First Sentry Bancshares, Inc. - FORM 10-K

Attached files

file	filename
EX-32.1 - CERTIFICATION OF PRESIDENT, CEO AND CFO - First Sentry Bancshares, Inc.	ex-32_1.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - First Sentry Bancshares, Inc.	ex-31_1.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - First Sentry Bancshares, Inc.	ex-31_2.htm

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2010

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to ______________________

Commission File No. 000-53790

First Sentry Bancshares, Inc.

(Exact name of registrant as specified in its charter)

West Virginia

(State or other jurisdiction of incorporation or organization)

03-0398338
(IRS Employer Identification No.)

823 Eighth Street, Huntington, West Virginia

(Address of Principal Executive Offices)

25701

(Zip Code)

(304) 522-6400

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

None
Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, par value $1.00 per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES o NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o.

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. (Check one):

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO x

As of March 25, 2011, there were issued and outstanding 1,437,651 shares of the Registrant’s Common Stock.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sales price on June 30, 2010 was $26.3 million.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the 2011 Annual Meeting of Stockholders of the Registrant (Part III).

First Sentry Bancshares, Inc.

Annual Report on Form 10-K

For The Year Ended

December 31, 2010

Table of Contents

		Page
ITEM 1.	Business	1
ITEM 1A.	Risk Factors	32
ITEM 1B.	Unresolved Staff Comments	32
ITEM 2.	Properties	32
ITEM 3.	Legal Proceedings	32
ITEM 4.	Reserved	33
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	33
ITEM 6.	Selected Financial Data	33
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	48
ITEM 8.	Financial Statements and Supplementary Data	49
ITEM 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	79
ITEM 9A.	Controls and Procedures	79
ITEM 9B.	Other Information	80
ITEM 10.	Directors, Executive Officers and Corporate Governance	80
ITEM 11.	Executive Compensation	81
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	81
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	81
ITEM 14.	Principal Accountant Fees and Services	81
ITEM 15.	Exhibits and Financial Statement Schedules	81
Signatures		82

PART I

ITEM 1.

Business

Forward Looking Statements

This Annual Report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include:

·	statements of our goals, intentions and expectations;

·	statements regarding our business plans and prospects and growth and operating strategies;

·	statements regarding the asset quality of our loan and investment portfolios; and

·	estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:

·	our ability to manage the risk in our loan portfolio;

·	significantly increased competition among depository and other financial institutions;

·	our ability to execute our plan to grow our assets on a profitable basis;

·	the expected growth opportunities and cost savings from our recent merger may not be fully realized or may take longer to realize than expected;

·	our ability to execute on a favorable basis any plan we may have to acquire other institutions or branches or establish new offices;

·	changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments and inflation;

·	general economic conditions, either nationally or in our market area;

·	adverse changes in the securities and national and local real estate markets (including real estate values);

·	legislative or regulatory changes that adversely affect our business, including regulatory changes imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations;

·	our ability to enter new markets successfully and take advantage of growth opportunities;

·	changes in consumer spending, borrowing and savings habits;

·	the effect of a weak economy on our lending portfolio;

·	the impact of the U.S. government’s economic stimulus program and its various financial institution rescue plans including TARP;

·	changes in accounting policies and practices, as may be adopted by the bank regulatory agencies and the authoritative accounting and auditing bodies; and

·	changes in our organization, compensation and benefit plans.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

First Sentry Bancshares, Inc. and First Sentry Bank

In 2002, First Sentry Bancshares, Inc. (the “Company”) became the bank holding company of First Sentry Bank (the “Bank”). On September 25, 2009, we completed our merger with Guaranty Financial Services, Inc. and became an SEC reporting company. We do not have any business activities other than our ownership of First Sentry Bank common stock and our two business trusts relating to trust preferred securities. As the holding company of First Sentry Bank, we are authorized to pursue other business activities permitted by applicable laws and regulations for bank holding companies. Our executive office is located at 823 Eighth Street, Huntington, West Virginia. Our telephone number is (304) 522-6400. At December 31, 2010, we had $490.7 million in consolidated assets, $398.7 million in deposits and $29.0 million in consolidated stockholders’ equity. We are subject to extensive regulation by the Board of Governors of the Federal Reserve System.

