The Bancorp and our operating subsidiary, Peoples Bank, continue to be well capitalized under applicable federal banking regulations. Our capital strength exceeds all regulatory  requirements with the Bancorp’s and Bank’s Tier 1 capital ratio at 8.5% and Total Risk Based Capital for the Bancorp at 12.9% with the Bank’s Total Risk Based Capital at 12.8% at the  end of 2010. During the year, balance sheet strategies were utilized to strengthen our capital ratios through the prudent sale of loans and investments. Our asset base was reduced without damaging our net interest margin as excess liquidity migrated from our balance sheet. In addition, the Board of Directors reduced our dividend to build our capital and preserve the long term capital strength of your company in a changing environment that demands higher levels of capital. Asset quality on loans originated by the Bank remained relatively stable throughout the year despite the high unemployment in our primary market territory. Overall, non-performing loans totaled $24.1 million at year end compared to $18.6 million at the end of 2009. The Bank’s non-performing loans are primarily concentrated in five geographically diverse commercial real estate participation loans purchased from other originators prior to the current recession in the period from 2005 through 2007. The weakness in loan participations does not reflect systemic weakness in our total loans. The Bank’s loan portfolio is well diversified with loan participations comprising only 6.9% of total loans. Management constantly reviews the value of the underlying asset of each participa- tion, utilizing current appraisals to determine current value of each credit facility, the cash flows from each enterprise, and the value added through personal guarantees and financial support of the borrower. Reserves for potential losses on our loan portfolio are held in our Allowance for Loan Losses (ALL). At year-end, the ALL to total loans was 2.18% compared to 1.33% at the end of 2009. Provisions to the ALL for 2010 were $5.6 million compared to $8.5 million in the prior year. Charge-offs net of recoveries were $2.6 million in 2010 compared to $7.1 million in 2009. The ALL includes $2.8 million of specific reserves for collateral deficiencies, including those  associated with the Bank’s participation loans. Management believes that the Bank is adequately reserved for potential losses in our loan portfolio including our participation loans. Like our shareholders, management recognizes the need to keep tight control on spending especially in the current economy. A key indicator of cost control is measured by a bank’s effi- ciency ratio, a percentage found by dividing total expenses by all sources of income. Many analysts concur that for a bank our size a ratio near 60% indicates strong cost control. For 2010, the Bancorp reported an efficiency ratio of 62.6% compared to the 64.7% reported last year, with the decline reflecting enhanced cost control and a superior position to 2009. Operating Efficiency Asset Quality Capital 3