10-Q/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

Amendment No. 1

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-12892

MISSION COMMUNITY BANCORP

(Exact name of registrant as specified in its charter)

California	77-0559736
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

3380 S. Higuera St., San Luis Obispo, California  93401

(Address of principal executive offices)

(805) 782-5000

Issuer’s telephone number

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þNo o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 or Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ Yes oNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

  Yes oNo þ

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  7,094,274 shares of common stock outstanding as of August 8, 2011.

Mission Community Bancorp

Form 10-Q/A

EXPLANATORY NOTE

We are filing this Amended Quarterly Report on Form 10-Q/A to our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011 (the “Original Filing”) to correct an EDGAR filing error in the Original Filing in which the Exhibit 101 Interactive Data Files (XBRL files) were incorrectly identified in the EDGAR filing with the Exhibit 100 designation.  No other changes are being made to the Original filing.  The Original Filing was filed with the Securities and Exchange Commission on August 15, 2011.

PART II - OTHER INFORMATION

Item 6.                         Exhibits

Exhibit Index:

Exhibit #
2.1	Plan of Reorganization and Agreement of Merger dated as of October 4, 2000 (A)
3.1	Restated Articles of Incorporation  (I)
3.2	Certificate of Amendment to Articles of Incorporation (L)
3.3	Certificate of Amendment to Articles of Incorporation (Y)
3.4	Bylaws, as amended  (B),(S)
4.1	Certificate of Determination for Series A Non-Voting Preferred Stock (B)
4.2	Certificate of Determination for Series B Non-Voting Preferred Stock (B)
4.3	Certificate of Determination for Series C Non-Voting Preferred Stock (D)
4.4	Purchase Agreement dated October 10, 2003, by and among Registrant, Mission Community Capital Trust I, and Bear Stearns & Co., Inc. (E)
4.5	Indenture dated as of October 14, 2003 by and between Registrant and Wells Fargo Bank, National Association, as trustee (E)
4.6	Declaration of Trust of Mission Community Capital Trust I dated  October 10, 2003 (E)
4.7	Amended and Restated Declaration of Trust of Mission Community Capital Trust I dated October 14, 2003 by and among the Registrant, Wells Fargo Delaware Trust Company, as Trustee, and Anita M. Robinson and William C. Demmin, as Administrators (E)
4.8	Guarantee Agreement dated October 14, 2003 between Registrant, as Guarantor, and Wells Fargo Bank, National Association, as Guarantee Trustee (E)
4.9	Fee Agreement dated October 14, 2003 by and among the Registrant, Wells Fargo Delaware Trust Co., Bear Stearns & Co., Inc. and Mission Community Capital Trust I (E)
4.10	Certificate of Determination for Series D Preferred Stock (R)
4.11	Form of Common Stock Purchase Warrant (Z)
4.12	Form of Warrant Agreement for warrants issued pursuant to subscription rights (AA)
10.1	Purchase and Sale Agreement and Lease dated January, 1997, as amended (B)
10.2	Intentionally omitted
10.3	Lease Agreement – Paso Robles (B)
10.4	Lease Agreement – San Luis Obispo (B)
10.5	Lease Agreement – Arroyo Grande (B)
10.6	1998 Stock Option Plan, as amended (B)
10.7	Lease Agreement – 569 Higuera, San Luis Obispo (D)
10.8	Lease Agreement – 671 Tefft Street, Nipomo CA (C)
10.9	Intentionally omitted
10.10	Lease Agreement – 3480  S. Higuera, San Luis Obispo (F)
10.11	Salary Protection Agreement — Mr. Pigeon (G)
10.12	Intentionally omitted
10.13	Second Amended and Restated Employment Agreement dated August 28, 2006 between Anita M. Robinson and Mission Community Bank (J)
Exhibit #
10.14	Employment Agreement dated June 3, 2007 between Brooks Wise and Mission Community Bank (J)
10.15	Financial Advisory Services Agreement dated January 4, 2007 between the Company and Seapower Carpenter Capital, Inc. (K)
10.16	Common Stock Repurchase Agreement dated August 10, 2007 between Fannie Mae and the Company (M)
10.17	Build-to-Suit Lease Agreement between Walter Bros. Construction Co., Inc. and Mission Community Bank for property at South Higuera Street and Prado Road in San Luis Obispo, California (N)
10.18	Lease Agreement – 1670 South Broadway, Santa Maria (O)
10.19	Mission Community Bancorp 2008 Stock Incentive Plan (P)
10.20	Amendment No. 1 to Second Amended and Restated Employment Agreement dated December 29, 2008 by and among Mission Community Bancorp, Mission Community Bank, and Anita M. Robinson (Q)
10.21	Amendment No. 1 to Employment Agreement dated December 29, 2008 by and among Mission Community Bancorp, Mission Community Bank, and Brooks W. Wise (Q)
10.22	Amended and Restated Salary Protection Agreement dated December 29, 2008 by and between Mission Community Bank and Ronald B. Pigeon (Q)
10.23	Letter Agreement dated January 9, 2009 between Mission Community Bancorp and the United States Department of Treasury, which includes the Securities Purchase Agreement—Standard Terms attached thereto, with respect to the issuance and sale of the Series D Preferred Stock (R)
10.24	Side Letter Agreement dated January 9, 2009 amending the Stock Purchase Agreement between Mission Community Bancorp and the Department of the Treasury (R)
10.25	Side Letter Agreement dated January 9, 2009 between Mission Community Bancorp and The Department of the Treasury regarding maintenance of two open seats on the Board of Directors (R)
10.26	Side Letter Agreement dated January 9, 2009 between Mission Community Bancorp and The Department of the Treasury regarding CDFI status (R)
10.27	Securities Purchase Agreement dated December 22, 2009 between the Company and Carpenter Fund Manager GP, LLC (“Securities Purchase Agreement”) (U)
10.28	Form of Warrant to be issued in connection with the Securities Purchase Agreement (U)
10.29	Amendment No. 1 to Securities Purchase Agreement dated March 17, 2010 (V)
10.30	Amendment No. 2 to Employment Agreement of Brooks Wise dated March 22, 2010 (W)
10.31	Amendment No. 2 to Securities Purchase Agreement dated March 17, 2010 (X)
10.32	Employment Agreement dated July 1, 2010 between James W. Lokey and Mission Community Bancorp (Y)
10.33	Agreement and Plan of Merger dated as of June 24, 2011 by and among Carpenter Fund Manager GP, LLC; Mission Community Bancorp; Mission Community Bank; Santa Lucia Bancorp and Santa Lucia Bank (BB)
31.1	Certification of CEO pursuant to Section 302 of Sarbanes Oxley Act
31.2	Certification of CFO pursuant to Section 302 of Sarbanes Oxley Act
32.1	Certification of CEO pursuant to Section 906 of Sarbanes Oxley Act
32.2	Certification of CFO pursuant to Section 906 of Sarbanes Oxley Act
101	Interactive Data Files
(A) Included in the Company’s Form 8-K filed on December 18, 2000, and incorporated by reference herein. (B) Included in the Company’s Form 10-KSB filed on April 2, 2001, and incorporated by reference herein. (C) Included in the Company’s Form 10-QSB filed August 12, 2002, and incorporated by reference herein. (D) Included in the Company’s Form 10-QSB filed on November 12, 2002, and incorporated by reference herein. (E) Included in the Company’s Form 8-K filed on October 21, 2003, and incorporated by reference herein. (F) Included in the Company’s Form 10-QSB filed on August 10, 2004, and incorporated by reference herein. (G) Included in the Company’s Form 8-K filed on January 19, 2005, and incorporated by reference herein. (H) Intentionally omitted (I) Included in the Company’s Form 10-QSB filed on August 14, 2006, and incorporated by reference herein. (J) Included in the Company’s Form 8-K filed on June 13, 2007, and incorporated by reference herein. (K) Included in the Form SB-2 Registration Statement of the Company filed on June 13, 2007, and incorporated by reference herein. (L) Included in Pre-Effective Amendment No. 1 to the Form SB-2 Registration Statement of the Company filed on July 24, 2007, and incorporated by reference herein. (M) Included in the Company’s Form 8-K filed on August 14, 2007, and incorporated by reference herein. (N) Included in the Company’s Form 8-K filed on October 23, 2007, and incorporated by reference herein. (O) Included in the Company’s Form 10-KSB filed on March 28, 2008, and incorporated by reference herein. (P) Included in the Company’s Form 10-Q filed on May 15, 2008, and incorporated by reference herein. (Q)Included in the Company’s Form 8-K filed on December 30, 2008, and incorporated by reference herein. (R)Included in the Company’s Form 8-K filed on January 14, 2009, and incorporated by reference herein. (S)Included in the Company’s Form 10-Q filed on August 14, 2009, and incorporated by reference herein. (T)Included in the Company’s Form 10-K filed on March 16, 2009, and incorporated by reference herein. (U)Included in the Company’s From 8-K filed on December 24, 2009, and incorporated by reference herein. (V)Included in the Company’s Form 8-K filed on March 22, 2010, and incorporated by reference herein. (W)Included in the Company’s Form 8-K filed on March 26, 2010, and incorporated by reference herein. (X)Included in the Company’s Form 8-K filed on June 1, 2010, and incorporated by reference herein. (Y)Included in the Company’s Form 8-K filed on August 2, 2010, and incorporated by reference herein. (Z)Included in the Company’s Form S-1 Registration Statement filed on August 31, 2010, and incorporated by reference herein. (AA)Included in Amendment No. 1 to the Company’s Form S-1 Registration Statement filed on October 1, 2010, and incorporated by reference herein. (BB)Included in the Company’s Form 8-K filed on June 27, 2011, and incorporated by reference herein.

Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MISSION COMMUNITY BANCORP

By:  /s/ Anita M. Robinson

ANITA M. ROBINSON

President

Dated:  August 16, 2011

By:  /s/ Mark R. Ruh

MARK R. RUH

Executive Vice President and Chief Financial Officer

Dated:  August 16, 2011

EX-31.1

Exhibit 31.1

SARBANES-OXLEY ACT SECTION 302 CERTIFICATION

OF CHIEF EXECUTIVE OFFICER

I, James W. Lokey, certify that:

(1) I have reviewed this Form 10-Q of Mission Community Bancorp;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

(4) The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

(5) The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date:  August 16, 2011

/s/ James W. Lokey

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

SARBANES-OXLEY ACT SECTION 302 CERTIFICATION

OF CHIEF FINANCIAL OFFICER

I, Mark R. Ruh, certify that:

(1) I have reviewed this Form 10-Q of Mission Community Bancorp;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

(4) The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

(5) The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date:  August 16, 2011

/s/ Mark R. Ruh

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

SARBANES-OXLEY ACT SECTION 906 CERTIFICATION CHIEF EXECUTIVE OFFICER

In connection with this quarterly report on Form 10-Q of Mission Community Bancorp (“the Company”) for the period ended June 30, 2011, I, James W. Lokey, Chairman and Chief Executive Officer, hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.  This Form 10-Q for the period ended June 30, 2011 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.  The information contained in this Form 10-Q for the period ended June 30, 2011 fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 16, 2011

By:         /s/ James W. Lokey

James W. Lokey

Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

SARBANES-OXLEY ACT SECTION 906 CERTIFICATION  CHIEF FINANCIAL OFFICER

In connection with this quarterly report on Form 10-Q of Mission Community Bancorp (“the Company”) for the period ended June 30, 2011, I, Mark R. Ruh, Executive Vice President and Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. This Form 10-Q for the period ended June 30, 2011 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in this Form 10-Q for the period ended June 30, 2011 fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 16, 2011

By:         /s/ Mark R. Ruh

Mark R. Ruh

Executive Vice President

and Chief Financial Officer

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Condensed Consolidated Balance Sheets (Parentheticals)	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2010
Preferred stock, shares authorized:	10,000,000	10,000,000	10,000,000
Common stock, shares authorized	50,000,000	50,000,000	50,000,000
Common stock, shares issued	7,094,274	7,094,274	6,345,602
Common stock, shares outstanding	7,094,274	7,094,274	6,345,602
Series A Preferred Stock [Member]
Preferred stock, shares issued	100,000	100,000	100,000
Preferred stock, shares outstanding	100,000	100,000	100,000
Series B Preferred Stock [Member]
Preferred stock, shares issued	20,500	20,500	20,500
Preferred stock, shares outstanding	20,500	20,500	20,500
Series C Preferred Stock [Member]
Preferred stock, shares issued	50,000	50,000	50,000
Preferred stock, shares outstanding	50,000	50,000	50,000
Series D Preferred Stock [Member]
Preferred stock, shares issued	5,116	5,116	5,116
Preferred stock, shares outstanding	5,116	5,116	5,116

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Interest and fees on loans	$ 1,697	$ 1,930	$ 3,486	$ 3,988
Interest on investment securities	461	304	880	613
Other interest income	6	10	16	17
Total interest income	2,164	2,244	4,382	4,618
Interest on money market, NOW and savings deposits	104	117	219	236
Interest on time certificates of deposit	229	293	476	631
Other interest expense	25	86	55	185
Total interest expense	358	496	750	1,052
Net interest income	1,806	1,748	3,632	3,566
Provision for loan and lease losses		5,250		5,450
Net interest income after provision for loan and lease losses	1,806	(3,502)	3,632	(1,884)
Service charges on deposit accounts	121	92	198	174
Gain on sale of loans	35	181	141	181
Loan servicing fees, net of amortization	35	39	59	73
Gain on sale of available-for-sale securities				58
Other real estate income	18		38
Net gains(losses) and writedowns of fixed assets or other real estate	70	(344)	23	(450)
(Losses) gains on disposition of loans held for sale	(4)		46
Other income and fees	42	47	84	86
Total non-interest income	317	15	589	122
Salaries and employee benefits	1,448	921	2,763	1,844
Occupancy expenses	331	315	652	615
Furniture and equipment	112	112	226	236
Data processing	262	176	463	364
Professional fees	403	184	533	318
Marketing and business development	56	33	93	70
Office supplies and expenses	67	61	126	118
Insurance and regulatory assessments	81	192	226	396
Loan and lease expenses	123	29	160	57
Other real estate expenses	42	29	98	39
Other expenses	167	126	317	232
Total non-interest expense	3,092	2,178	5,657	4,289
Loss before income taxes	(969)	(5,665)	(1,436)	(6,051)
Income tax expense	5		5
Net loss	(974)	(5,665)	(1,441)	(6,051)
Net loss applicable to common stock	$ (1,021)	$ (5,460)	$ (1,543)	$ (5,873)
Net loss - basic (in Dollars per share)	$ (0.14)	$ (1.65)	$ (0.22)	$ (2.52)
Average common shares outstanding - basic (in Shares)	7,094,274	3,301,646	7,094,274	2,329,027

XML



Document And Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 08, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	Mission Community Bancorp
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		7,094,274
Amendment Flag	false
Entity Central Index Key	0001129920
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

XML



Note 5 - Credit Quality and the Allowance for Loan and Lease Losses

3 Months Ended

Jun. 30, 2011

Allowance for Credit Losses [Text Block]

Note 5 — Credit Quality and the Allowance for Loan and Lease Losses

An allowance for loan and lease losses is provided for loans held for investment (i.e., not held for sale).  Loans held for sale are carried on the consolidated balance sheets at the lower of cost or fair value, therefore no related allowance for loan losses is provided.