All of our officers and directors are also officers and directors of First Sentry Bank. In addition, we use the support staff of First Sentry Bank from time to time.

General

We were organized in 1996 to provide residents of Cabell County, West Virginia, and particularly the Huntington, West Virginia market area with a local community bank. Our principal business consists of accepting deposits, originating commercial real estate loans, commercial loans, one- to four-family residential mortgage loans and, to a lesser extent, originating consumer loans. We also invest in investment securities. We operate from our main office in Huntington, West Virginia, three branch offices, and one drive-through facility located in Cabell and Lincoln counties, West Virginia.

We attract retail deposits from the general public in the communities surrounding our main office and our branch offices. We also accept brokered deposits as well as deposits via our participation in the CDARS network which are considered brokered deposits. A significant portion of our commercial real estate, residential real estate and commercial loans are generated by referrals from brokers, current customers, professional contacts and through a general marketing campaign. We generally retain in our portfolio all adjustable-rate loans we originate, as well as fixed-rate loans with terms of five years or less. For customers who are interested in longer term loans, such as traditional fixed rate 30 year one- to four-family residential mortgage loans, we function as a conduit by acting as a mortgage broker with other financial institutions and receive a fee from the other financial institutions for this service. We have entered into limited loan participations in recent years.

Our revenues are derived primarily from interest on loans and investment securities, and to a lesser extent, cash and due from banks. We also generate revenues from fees and service charges. Our primary sources of funds are deposits, borrowings in the form of securities sold under agreements to repurchase and FHLB advances and principal and interest payments on securities and loans.

Our website address is www.firstsentry.com. Information on our website is not and should not be considered a part of this annual report.

Market Area

Our primary market area is Cabell County, West Virginia, and since the Guaranty Financial Services, Inc. merger in 2009, we now operate a full service branch in Lincoln County, West Virginia. Our market area has experienced and is projected to continue to experience declining demographic trends. According to the 2009 U.S. Census Bureau estimates, Cabell County is the 3rd most populous county in the state of West Virginia and Lincoln County is the 32nd most populous county. The top three business segments in Cabell County are health care, railroad, and manufacturing while the top three business segments in Lincoln County are natural resource extraction, education, and retail.

2009 U.S. Census Bureau data estimates a total population in Cabell County of 95,214 and a total population in Lincoln County of 22,147, with little to no growth projected for 2010 in either county. The 2009 median household income for Cabell County and Lincoln County was $33,062 and $29,291, respectively. The 2009 median household income for the State of West Virginia was $37,356.

Cabell County is home to top corporate sector employers such as CSX, Special Metals Corp., St. Mary’s Regional Medical Center, Cabell Huntington Hospital, Steel of West Virginia, Alcon and GC Services. Some of the top employers in Lincoln County are Coal River Mining, Stowers & Sons Trucking, Chesapeake Energy, and the Lincoln County Board of Education. According to 2000 U.S. Census Bureau data, 30.8% of the population in Cabell County is employed in management/professional positions, the same 30.8% in sales/office, and 17.8% in the service industry. In Lincoln County, 36.6% of the population is employed in natural resource extraction and related occupations, 24.1% in sales/office occupations, and 19.3% in the service industry.

Competition

We offer a variety of financial products and services to meet the needs of the communities we serve. Our retail banking offices consist of multiple delivery channels, including full-service banking offices, automated teller machines and telephone and internet banking capabilities. We consider our reputation for superior customer service and financial strength as our major strengths in attracting and retaining customers in our market areas.

We face intense competition in our market area both in making loans and attracting deposits. Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks and credit unions. We face additional competition for deposits from money market funds, brokerage firms, mutual funds and insurance companies. Some of our competitors offer products and services that we do not offer, such as trust and retail brokerage services.

