non-GAAP financial measures are intended to enhance investors understanding of the Company's business performance, these should not be considered as an alternative to GAAP.

	6/30/10		3/31/10		12/31/09
	(Dollars in thousands)
Short-term variable-rate borrowed funds and repurchase agreements	$	13,684	$	14,978	$	24,299
FHLB borrowed funds		59,422		68,462		87,509
Total borrowed funds	$	73,106	$	83,440	$	111,808