Following is a summary of the changes in the allowance for loan and lease losses for the three- and six-month periods ended June 30:

	Three Months Ended						Six Months Ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Balance at beginning of period	$	3,244,630		$	5,080,392		$	3,197,636		$	5,536,929
Provision for loan and lease losses charged to expense		-			5,250,000			-			5,450,000
Loans charged off		(91,564	)		(6,600,145	)		(99,613	)		(7,287,500	)
Recoveries on loans previously charged off		28,926			1,221			83,969			32,039
Balance at end of period	$	3,181,992		$	3,731,468		$	3,181,992		$	3,731,468

Changes in the allowance for loan and lease losses for the three and six months ended June 30, 2011, and year ended December 31, 2010, are shown below disaggregated by portfolio segment:

	Three Months Ended June 30, 2011
Loan Portfolio Segment	Balance at Beginning of Period		Provision for Loan Losses Charged (Credited) to Expense			Less Loans Charged Off			Plus Recoveries on Loans Previously Charged Off		Balance at End of Period
Construction and land development	$	624,555	$	(501,909	)	$	-		$	-	$	122,646
Commercial real estate - owner-occupied		311,687		80,792			-			-		392,479
Commercial real estate - non-owner-occupied		474,121		238,974			-			-		713,095
Residential real estate		431,370		167,849			(83,000	)		-		516,219
All other real estate loans		3,261		792			-			-		4,053
Commercial and industrial loans		920,275		100,214			(8,564	)		26,076		1,038,001
Consumer and all other loans and lease financing		110,255		117			-			2,850		113,222
Unallocated		369,106		(86,829	)		-			-		282,277
Totals	$	3,244,630	$	-		$	(91,564	)	$	28,926	$	3,181,992
	Six Months Ended June 30, 2011
Loan Portfolio Segment	Balance at Beginning of Year		Provision for Loan Losses Charged (Credited) to Expense			Less Loans Charged Off			Plus Recoveries on Loans Previously Charged Off		Balance at End of Period
Construction and land development	$	530,473	$	(407,827	)	$	-		$	-	$	122,646
Commercial real estate - owner-occupied		165,181		216,823			-			10,475		392,479
Commercial real estate - non-owner-occupied		696,239		16,856			-			-		713,095
Residential real estate		501,008		84,702			(83,000	)		13,509		516,219
All other real estate loans		3,289		764			-			-		4,053
Commercial and industrial loans		1,021,240		(31,730	)		(8,564	)		57,055		1,038,001
Consumer and all other loans and lease financing		123,727		(5,386	)		(8,049	)		2,930		113,222
Unallocated		156,479		125,798			-			-		282,277
Totals	$	3,197,636	$	-		$	(99,613	)	$	83,969	$	3,181,992
	Year Ended December 31, 2010
Loan Portfolio Segment	Balance at Beginning of Year		Provision for Loan Losses Charged (Credited) to Expense			Less Loans Charged Off			Plus Recoveries on Loans Previously Charged Off		Balance at End of Year
Construction and land development	$	1,529,114	$	1,737,805		$	(2,755,179	)	$	18,733	$	530,473
Commercial real estate - owner-occupied		669,727		822,197			(1,326,743	)		-		165,181
Commercial real estate - non-owner-occupied		1,272,180		234,669			(810,610	)		-		696,239
Residential real estate		162,505		1,679,365			(1,340,862	)		-		501,008
All other real estate loans		248,029		(9,279	)		(235,461	)		-		3,289
Commercial and industrial loans		866,580		1,710,065			(1,582,702	)		27,297		1,021,240
Consumer and all other loans and lease financing		275,646		(18,153	)		(134,401	)		635		123,727
Unallocated		513,148		(356,669	)		-			-		156,479
Totals	$	5,536,929	$	5,800,000		$	(8,185,958	)	$	46,665	$	3,197,636

The Company assigns a risk rating to all loans except pools of homogeneous loans and those risk ratings are continuously reviewed and updated by management at least quarterly or as conditions dictate.  These risk ratings are also subject to semi-annual examination by independent specialists engaged by the Company, and also by its regulators. The following table shows the Bank’s loan portfolio (excluding loans held for sale) allocated by management’s internal risk ratings as of the dates indicated:

Loans by Risk Rating	Risk Ratings
(in thousands)			Special						Total
	Pass		Mention		Substandard		Doubtful		Loans
As of June 30, 2011:
Construction and land development	$	4,970	$	168	$	1,323	$	-	$	6,461
Commercial real estate - owner-occupied		26,144		3,518		1,251		-		30,913
Commercial real estate - non-owner-occupied		24,143		4,527		1,170		-		29,840
Residential real estate		14,147		-		92		19		14,258
All other real estate		1,297		-		-		-		1,297
Commercial and industrial		14,441		454		1,301		-		16,196
Consumer and all other loans and lease financing		7,280		-		51		-		7,331
Total loans, net of unearned income	$	92,422	$	8,667	$	5,188	$	19	$	106,296
As of December 31, 2010:
Construction and land development	$	2,932	$	179	$	1,324	$	-	$	4,435
Commercial real estate - owner-occupied		29,590		-		1,023		-		30,613
Commercial real estate - non-owner-occupied		22,477		6,077		781		-		29,335
Residential real estate		15,322		-		-		-		15,322
All other real estate		1,315		-		-		-		1,315
Commercial and industrial		14,872		150		877		13		15,912
Consumer and all other loans and lease financing		8,046		-		132		-		8,178
Total loans, net of unearned income	$	94,554	$	6,406	$	4,137	$	13	$	105,110
As of June 30, 2010:
Construction and land development	$	2,428	$	1,699	$	6	$	-	$	4,133
Commercial real estate - owner-occupied		27,857		-		2,208		-		30,065
Commercial real estate - non-owner-occupied		24,209		2,784		4,825		-		31,818
Residential real estate		15,853		321		154		-		16,328
All other real estate		1,380		-		-		-		1,380
Commercial and industrial		14,234		428		1,725		13		16,400
Consumer and all other loans and lease financing		8,501		93		202		-		8,796
Total loans, net of unearned income	$	94,462	$	5,325	$	9,120	$	13	$	108,920

The following table shows an aging analysis of the loan portfolio (excluding loans held for sale) as of the dates indicated.  Also shown are loans on non-accrual, those that are past due and still accruing interest and troubled debt restructurings:

Loans by Delinquency Status													Accruing		Past Due
(in thousands)	Recorded Balance of Loans Past Due												Troubled		90+ Days
	30-59		60-89		90+		Total						Debt		and		Non-Accrual
	Days		Days		Days		Past Due		Current		Total Loans		Restructurings		Accruing		Loans
As of June 30, 2011:
Construction and land development	$	-	$	-	$	1,323	$	1,323	$	5,138	$	6,461	$	-	$	-	$	1,323
Commercial real estate - owner-occupied		-		-		682		682		30,231		30,913		-		-		709
Commercial real estate - non-owner-occupied		393		-		-		393		29,447		29,840		-		-		393
Residential real estate		-		-		92		92		14,166		14,258		-		-		111
All other real estate		-		-		-		-		1,297		1,297		-		-		-
Commercial and industrial		153		156		-		309		15,887		16,196		-		-		739
Consumer and all other loans and lease financing		-		-		-		-		7,331		7,331		7		-		-
Total loans, net of unearned income	$	546	$	156	$	2,097	$	2,799	$	103,497	$	106,296	$	7	$	-	$	3,275
As of December 31, 2010:
Construction and land development	$	-	$	-	$	-	$	-	$	4,435	$	4,435	$	-	$	-	$	-
Commercial real estate - owner-occupied		-		681		-		681		29,932		30,613		-		-		641
Commercial real estate - non-owner-occupied		-		-		-		-		29,335		29,335		-		-		-
Residential real estate		-		-		-		-		15,322		15,322		-		-		-
All other real estate		-		-		-		-		1,315		1,315		-		-		-
Commercial and industrial		237		165		821		1,223		14,689		15,912		-		-		1,352
Consumer and all other loans and lease financing		38		-		-		38		8,140		8,178		-		-		-
Total loans, net of unearned income	$	275	$	846	$	821	$	1,942	$	103,168	$	105,110	$	-	$	-	$	1,993
As of June 30, 2010:
Construction and land development	$	-	$	185	$	7	$	192	$	3,941	$	4,133	$	-	$	-	$	6
Commercial real estate - owner-occupied		-		-		785		785		29,280		30,065		-		-		785
Commercial real estate - non-owner-occupied		-		-		233		233		31,585		31,818		-		-		671
Residential real estate		-		-		-		-		16,328		16,328		-		-		-
All other real estate		-		-		-		-		1,380		1,380		-		-		-
Commercial and industrial		609		150		1,098		1,857		14,543		16,400		168		-		1,527
Consumer and all other loans and lease financing		-		-		-		-		8,796		8,796		109		-		-
Total loans, net of unearned income	$	609	$	335	$	2,123	$	3,067	$	105,853	$	108,920	$	277	$	-	$	2,989

Following are summaries of the investment in impaired loans (excluding loans held for sale) as of the dates indicated, including the related allowance for loan losses and cash-basis income recognized:

Impaired Loans							For the Six Months Ended
(in thousands)	As of June 30, 2011						June 30, 2011
			Unpaid				Average		Interest Income
	Recorded		Principal		Related		Recorded		Recognized
	Investment		Balance		Allowance		Investment		While Impaired
Impaired Loans With a Related Allowance for Loan and Lease Losses:
Construction and land development	$	-	$	-	$	-	$	-	$	-
Commercial real estate - owner-occupied		353		424		32		345		-
Commercial real estate - non-owner-occupied		393		393		51		131		-
Residential real estate		111		194		19		37		-
All other real estate		-		-		-		-		-
Commercial and industrial		345		805		100		482		-
Consumer and all other loans and lease financing		7		7		-		5		-
Total Impaired Loans With An Allowance Recorded		1,209		1,823		202		1,000		-
Impaired Loans With No Related Allowance for Loan and Lease Losses:
Construction and land development		1,680		1,698		-		797		-
Commercial real estate - owner-occupied		-		-		-		-		-
Commercial real estate - non-owner-occupied		-		-		-		-		-
Residential real estate		-		-		-		-		-
All other real estate		-		-		-		-		-
Commercial and industrial		393		445		-		419		-
Consumer and all other loans and lease financing		-		-		-		-		-
Total Impaired Loans With No Allowance Recorded		2,073		2,143		-		1,216		-
Total Loans Individually Evaluated for Impairment:
Construction and land development		1,680		1,698		-		797		-
Commercial real estate - owner-occupied		353		424		32		345		-
Commercial real estate - non-owner-occupied		393		393		51		131		-
Residential real estate		111		194		19		37		-
All other real estate		-		-		-		-		-
Commercial and industrial		738		1,250		100		901		-
Consumer and all other loans and lease financing		7		7		-		4		-
Total Loans Individually Evaluated For Impairment	$	3,282	$	3,966	$	202	$	2,215	$	-
Loans Collectively Evaluated for Impairment:
Construction and land development	$	4,781	$	4,781	$	123
Commercial real estate - owner-occupied		30,560		30,560		361
Commercial real estate - non-owner-occupied		29,447		29,447		662
Residential real estate		14,147		14,147		497
All other real estate		1,297		1,297		4
Commercial and industrial		15,458		15,458		938
Consumer and all other loans and lease financing		7,324		7,324		113
Unallocated		-		-		282
Total Loans Collectively Evaluated For Impairment	$	103,014	$	103,014	$	2,980
Total Loans:
Construction and land development	$	6,461	$	6,479	$	123
Commercial real estate - owner-occupied		30,913		30,984		393
Commercial real estate - non-owner-occupied		29,840		29,840		713
Residential real estate		14,258		14,341		516
All other real estate		1,297		1,297		4
Commercial and industrial		16,196		16,708		1,038
Consumer and all other loans and lease financing		7,331		7,331		113
Unallocated		-		-		282
Total Loans	$	106,296	$	106,980	$	3,182

Impaired Loans							For the Year Ended
(in thousands)	As of December 31, 2010						December 31, 2010
			Unpaid				Average		Interest Income
	Recorded		Principal		Related		Recorded		Recognized
	Investment		Balance		Allowance		Investment		While Impaired
Impaired Loans With a Related Allowance for Loan and Lease Losses:
Construction and land development	$	-	$	-	$	-	$	1,817	$	-
Commercial real estate - owner-occupied		-		-		-		2,053		-
Commercial real estate - non-owner-occupied		-		-		-		1,393		-
Residential real estate		-		-		-		94		-
All other real estate		-		-		-		-		-
Commercial and industrial		1,010		1,424		9		1,193		-
Consumer and all other loans and lease financing		-		-		-		226		-
Total Impaired Loans With An Allowance Recorded		1,010		1,424		9		6,776		-
Impaired Loans With No Related Allowance for Loan and Lease Losses:
Construction and land development		356		375		-		307		-
Commercial real estate - owner-occupied		326		396		-		46		-
Commercial real estate - non-owner-occupied		-		-		-		958		-
Residential real estate		-		-		-		-		-
All other real estate		-		-		-		-		-
Commercial and industrial		301		322		-		299		27
Consumer and all other loans and lease financing		-		-		-		-		-
Total Impaired Loans With No Allowance Recorded		983		1,093		-		1,610		27
Total Loans Individually Evaluated for Impairment:
Construction and land development		356		375		-		2,124		-
Commercial real estate - owner-occupied		326		396		-		2,099		-
Commercial real estate - non-owner-occupied		-		-		-		2,351		-
Residential real estate		-		-		-		94		-
All other real estate		-		-		-		-		-
Commercial and industrial		1,311		1,746		9		1,492		27
Consumer and all other loans and lease financing		-		-		-		226		-
Total Loans Individually Evaluated For Impairment	$	1,993	$	2,517	$	9	$	8,386	$	27
Loans Collectively Evaluated for Impairment:
Construction and land development	$	4,079	$	4,079	$	531
Commercial real estate - owner-occupied		30,287		30,287		165
Commercial real estate - non-owner-occupied		29,335		29,335		696
Residential real estate		15,322		15,322		501
All other real estate		1,315		1,315		3
Commercial and industrial		14,601		14,601		1,012
Consumer and all other loans and lease financing		8,178		8,178		124
Unallocated		-		-		157
Total Loans Collectively Evaluated For Impairment	$	103,117	$	103,117	$	3,189
Total Loans:
Construction and land development	$	4,435	$	4,454	$	531
Commercial real estate - owner-occupied		30,613		30,683		165
Commercial real estate - non-owner-occupied		29,335		29,335		696
Residential real estate		15,322		15,322		501
All other real estate		1,315		1,315		3
Commercial and industrial		15,912		16,347		1,021
Consumer and all other loans and lease financing		8,178		8,178		124
Unallocated		-		-		157
Total Loans	$	105,110	$	105,634	$	3,198

The amount of the allowance for loan losses provided for impaired loans represents the aggregate amount by which the recorded investment in each impaired loan exceeds its fair value.  Fair value for this purpose is determined by computing either the present value of expected future cash flows discounted at the loan’s effective interest rate or, if repayment is expected solely from the collateral, the fair value of the underlying collateral less estimated costs to sell, based on current appraisals.  In some cases, impaired loans are partially charged off, such that there is no excess of the recorded investment over the fair value of the loan, as determined above

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Note 10 - Pending Acquisition

3 Months Ended

Jun. 30, 2011

Business Combination Disclosure [Text Block]

Note 10 — Pending Acquisition

On June 24, 2011, the Company entered into an Agreement and Plan of Merger by and among Carpenter, as General Partner of Carpenter Community BancFund L.P. and Carpenter Community BancFund A., L.P. (the “Funds”), the Bank, Santa Lucia Bancorp (“SL Bancorp”) and Santa Lucia Bank (“SL Bank”) (the “Merger Agreement”).  Pursuant to the Merger Agreement, the Funds will acquire SL Bancorp for $3.5 million, as described below, and will immediately thereafter merge SL Bank, a wholly-owned subsidiary of SL Bancorp, with and into Mission Community Bank (the “Bank Merger”).

Subject to the terms and conditions of the Merger Agreement, a to-be-formed wholly-owned subsidiary of the Funds (“NewCo”) will merge with and into SL Bancorp, with SL Bancorp being the surviving corporation (the “Merger”).  At the effective time of the Merger, each outstanding share of SL Bancorp common stock, other than any shares dissenting from the Merger, will be converted into the right to receive $0.35 in cash, or an aggregate of approximately $700,000.  In addition, as a condition to the Merger, NewCo will acquire, from the United States Department of the Treasury (“UST”), for a purchase price of $2.8 million, all of the issued and outstanding shares of preferred stock and warrants issued by SL Bancorp to UST in connection with the Troubled Asset Relief Capital Purchase Program (the “TARP Securities”), which $2.8 million payment will also settle past due dividends on the TARP Securities.  Following such purchase, NewCo will surrender the TARP Securities to SL Bancorp for cancellation..

In addition, in connection with the Merger, SL Bank will transfer to SL Bancorp certain non-performing assets so that following the Merger and the Bank Merger the Funds will own SL Bancorp, which will have as its principal asset certain non-performing assets.  The Merger and Bank Merger have been unanimously approved by the board of directors of each of the Company, the Bank, SL Bancorp and SL Bank.

The transaction is subject to customary conditions, including the approval of the shareholders of SL Bancorp and receipt of all required regulatory approvals.  The transaction is subject to further conditions, including:  the repurchase of the TARP Securities from UST; SL Bank and SL Bancorp meeting certain financial conditions at the closing date; and receipt of a fairness opinion to the effect that the per share Merger Consideration is fair to the shareholders of SL Bancorp from a financial point of view.