Our deposit sources are primarily concentrated in the communities surrounding our banking offices in Cabell and Lincoln Counties, West Virginia. As of June 30, 2010 (the latest date for which information is publicly available), we ranked first in deposit market share, with a 18.8% market share in the Cabell County market area and ranked fifth in deposit market share, with a 7.8% market share in the Lincoln County market area.

Lending Activities

Our principal lending activity has been the origination of commercial real estate, one- to four-family residential mortgage and commercial loans. We also originate to a lesser extent consumer loans.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio and by type of loan at the dates indicated. We do not have any loans held for sale at the dates presented.

	At December 31,
	2010						2009						2008						2007						2006
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Loans:
Commercial real estate	$	173,898			48.71	%	$	170,515			46.64	%	$	107,458			47.93	%	$	98,583			47.55	%	$	95,568			47.75	%
Commercial		107,388			30.08			115,996			31.73			68,116			30.38			64,103			30.92			59,381			29.67
Residential real estate		55,406			15.52			55,332			15.13			35,543			15.85			31,341			15.12			31,930			15.95
Consumer		20,308			5.69			23,767			6.50			13,091			5.84			13,297			6.41			13,260			6.63
Total loans		357,000			100.00	%		365,610			100.00	%		224,208			100.00	%		207,324			100.00	%		200,139			100.00	%

Other items:
Unearned fees and discounts, net		(94	)					(64	)					(36	)					(34	)					(36	)
Undisbursed loan funds		—						—						—						—						—
Allowance for loan losses		(5,005	)					(4,785	)					(3,227	)					(2,852	)					(2,659	)

Total loans, net	$	351,901					$	360,761					$	220,945					$	204,438					$	197,444

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2010. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

	Commercial real estate					Commercial					Residential real estate					Consumer					Total
	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in thousands)
Due During the Years Ending December 31,
2011	$	47,651		5.35	%	$	46,631		4.64	%	$	9,980		6.04	%	$	3,447		5.41	%	$	107,709		5.12	%
2012 to 2013		44,331		6.24			18,673		5.26			9,599		5.94			5,058		7.65			77,661		6.06
2014 to 2015		60,268		5.68			15,205		5.46			15,935		5.41			5,275		7.17			96,683		5.68
2016 to 2020		7,798		5.27			11,573		4.84			15,976		4.71			5,959		7.59			41,306		5.27
2021 and beyond		13,850		5.80			15,306		4.05			3,916		6.25			569		7.51			33,641		5.09

Total	$	173,898		5.72	%	$	107,388		4.80	%	$	55,406		5.47	%	$	20,308		7.12	%	$	357,000		5.49	%

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at December 31, 2010 that are contractually due after December 31, 2011.

	Due After December 31, 2011
	Fixed		Adjustable		Total
	(In thousands)
Loans:
Commercial real estate	$	79,467	$	46,780	$	126,247
Commercial		18,977		41,780		60,757
Residential real estate		32,349		13,077		45,426
Consumer		15,801		1,060		16,861

Total loans	$	146,594	$	102,697	$	249,291

Commercial Real Estate Loans. Commercial real estate loans totaled $173.9 million, or 48.7% of our loan portfolio as of December 31, 2010. Our commercial real estate loans are generally owner occupied secured by such collateral as apartment buildings, office buildings and shopping centers. We occasionally enter into commercial real estate loan participations and Small Business Administration guaranteed loans. At December 31, 2010, our commercial real estate loan portfolio consisted of 741 loans outstanding, with an average loan balance of approximately $235,000. Our largest commercial real estate loan had a principal balance of $4.0 million at December 31, 2010, and was secured by townhomes. This loan was performing in accordance with its terms at December 31, 2010. Substantially all of our commercial real estate loans are secured by properties located in our primary market area.