The Merger Agreement contains representations and warranties customary for transactions of this type.  In addition, each of SL Bank and SL Bancorp has agreed to various customary covenants and agreements, including, among others, (i) to conduct its business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and the effectiveness of the Merger and the Bank Merger, (ii) not to engage in certain kinds of transactions during this period, (iii) to convene and hold a meeting of its shareholders to consider and vote upon the Merger, (iv) to recommend approval of the Merger to its shareholders and, subject to certain exceptions, not make any changes to such recommendation and (v) not solicit, initiate, or knowingly encourage any alternative proposal to acquire SL Bank or SL Bancorp.

Upon consummation of the Merger and the Bank Merger, which are currently expected to occur in the fourth quarter of 2011, management projects the Company’s consolidated assets to exceed $460 million and deposits to exceed $400 million.

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Note 1 - Basis of Presentation and Management Representations

3 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 – Basis of Presentation and Management Representations

The unaudited consolidated financial statements include accounts of Mission Community Bancorp (“the Company”) and its subsidiaries, Mission Community Bank (“the Bank”) and Mission Asset Management, Inc. (“MAM”), and the Bank’s subsidiary, Mission Community Development Corporation.  All material inter-company balances and transactions have been eliminated.

These financial statements have been prepared in accordance with the Securities and Exchange Commission’s rules and regulations for quarterly reporting and, therefore, do not necessarily include all information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles.  These financial statements should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2010, which was filed on March 31, 2011.

Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.  In the opinion of management, the unaudited financial statements for the three- and six-month periods ended June 30, 2011 and 2010 reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations.

Management has determined that since all of the banking products and services offered by the Bank are available in each branch of the Bank, all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment.

The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable legal limits. The Bank participated in the FDIC’s Transaction Account Guarantee Program (“TAGP”). Under the program, through December 31, 2010, all noninterest-bearing transaction accounts were fully guaranteed by the FDIC for the entire amount in the account. Coverage under the TAGP is in addition to and separate from the coverage under the FDIC’s general deposit insurance rules.  The Dodd-Frank Wall Street Reform and Consumer Protection Act permanently raised the current standard maximum deposit insurance amount to $250,000 and extended full deposit insurance coverage for non-interest bearing transaction accounts to December 31, 2012.

Certain reclassifications have been made to prior period balances to conform to classifications in 2011.

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Note 7 - Income taxes

3 Months Ended

Jun. 30, 2011

Income Tax Disclosure [Text Block]

Note 7 —Income taxes

Due to a limitation on the Company’s ability to recognize deferred tax assets, no federal income tax expense or benefit was recognized for the three- and six-month periods ended June 30, 2011, although a $5 thousand minimum state franchise tax expense was recorded.  For the first six months of 2010, no federal or state income tax expense or benefit was recognized due to the deferred tax asset limitation.

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Note 8 - Fair Value Measurement

3 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Text Block]

Note 8 — Fair Value Measurement

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2011 and December 31, 2010, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

· Level 1—Quoted prices in active markets for identical assets or liabilities

· Level 2—Estimates based on significant other observable inputs that market participants would use in pricing the asset or liability

· Level 3—Estimates based on significant unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.  Valuation techniques include management’s judgment, which may be a significant factor.

For some assets or liabilities, the inputs used to measure fair value may fall into more than one level of the fair value hierarchy.  In such cases, the asset or liability is identified based on the lowest level input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the asset or liability.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

(in thousands)	Fair Value Measurements Using
June 30, 2011	Level 1		Level 2		Level 3		Total
Available for sale securities:
U.S. Government agencies	$	-	$	29,932	$	-	$	29,932
Mortgage-backed securities		-		58,939		-		58,939
Municipal securities		-		2,954		-		2,954
Corporate debt securities		-		-		-		-
Asset-backed securities		-		131		-		131
Total available-for-sale securities		-		91,956		-		91,956
Loans held for sale		-		-		10,029		10,029
Total assets measured at fair value on a recurring basis	$	-	$	91,956	$	10,029	$	101,985
December 31, 2010
Available for sale securities:
U.S. Government agencies	$	-	$	20,860	$	-	$	20,860
Mortgage-backed securities		-		49,480		-		49,480
Municipal securities		-		2,922		-		2,922
Corporate debt securities		-		2,001		-		2,001
Asset-backed securities		-		172		-		172
Total available-for-sale securities		-		75,435		-		75,435
Loans held for sale		-		-		15,115		15,115
Total assets measured at fair value on a recurring basis	$	-	$	75,435	$	15,115	$	90,550

The fair value of securities available for sale equals quoted market prices, if available.  If quoted market prices are not available, fair value is determined using quoted market prices for similar securities.  There were no changes in the valuation techniques used during 2011 or 2010 and there were no transfers into or out of Levels 1, 2 or 3 of the fair value hierarchy during the six months ended June 30, 2011.

Loans held for sale that are carried at fair value on a recurring basis consist of all loans held by the company’s MAM subsidiary.  Those loans are valued by assessing the probability of borrower default using historical payment performance and available cash flows to the borrower, then projecting the amount and timing of cash flows to MAM, including collateral liquidation if repayment weaknesses exist.

Management monitors the availability of observable market data to assess the appropriate classifications of financial instruments within the fair value hierarchy.  Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another.  In such instances, the transfer is reported at the beginning of the reporting period.

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

(in thousands)									Current
									Period
	Fair Value Measurements Using								Gains
June 30, 2011	Level 1		Level 2		Level 3		Total		(Losses)
Financial assets measured at fair value on a non-recurring basis:
Impaired loans, net of charge-offs and specific reserves--
Construction and land development	$	-	$	-	$	1,680	$	1,680	$	-
Commercial real estate - owner-occupied		-		-		321		321		(32	)
Commercial real estate - non-owner-occupied		-		-		342		342		(52	)
Residential real estate		-		-		92		92		(102	)
Commercial and industrial		-		-		638		638		(99	)
Consumer and all other loans and lease financing		-		-		7		7		-
Total impaired loans, net of specific reserves	$	-	$	-	$	3,080	$	3,080	$	(285	)
Non-financial assets measured at fair value on a non-recurring basis:
Other real estate owned	$	-	$	-	$	2,833	$	2,833	$	23
									Full Year
	Fair Value Measurements Using								Gains
December 31, 2010	Level 1		Level 2		Level 3		Total		(Losses)
Financial assets measured at fair value on a non-recurring basis:
Impaired loans, net of charge-offs and specific reserves--
Commercial and industrial	$	-	$	-	$	1,010	$	1,010	$	(648	)
Commercial real estate - owner-occupied		-		-		326		326		(97	)
Construction and land development		-		-		356		356		(10	)
Total impaired loans, net of specific reserves	$	-	$	-	$	1,692	$	1,692	$	(755	)
Non-financial assets measured at fair value on a non-recurring basis:
Other real estate owned	$	-	$	-	$	3,137	$	3,137	$	(486	)

The following methods were used to estimate the fair value of each class of assets above.  The fair value of impaired loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less estimated costs to sell if repayment is expected solely from the collateral.  Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria.  Collateral-dependent impaired loans are categorized as Level 3 due to ongoing real estate conditions resulting in inactive market data which, in turn, required the use of unobservable inputs and assumptions in fair value measurements.  Impaired loans were measured and reported at fair value through specific valuation allocations of the allowance for loan and lease losses and/or partial charge-offs of the impaired loans.

The fair value of other real estate owned is based on the values obtained through property appraisals, which can include observable and unobservable inputs.  Other real estate owned fair values are categorized as Level 3 due to ongoing real estate conditions resulting in inactive market data which required the use of unobservable inputs and assumptions in fair value measurements.