Our commercial real estate loans typically amortize over 15- to 20-year payout schedules, with interest rates that are fixed or adjustable for up to five years and contain a balloon payment feature at the end of the term. Our fixed rate commercial real estate loans are typically based on a margin over the five-year treasury securities interest rate while our adjustable rate commercial real estate loans float with the prime rate as reported in The Wall Street Journal. We will also offer one year renewable adjustable rate lines of credit secured by commercial real estate that float with the prime rate. At December 31, 2010, we had $18.5 million in lines of credit secured by commercial real estate. On occasion, we make development loans for the construction of apartment buildings. At December 31, 2010, we had one such loan outstanding with a principal balance of $439,000.

In the underwriting of commercial real estate loans, we lend up to the lesser of 80% of the property’s appraised value or purchase price. We base our decision to lend primarily on the economic viability of the property and the creditworthiness of the borrower. In evaluating a proposed commercial real estate loan, we emphasize the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 125%), computed after deduction for a vacancy factor and property expenses we deem appropriate. Personal guarantees are generally obtained from commercial real estate borrowers. We require title insurance or a title opinion, fire and extended coverage casualty insurance, and, if appropriate, flood insurance, in order to protect our security interest in the underlying property. Although a portion of our commercial real estate loans are referred by brokers, we underwrite all commercial real estate loans in accordance with our own underwriting guidelines.

Commercial real estate loans generally carry higher interest rates and have shorter terms than one- to four-family residential mortgage loans. Commercial real estate loans, however, entail greater credit risks, compared to one- to four-family residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial real estate than residential properties.

Commercial Loans. We make various types of secured and unsecured commercial loans to customers in our market area. The terms of these loans generally range from less than one year to a maximum of five years. The loans are either negotiated on a fixed-rate basis or carry adjustable interest rates that are subject to change periodically and are indexed to the prime rate as reported in The Wall Street Journal. At December 31, 2010, we had 933 commercial loans outstanding, with an aggregate balance of $107.4 million, or 30.1% of the total loan portfolio. As of December 31, 2010, the average commercial loan balance was approximately $115,000. At December 31, 2010, our largest commercial loan had a principal balance of $2.5 million and was secured by inventory, accounts receivable and equipment. At December 31, 2010, this loan was performing in accordance with its terms.

Commercial credit decisions are based upon our credit assessment of the loan applicant. We evaluate the applicant’s ability to repay in accordance with the proposed terms of the loan and we assess the risks involved. Commercial loans are underwritten on the basis of the borrower’s ability to service such debt from income (generally requiring a minimum ratio of 125%). Personal guarantees of the principals are typically obtained. Our underwriting standards include an evaluation of the loan applicant’s financial statements, tax returns, the adequacy of the primary and secondary sources of repayment for the loan and credit agency reports of the applicant’s personal credit history. Collateral supporting a secured transaction is also analyzed to determine its marketability. Collateral that typically secures our commercial loans consist of equipment, accounts receivable and inventory of a business.

Commercial loans generally have higher interest rates than residential loans of like duration because they have a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of any collateral.

One- to Four-Family Residential Mortgage Loans. At December 31, 2010, $55.4 million, or 15.5% of our total loan portfolio, consisted of one- to four-family residential mortgage loans, including home equity loans. We currently only originate short term fixed rate one- to four-family residential mortgage loans, although we have offered adjustable rate one- to four-family residential mortgage loans in the past. We offer conforming and non-conforming, fixed-rate residential mortgage loans that amortize up to a 30-year payout schedule, with maturities of up to 5 years that contain a balloon payment feature at the end of the term. For customers who are interested in longer term loans, such as traditional fixed rate 30-year one- to four-family residential mortgage loans, we function as a conduit by acting as a mortgage broker with other financial institutions and receive a fee from the other financial institutions for this service. We also offer home equity loans with a 10-year term that generally float with the prime rate as reported in The Wall Street Journal. At December 31, 2010, we had $14.2 million in home equity loans.