The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the first six months of 2011 and 2010:

(in thousands)	Level 3 Available-for-Sale Securities  and Loans Held for Sale
	Six Months Ended June 30
	2011			2010
Balance at beginning of year	$	15,115		$	913
Securities transfered into Level 3		-			-
Net increase (decrease) in SBA loans held for sale		244			(616	)
Loans held for sale transfered into Level 3		-			16,689
Unrealized gains (losses)
included in other comprehensive income (loss)		-			-
Purchases		-			-
Settlements - principal reductions in loans held for sale		(4,186	)		-
Loans held for sale transferred to other real estate owned		(1,069	)
Securities valuation reserve		-			(10	)
Loans held for sale valuation reserve		(75	)		-
Balance at end of period	$	10,029		$	16,976

"Settlements” in the above table relate to actual cash payments received from borrowers on loans held for sale and do not represent refinancings or write-downs to fair value. The following methods and assumptions were used to estimate the fair value of significant financial instruments that are not carried at fair value in the consolidated balance sheet:

Financial Assets.  The carrying amounts of cash and short-term investments are considered to approximate fair value.  Short-term investments include federal funds sold and interest bearing deposits with other banks.  For investment securities, fair values are based on quoted market prices, where available.  If quoted market prices are not available, fair values are estimated using quoted market prices for similar securities and indications of values provided by brokers.  The fair value of loans (including loans held for sale) are estimated using a combination of techniques, including discounting estimated future cash flows and quoted market prices of similar instruments, where available.  The carrying value of accrued interest receivable approximates fair value.  The fair value of Company owned life insurance policies are based on current cash surrender values at each reporting date provided by the insurers.  The carrying amount of FHLB and FRB stock approximate their fair value.

Financial Liabilities.  The carrying amounts of deposit liabilities payable on demand and short-term borrowed funds are considered to approximate fair value.  For fixed maturity deposits, fair value is estimated by discounting estimated future cash flows using currently offered rates for deposits of similar remaining maturities.  The fair value of long-term debt is based on rates currently available to the Bank for debt with similar terms and remaining maturities.

Off-Balance Sheet Financial Instruments.  The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements.  The fair value of these financial instruments is not material.

The estimated fair value of financial instruments is summarized as follows:

(in thousands)	June 30, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Cash and due from banks	$	6,755	$	6,755	$	10,817	$	10,817
Interest-bearing deposits in other banks		302		302		550		550
Investment securities		91,956		91,956		75,435		75,435
Loans held for sale		10,029		10,029		15,115		15,115
Loans, net of allowance for loan and lease losses		103,114		103,791		101,912		102,926
Federal Home Loan Bank and other stocks		2,489		2,489		2,682		2,682
Company owned life insurance		3,025		3,025		2,980		2,980
Accrued interest receivable		805		805		697		697
Financial Liabilities:
Deposits		182,280		182,512		173,240		173,590
Other borrowings		-		-		349		349
Junior subordinated debt securities		3,093		1,328		3,093		1,333
Accrued interest payable		171		171		180		180

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Note 6 - Shareholders’ Equity and Loss Per Share

3 Months Ended

Jun. 30, 2011

Stockholders' Equity Note Disclosure [Text Block]

Note 6 — Shareholders’ Equity and Loss Per Share

Common Stock

On April 27, 2010, there was an initial closing (the “Initial Closing”) under the Securities Purchase Agreement dated December 22, 2009, as amended (the “Securities Purchase Agreement”), by and between the Company and Carpenter Fund Manager GP, LLC (“Carpenter”) on behalf of and as General Partner of Carpenter Community BancFund, L.P., Carpenter Community BancFund-A, L.P. and Carpenter Community BancFund—CA, L.P.  (the “Investors”).   At the Initial Closing the Investors purchased an aggregate of 2,000,000 shares of the common stock of the Company paired with warrants to purchase 2,000,000 shares of the common stock of the Company for an aggregate purchase price of $10 million.  The warrants are exercisable for a term of five years from issuance at an exercise price of $5.00 per share and contain customary anti-dilution provisions.

On June 15, 2010, the Investors purchased an aggregate of 3,000,000 additional shares of common stock and warrants to purchase 3,000,000 shares of common stock at a purchase price of $5.00 per unit of one share of common stock and one warrant in the second closing under the Securities Purchase Agreement (the “Second Closing”), for an aggregate purchase price of $15 million.

The Company used a substantial majority of the proceeds from the Second Closing to enable a newly-formed wholly owned subsidiary of the Company, Mission Asset Management, Inc., to purchase from the Bank certain non-performing loans and other real estate owned assets.

The Securities Purchase Agreement further provided that the Company would conduct a rights offering to its existing shareholders, pursuant to which each shareholder was offered the right to purchase 15 additional shares of common stock, paired with a warrant, for each share held, at a price of $5.00 per unit of common stock and warrant.  The rights offering closed on December 15, 2010, with 748,672 shares being issued. Net proceeds from the rights offering totaled $3,527,000.

Prior to the Initial Closing, Carpenter was the largest shareholder of the Company, beneficially owning 333,334 shares of the common stock of the Company or 24.7% of the issued and outstanding shares.  Following the Second Closing and the rights offering, Carpenter was the beneficial owner of 5,333,334 shares of the common stock of the Company (not including warrants) or 75.2% of the issued and outstanding shares.

Loss per Share

The following table shows the calculation of earnings (loss) per common share and the allocation of the Company’s net loss among common stock and the various classes of preferred stock:

(in thousands, except per share data)	Three Months Ended						Six Months Ended
		June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Net income (loss)	$	(974	)	$	(5,665	)	$	(1,441	)	$	(6,051	)
Less net income (loss) allocated to preferred stock:
Convertible preferred (Series A & C)		(14	)		(223	)		(22	)		(253	)
Non-convertible preferred (Series B)		(3	)		(46	)		(4	)		(53	)
TARP preferred (Series D)		64			64			128			128
Net income (loss) allocated to all classes of preferred stock		47			(205	)		102			(178	)
Income (loss) allocated to common stock	$	(1,021	)	$	(5,460	)	$	(1,543	)	$	(5,873	)
Average common shares outstanding		7,094,274			3,301,646			7,094,274			2,329,027
Basic earnings (loss) per common share	$	(0.14	)	$	(1.65	)	$	(0.22	)	$	(2.52	)

No presentation of diluted earnings (loss) per common share has been presented because the result would be anti-dilutive.

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Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parentheticals) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Issuance costs	$ 40
Common Stock [Member]
Issuance costs	40	153
Comprehensive Income [Member]
Unrealized gain on securities sold during the period, taxes		0
Unrealized gain on remaining available-for-sale securities, taxes	$ 0	$ 0

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Note 2 - Stock Based Compensation Plans

3 Months Ended

Jun. 30, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 2 – Stock Based Compensation Plans

The Company has a stock option plan, adopted in 1998, which is more fully described in Note J to the consolidated financial statements in the Company’s Annual Report on Form 10-K.  The 1998 Stock Option Plan has been terminated with respect to the granting of future options under the Plan.  In 2008 the Company adopted the Mission Community Bancorp 2008 Stock Incentive Plan, which provides for the grant of various equity awards, including stock options.

The Company accounts for equity-based compensation arrangements, including employee stock options, using the “modified prospective method,” where stock-based compensation expense is recognized using the fair value based method for all new awards granted.

The Company determines the fair value of options granted on the date of grant using a Black-Scholes-Merton option pricing model, which uses assumptions based on expected option life, expected stock volatility and the risk-free interest rate. The expected volatility assumptions used by the Company are based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The Company bases its expected life assumption on its historical experience and on the terms and conditions of the stock options it grants to employees. The risk-free rate is based on the U.S. Treasury yield curve for the periods within the contractual life of the options in effect at the time of the grant. The Company also makes assumptions regarding estimated forfeitures that will impact the total compensation expenses recognized.

The fair value of options granted in the six months ended June 30, 2011, were estimated on the date of grant using the following assumptions:

Date of grant	1/25/2011			4/4/2011
Exercise price	$	5.00		$	5.00
Market price of common stock	$	3.65		$	3.61
Expected stock price volatility		37.4	%		37.3	%
Expected option life	6 years			6 years
Risk-free interest rate		2.32	%		2.53	%
Weighted average fair value of all options granted during the period:
3 months ended 6/30/11				$	1.07
6 months ended 6/30/11				$	1.08

No options were granted during the six months ended June 30, 2010.

During the three-month periods ended June 30, 2011 and 2010, the Company recognized pre-tax stock-based compensation expense of $35,000 and $10,000, respectively.  For the six-month periods ended June 30, 2011 and 2010, stock-based compensation expense was recognized totaling $69,000 and $19,000, respectively.  As of June 30, 2011, the Company has unvested options outstanding with unrecognized compensation expense totaling $303,000, which is scheduled to be recognized as follows (in thousands):

July 1 through December 31, 2011	$	71
2012		142
2013		72
2014		9
2015		8
2016		1
Total unrecognized compensation cost	$	303

No options outstanding were “in the money” as of June 30, 2011.