One- to four-family residential mortgage loans are generally underwritten according to Freddie Mac guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate fixed-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Office of Federal Housing Enterprise Oversight, which is currently $417,000 for single-family homes. We also originate loans above the lending limit for conforming loans, which are referred to as “jumbo loans.” We originate fixed-rate jumbo loans that amortize up to a 30-year payout schedule, with maturities of up to 5 years that contain a balloon payment feature at the end of the term. We generally underwrite jumbo loans in a manner similar to conforming loans.

We will originate one- to four-family residential loans with loan-to-value ratios up to and including a loan-to-value ratio of 89%. As of December 31, 2010, we had $3.2 million of loans in our loan portfolio with loan-to-value ratios in excess of 90%. We do not offer “interest only” mortgage loans on one- to four-family residential properties, where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan. We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan. We do not offer “subprime loans” (loans that generally target borrowers with weakened credit histories, typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity, as evidenced by low credit scores or high debt-burden ratios).

Consumer Loans. To date, our consumer lending has been relatively modest. We will originate a variety of consumer and other loans, including automobiles, loans secured by deposits and other personal unsecured loans. We do not originate indirect automobile loans. As of December 31, 2010, consumer loans totaled $20.3 million, or 5.7% of the total loan portfolio.

Most of our consumer loans consist of secured and unsecured installment loans, including automobile loans and loans secured by certificates of deposit. Unsecured installment loans generally have shorter terms than secured consumer loans and generally have higher interest rates than rates charged on secured installment loans with comparable terms.

The procedures for underwriting consumer loans include an assessment of an applicant’s credit history and the ability to meet existing obligations and payments on the proposed loan. Although an applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral security, if any, to the proposed loan amount.

Consumer loans generally entail greater risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that tend to depreciate rapidly. In addition, the repayment of consumer loans depend on the borrower’s continued financial stability as their repayment is more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy than a single family mortgage loan.

Loan Originations, Purchases, Sales, Participations and Servicing. Lending activities are conducted primarily by our loan personnel operating at our main office and our branch office locations. All loans that we originate are underwritten pursuant to our policies and procedures, which incorporate standard underwriting guidelines, including those of Freddie Mac, to the extent applicable. We originate both adjustable-rate and fixed-rate loans. Our ability to originate fixed- or adjustable-rate loans is dependent upon the relative customer demand for such loans, which is affected by current market interest rates as well as anticipated future market interest rates and local economic conditions. In the event that local economic conditions deteriorate or interest rates begin to rise from their relatively low levels, loan demand may decrease and consequently our loan origination and sales activity may be adversely affected. A significant portion of our commercial real estate, residential real estate and commercial loans are generated by referrals from brokers, current customers, professional contacts and through a general marketing campaign. We also advertise throughout our market area.

We generally retain in our portfolio all adjustable-rate loans that we originate, as well as short-term, fixed-rate residential mortgage loans (terms of 5 years or less). We generally do not sell any of the loans that we originate. We have entered into a limited number of loan participations in recent years.

Loan Approval Procedures and Authority. First Sentry Bank’s lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by First Sentry Bank’s Board of Directors. The loan approval process is intended to assess the borrower’s ability to repay the loan and value of the property that will secure the loan. To assess the borrower’s ability to repay, we review the borrower’s employment and credit history and information on the historical and projected income and expenses of the borrower.

First Sentry Bank’s policies and loan approval limits are established by the Board of Directors. Aggregate lending relationships in amounts up to $250,000 that are secured by conforming real estate mortgage loans can be approved by designated officers with specific lending approval authority. Relationships in excess of $250,000 can be approved by our President and Chief Executive Officer, up to $500,000 for loans secured by conforming real estate mortgage loans, and up to $1.5 million when combined with the lending authority of the Chairman of the Board. In practice, our Senior Loan Officer is involved in the approval of all loans. Certain of our officers can approve loans in amounts up to $25,000 that are not secured by real estate, and loans in excess of that amount, up to $200,000, can be approved by our President and Chief Executive Officer. Loans in excess of the prescribed lending authorities may be approved by the Executive Loan Committee. All loans are reported to the Executive Loan Committee and the Board of Directors in the month following the closing.