The following table summarizes information about stock option activity for the six months ended June 30, 2011:

						Weighted-			Aggregate
				Weighted-		Average			Intrinsic
				Average		Remaining			Value of
				Exercise		Contractual			In-the-Money
	Shares			Price		Term			Options
Outstanding at beginning of year		183,432		$	10.39
Options granted		40,000			5.00
Options exercised		-
Options cancelled		( 7,000	)		8.25
Outstanding at end of period		216,432		$	9.46		7.6	Years	$	-
Options exercisable at end of period		93,094		$	13.08		5.9	Years	$	-
Options Vested or Expected to Vest		216,432		$	9.46		7.6	Years	$	-

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Note 3 - Investment Securities

3 Months Ended

Jun. 30, 2011

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 3 — Investment Securities

Investment securities have been classified in the consolidated balance sheets as available for sale according to management’s intent.  The amortized cost of securities and their approximate fair values as of the balance sheet dates were as follows:

(in thousands)			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
June 30, 2011:
U.S. Government agencies	$	29,826	$	165	$	(59	)	$	29,932
Mortgage-backed securities		58,704		358		(123	)		58,939
Municipal securities		2,917		42		(5	)		2,954
Corporate debt securities		-		-		-			-
Asset-backed securities		127		4		-			131
	$	91,574	$	569	$	(187	)	$	91,956
December 31, 2010:
U.S. Government agencies	$	21,083	$	47	$	(270	)	$	20,860
Mortgage-backed securities		49,831		215		(566	)		49,480
Municipal securities		2,917		20		(15	)		2,922
Corporate debt securities		1,981		20		-			2,001
Asset-backed securities		165		7		-			172
	$	75,977	$	309	$	(851	)	$	75,435

The scheduled maturities of investment securities at June 30, 2011, were as follows.  Actual maturities may differ from contractual maturities because some investment securities may allow the right to call or prepay the obligation with or without call or prepayment penalties.

(in thousands)	Available-for-Sale Securities
	Amortized		Fair
	Cost		Value
Within one year	$	-	$	-
Due in one year to five years		28,907		28,994
Due in five years to ten years		16,101		16,222
Due in greater than ten years		46,566		46,740
	$	91,574	$	91,956

Investment securities in a temporary unrealized loss position as of each balance sheet date are shown in the following table, based on the length of time they have been continuously in an unrealized loss position:

(in thousands)	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
June 30, 2011:
U.S. Government agencies	$	11,938	$	59	$	-	$	-	$	11,938	$	59
Mortgage-backed securities		28,143		123		-		-		28,143		123
Municipal securities		575		5		-		-		575		5
Corporate debt securities		-		-		-		-		-		-
Asset-backed securities		-		-		-		-		-		-
	$	40,656	$	187	$	-	$	-	$	40,656	$	187
December 31, 2010:
U.S. Government agencies	$	15,985	$	270	$	-	$	-	$	15,985	$	270
Mortgage-backed securities		37,274		566		-		-		37,274		566
Municipal securities		1,169		15		-		-		1,169		15
Corporate debt securities		-		-		-		-		-		-
Asset-backed securities		-		-		-		-		-		-
	$	54,428	$	851	$	-	$	-	$	54,428	$	851

As of June 30, 2011, the Company held 19 securities that had been in an unrealized loss position for less than 12 months.  No securities have been in an unrealized loss position for 12 months or longer as of June 30, 2011.  The unrealized losses relate principally to changes in market interest rate conditions.  All of the securities continue to pay as scheduled.  When analyzing the issuer’s financial condition, management considers the length of time and extent to which the market value has been less than cost; the historical and implied volatility of the security; the financial condition of the issuer of the security; and the Bank’s intent and ability to hold the security to recovery.  As of June 30, 2011, management does not have the intent to sell these securities nor does it believe it is more likely than not that it will be required to sell these securities before maturity or the recovery of amortized cost basis.  Based on the Bank’s evaluation of the above and other relevant factors, the Bank does not believe the securities that are in an unrealized loss position as of June 30, 2011 are other than temporarily impaired.

During the first quarter of 2010, the Bank sold $5,532,000 of investment securities for gross gains of $58,000.  Settlement of these transactions occurred during the second quarter of 2010.  No securities were sold in the first six months of 2011.

As of June 30, 2011, investment securities carried at $11,665,000 and $17,628,000 were pledged to secure public deposits, as required by law, and to secure borrowing facilities from the Federal Home Loan Bank of San Francisco, respectively.

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Note 4 - Loans

3 Months Ended

Jun. 30, 2011

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4 — Loans

The Company’s loan portfolio consists primarily of loans to borrowers within the Central Coast area of California.  Although the Company seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Company’s market area and, as a result, the loan and collateral portfolios are concentrated in those industries and in that geographic area.

The following table shows the composition of the Company’s loans by type:

Loan Composition
(Dollars in thousands)
	June 30, 2011					December 31, 2010					June 30, 2010
Type of Loan	Amount		Percentage			Amount		Percentage			Amount		Percentage
Construction and land development	$	9,866		8.5	%	$	8,972		7.4	%	$	9,659		7.7	%
Commercial real estate - owner-occupied		31,572		27.2	%		35,135		29.2	%		34,977		27.8	%
Commercial real estate - non-owner-occupied		32,717		28.1	%		32,240		26.8	%		35,374		28.1	%
Residential real estate		15,338		13.2	%		16,641		13.9	%		17,414		13.8	%
All other real estate loans		2,951		2.5	%		2,989		2.5	%		3,100		2.5	%
Commercial and industrial loans		16,659		14.3	%		17,701		14.7	%		18,725		14.9	%
Agricultural loans		2,596		2.2	%		1,022		0.9	%		390		0.3	%
Municipal loans		2,429		2.1	%		2,987		2.5	%		3,589		2.8	%
Leases, net of unearned income		815		0.7	%		1,047		0.9	%		1,097		0.9	%
Consumer loans		1,382		1.2	%		1,491		1.2	%		1,571		1.2	%
Total loans	$	116,325		100.0	%	$	120,225		100.0	%	$	125,896		100.0	%

The table above includes loans held for sale as follows:

Loans Held for Sale
(Dollars in thousands)
	June 30, 2011					December 31, 2010					June 30, 2010
Type of Loan	Amount		% of Total Loans			Amount		% of Total Loans			Amount		% of Total Loans
Commercial	$	252		0.2	%	$	32		0.0	%	$	376		0.3	%
Real estate		6,372		5.5	%		10,545		8.8	%		11,074		8.8	%
Construction and land development		3,405		2.9	%		4,538		3.8	%		5,526		4.4	%
Total loans held for sale	$	10,029		8.6	%	$	15,115		12.6	%	$	16,976		13.5	%

Loans and leases, other than those held for sale, are carried at the principal amount outstanding, net of any deferred loan origination fee income and deferred direct loan origination costs, and net of any unearned interest on discounted loans.  A separate allowance for loan and lease losses is provided for loans held for investment.  Loans held for sale are carried at the lower of cost or fair value, with no allowance for loan losses.

As of June 30, 2011, and December 31, 2010, loans totaling $94,759,000 and $60,681,000, respectively, were pledged to secure potential borrowing facilities from the Federal Home Loan Bank of San Francisco and the Federal Reserve Bank of San Francisco.

Included in commercial loans at December 31, 2010, were $349,458 in guaranteed portions of SBA loans sold and subject to a 90-day premium refund obligation.  In accordance with accounting standards for the sale of a portion of a loan, the Bank recorded the proceeds from the sale of the guaranteed portion of those SBA loans, which totaled $385,546, as a secured borrowing and included $349,458 of that amount in other borrowings on the consolidated balance sheet, with $36,088 recorded as a deferred premium and included in other liabilities.  The 90-day premium refund obligation elapsed during the first quarter of 2011 and the transaction was recorded as a sale during that quarter, with the guaranteed portions of loans and the secured borrowings removed from the balance sheet and the resulting gain on sale recorded.  In February 2011, the SBA eliminated the refund obligation period, so the Bank is no longer required to defer gain recognition for SBA loan sales.  As of June 30, 2011, no SBA loan sales have been deferred.