Applications for loan amounts in excess of the conforming loan limit may only receive a credit approval, subject to an appraisal of the subject property. We require appraisals by independent, licensed, third-party appraisers of all real property securing loans in excess of $250,000. All appraisers are approved by the Board of Directors annually.

Non-performing and Problem Assets

When a loan is 10 days past due, we send the borrower a late notice. When the loan is 15 to 30 days past due, we attempt personal, direct contact with the borrower to determine the reason for the delinquency, to ensure that the borrower correctly understands the terms of the loan and to emphasize the importance of making payments on or before the due date. After 30 days, we mail the borrower a letter reminding the borrower of the delinquency and the loan officer may make personal contact. If necessary, subsequent late charges and delinquency notices are issued and the account will be monitored on a regular basis thereafter. If a loan remains delinquent at 90 days, we will send the borrower a final demand for payment and if unsuccessful we then will refer the loan to legal counsel to commence foreclosure proceedings. Any of our loan officers can shorten these time frames in consultation with the senior lending officer.

Loans are generally placed on non-accrual status when payment of principal or interest is more than 90 days delinquent unless the loan is considered well-secured and in the process of collection. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt. When loans are placed on a non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if both principal and interest payments are brought current and factors indicating doubtful collection no longer exist. Loans, or portions of such loans, are charged off when we determine that a realized loss has occurred. Until such time, an allowance for loan losses is maintained for estimated losses. Our Senior Loan Officer reports monitored loans, including all loans rated Special Mention, Substandard, Doubtful or Loss, to the Executive Loan Committee and the Board of Directors on a monthly basis. At December 31, 2010, we had $2.7 million in non-accruing loans. Our largest exposure of non-performing loans consisted of one commercial loan secured by a patent and guaranteed by the owner which had a principal balance of $1.2 million. We believe that we have adequate reserves on these loans and that based on our internal evaluation of the value of the collateral securing the loans, we do not anticipate further losses on these loans.

Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. At each date presented, we had no troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates).

	At December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)
Non-accrual loans:
Loans:
Commercial real estate	$	1,500		$	1,783		$	911		$	883		$	2,159
Commercial		1,190			—			14			—			6
Residential real estate		1			5			155			12			—
Consumer		4			99			9			15			1

Total non-accrual loans		2,695			1,887			1,089			910			2,166

Loans delinquent 90 days or greater and still accruing:
Loans:
Commercial real estate		1,059			—			—			57			382
Commercial		136			—			14			—			35
Residential real estate		401			523			—			302			173
Consumer		164			26			8			29			74
Total loans delinquent 90 days or greater and still accruing		1,760			549			22			388			664

Total non-performing loans		4,455			2,436			1,111			1,298			2,830

Other real estate owned:
Loans:
Commercial real estate		1,783			1,774			1,306			1,249			—
Commercial		—			—			—			—			—
Residential real estate		320			495			185			450			—
Consumer		—			—			—			—			—
Total real estate owned		2,103			2,269			1,491			1,699			—

Total non-performing assets	$	6,558		$	4,705		$	2,602		$	2,997		$	2,830

Ratios:
Non-performing loans to total loans		1.25	%		0.67	%		0.50	%		0.66	%		1.41	%
Non-performing assets to total assets		1.34	%		0.96	%		0.77	%		1.11	%		1.13	%

For the years ended December 31, 2010 and 2009, gross interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was $103,148 and $79,796, respectively. Interest income recognized on such loans for the years ended December 31, 2010 and 2009 was $3,236 and $35,124, respectively.

Delinquent Loans. The following table sets forth our loan delinquencies by type and by amount at the dates indicated.