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Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (USD $) In Thousands, except Share data	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Comprehensive Income [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Dec. 31, 2009	$ 18,638	$ 6,152	$ 18,042	$ 242		$ (6,280)	$ 482
Balance (in Shares) at Dec. 31, 2009			1,345,602
Issuance of common stocki n private placement, net of issuance costs of $153	24,847		24,847
Issuance of common stocki n private placement, net of issuance costs of $153 (in Shares)			5,000,000
Dividends, series D preferred stock	(127)					(127)
Stock-based compensation	19			19
Net (loss)	(6,051)				(6,051)	(6,051)
Less beginning of year unrealized gain on securities sold during the period, net of taxes of $-0-	(22)				(22)		(22)
Net unrealized gain on remaining available-for-sale securities, net	510				510		510
Total comprehensive income (loss)					(5,563)
Additional expenses of 2010 shareholder rights offering			(153)
Balance at Jun. 30, 2010	37,814	6,152	42,889	261		(12,458)	970
Balance (in Shares) at Jun. 30, 2010			6,345,602
Balance at Dec. 31, 2010	39,144	6,152	46,427	327		(13,220)	(542)
Balance (in Shares) at Dec. 31, 2010			7,094,274
Dividends, series D preferred stock	(128)					(128)
Stock-based compensation	69			69
Net (loss)	(1,441)				(1,441)	(1,441)
Net unrealized gain on remaining available-for-sale securities, net	924				924		924
Total comprehensive income (loss)					(517)
Additional expenses of 2010 shareholder rights offering	(40)		(40)
Balance at Jun. 30, 2011	$ 38,528	$ 6,152	$ 46,387	$ 396		$ (14,789)	$ 382
Balance (in Shares) at Jun. 30, 2011			7,094,274

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net loss	$ (974)	$ (5,665)	$ (1,441)	$ (6,051)
Depreciation	127	126	252	259
Accretion of discount on securities and loans, net	138	(1)	257	(24)
Provision for credit losses		5,250		5,450
Stock-based compensation	35	10	69	19
Gain on sale of available-for-sale securities				(58)
Gain on sale of loans	(35)	(181)	(141)	(181)
Losses (gains) on disposition of loans held for sale	4		(46)
Net losses (gains) and writedowns of fixed assets or other real estate	(70)	344	(23)	450
Increase in company-owned life insurance	(23)	(24)	(45)	(47)
Other, net	463	(199)	(260)	304
Proceeds from loan sales	475	1,482	1,440	4,402
Loans originated for sale	(629)	(1,542)	(1,562)	(3,583)
Net cash (used in) provided by operating activities	(489)	(400)	(1,500)	940
Net decrease in Federal Home Loan Bank and other stock	117	189	193	189
Net decrease in deposits in other banks			248	25
Purchase of available-for-sale securities	(14,038)	(19,193)	(22,033)	(23,160)
Proceeds from maturities, calls and paydowns of available-for-sale securities	2,439	7,124	6,142	10,660
Proceeds from sales of available-for-sale securities		5,564		5,622
Net decrease in loans	1,610	(130)	3,160	2,279
Purchases of premises and equipment	(100)	(127)	(191)	(340)
Additional investments in other real estate owned	(79)		(111)
Proceeds from sale of other real estate owned	1,368	5	1,507	605
Net cash used in investing activities	(8,683)	(6,568)	(11,085)	(4,120)
Net increase (decrease) in demand deposits and savings accounts	6,665	(6,387)	1,797	(4,974)
Net increase in time deposits	956	2,162	7,243	2,330
Net (decrease) in other borrowings		(1,858)	(349)	(1,858)
Proceeds from common stock issued, net of issuance costs		24,847	(40)	24,847
Payment of TARP-CPP dividends	(64)	(64)	(128)	(128)
Net cash provided by financing activities	7,557	18,700	8,523	20,217
Net (decrease) increase in cash and cash equivalents	(1,615)	11,732	(4,062)	17,037
Cash and cash equivalents at beginning of period	8,370	13,900	10,817	8,595
Cash and cash equivalents at end of period	6,755	25,632	6,755	25,632
Change in unrealized gains (losses) on available-for-sale securities	1,109	402	925	488
Real estate acquired by foreclosure		377	1,069	377
Loans reclassified to held for sale		16,689		16,689
Interest paid	378	590	760	1,135
Taxes paid	$ 2		$ 2

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Note 9 - Recent Accounting Pronouncements

3 Months Ended

Jun. 30, 2011

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

Note 9 — Recent Accounting Pronouncements

Fair Value Measurements and Disclosures

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (“Topic 820”): Improving Disclosures about Fair Value Measurements.  ASU 2010-06 revised two disclosure requirements concerning fair value measurements and clarified two others.  It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers.  It also requires the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis.  The amendments also clarified that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements.  ASU 2010-06 became effective for the Company’s financial statements as of December 31, 2010, except for the disclosure requirements related to the presentation of purchases, sales, issuances and settlements within Level 3, which were adopted by the Company on January 1, 2011.  The adoption of the remaining provisions of ASU 2010-06 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses

In July 2010, the FASB issued FASB ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  ASU 2010-20 requires more robust and disaggregated disclosures about the credit quality of financing receivables (loans) and allowances for loan and lease losses, including disclosure about credit quality indicators, past due information and modifications of finance receivables.  The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on  and  after  December 15, 2010.    The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010.  The adoption of this guidance has significantly expanded disclosure requirements related to accounting policies and disclosures related to the allowance for loan and lease losses but did not have an impact on the Company’s financial position, results of operations or cash flows.

Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring

In January 2011, the FASB issued ASU 2011-01, Receivables (Topic 310):  Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20.  ASU 2011-01 approved the deferral of certain disclosure requirements surrounding TDRs included in ASU 2010-20, which were scheduled to be effective on January 1, 2011. The disclosure requirements were delayed until the FASB finalized the standards update related to their exposure draft, Clarifications to Accounting for Troubled Debt Restructurings by Creditors.  In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.  ASU 2011-02 provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a TDR.  The new guidance will require creditors to evaluate modifications and restructurings of receivables using a more principles-based approach, which may result in more modifications and restructurings being considered TDR.  The amendments are effective for the first interim or annual period beginning on or after June 15, 2011.  The disclosures which were deferred by ASU 2011-01 are required for interim and annual periods beginning on or after June 15, 2011.  Management is currently determining the potential impact that the adoption of this standard may have on the Company’s financial position, results of operations and disclosures.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2010
Assets
Cash and due from banks	$ 6,755	$ 10,817	$ 25,632
Interest-bearing deposits in other banks	302	550	400
Investment securities available for sale	91,956	75,435	48,598
Loans held for sale	10,029	15,115	16,976
Loans, net of unearned income	106,296	105,110	108,920
Less allowance for loan and lease losses	(3,182)	(3,198)	(3,731)
Net loans	103,114	101,912	105,189
Federal Home Loan Bank stock and other stock, at cost	2,489	2,682	2,814
Premises and equipment	3,138	3,199	3,336
Other real estate owned	2,833	3,137	1,528
Company owned life insurance	3,025	2,980	2,932
Accrued interest and other assets	1,628	1,974	1,377
Total Assets	225,269	217,801	208,782
Liabilities and Shareholders' Equity
Noninterest-bearing demand	25,549	22,910	22,443
Money market, NOW and savings	69,168	70,010	51,343
Time certificates of deposit	87,563	80,320	87,340
Total deposits	182,280	173,240	161,126
Other borrowings		349	4,142
Junior subordinated debt securities	3,093	3,093	3,093
Accrued interest and other liabilities	1,368	1,975	2,607
Total liabilities	186,741	178,657	170,968
Preferred stock - 10,000,000 shares authorized:	0	0	0
Common stock - 50,000,000 shares authorized; issued and outstanding: 7,094,274 at June 30, 2011 and December 31, 2010, and 6,345,602 at June 30, 2010	46,387	46,427	42,889
Additional paid-in capital	396	327	261
Retained deficit	(14,789)	(13,220)	(12,458)
Accumulated other comprehensive income (loss)	382	(542)	970
Total shareholders' equity	38,528	39,144	37,814
Total Liabilities and Shareholders' Equity	225,269	217,801	208,782
Series A Preferred Stock [Member]
Liabilities and Shareholders' Equity
Preferred stock, value	392	392	392
Series B Preferred Stock [Member]
Liabilities and Shareholders' Equity
Preferred stock, value	192	192	192
Series C Preferred Stock [Member]
Liabilities and Shareholders' Equity
Preferred stock, value	500	500	500
Series D Preferred Stock [Member]
Liabilities and Shareholders' Equity
Preferred stock, value	$ 5,068	$ 5,068	$ 5,068