	Loans Delinquent For
	60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)

At December 31, 2010
Loans:
Commercial real estate		1	$	365		6	$	2,559		7	$	2,924
Commercial		3		47		9		1,326		12		1,373
Residential real estate		3		228		7		402		10		630
Consumer		17		126		23		168		40		294
Total loans		24	$	766		45	$	4,455		69	$	5,221

At December 31, 2009
Loans:
Commercial real estate		1	$	465		5	$	1,783		6	$	2,248
Commercial		—		—		—		—		—		—
Residential real estate		2		31		8		528		10		559
Consumer		12		94		21		125		33		219
Total loans		15	$	590		34	$	2,436		49	$	3,026

At December 31, 2008
Loans:
Commercial real estate		—	$	—		5	$	911		5	$	911
Commercial		1		196		2		28		3		224
Residential real estate		2		119		3		155		5		274
Consumer		2		23		3		17		5		40
Total loans		5	$	338		13	$	1,111		18	$	1,449

At December 31, 2007
Loans:
Commercial real estate		1	$	1		5	$	940		6	$	941
Commercial		2		78		—		—		2		78
Residential real estate		1		74		6		314		7		388
Consumer		4		24		6		44		10		68
Total loans		8	$	177		17	$	1,298		25	$	1,475

At December 31, 2006
Loans:
Commercial real estate		2	$	646		6	$	2,540		8	$	3,186
Commercial		2		526		2		41		4		567
Residential real estate		2		45		3		173		5		218
Consumer		6		31		7		76		13		107
Total loans		12	$	1,248		18	$	2,830		30	$	4,078

Other Real Estate Owned. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned. When such property is acquired it is recorded on our financial statements at the lower of cost or estimated fair market value at the date of foreclosure. Estimated fair value generally represents the sale price a buyer would be willing to pay on the basis of current market conditions, including normal terms from other financial institutions, less the estimated costs to sell the property. After acquisition, holding costs and declines in estimated fair market value result in charges to operations in the period in which the decline occurs. At December 31, 2010, we had $2.1 million of real estate owned.

Classification of Assets. Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, are required to be designated as special mention. As of December 31, 2010, we had $10.0 million of assets designated as special mention.

The allowance for loan losses is the amount estimated by management as necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. Our determination as to the classification of our assets and the amount of our loss allowances will be subject to review by our principal regulators, the Federal Deposit Insurance Corporation and the West Virginia Division of Banking, which can require that we establish additional loss allowances. We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. On the basis of our review of our assets at December 31, 2010, classified assets consisted of substandard assets of $9.4 million and no doubtful or loss assets. As of December 31, 2010, our largest substandard asset was a $2.5 million commercial real estate loan secured by a golf course, club house and residential development. The classified assets total includes $3.3 million of nonperforming loans at December 31, 2010.

Allowance for Loan Losses

We provide for loan losses based upon the consistent application of our documented allowance for loan loss methodology. All loan losses are charged to the allowance for loans losses and all recoveries are credited to it. Additions to the allowance for loan losses are provided by charges to income based on various factors which, in our judgment, deserve current recognition in estimating probable losses. We review the loan portfolio on a quarterly basis and make provisions for loan losses in order to maintain the allowance for loan losses in accordance with GAAP.

The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. The allowance is determined by establishing a reserve rate based on the type of loan, the collateral securing the loan and the loan’s risk rating. Loans that are classified as substandard or doubtful are individually analyzed. The reserve rate is then calculated and applied to the outstanding balances of loans to determine the allocated portion of the allowance for loan losses. Any unallocated portion of the allowance for loan losses is determined by general changes in the size or composition of our loan portfolio.

Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. In addition, the Federal Deposit Insurance Corporation and the West Virginia Division of Banking, as an integral part of their examination process, will periodically review our allowance for loan losses. Such agency may require us to recognize adjustments to the allowance based on its judgments about information available to them at the time of their examination.

Commercial real estate loans generally have greater credit risks compared to one- to four-family residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties typically depends on the successful operation of the related business and thus may be subject to a greater extent to adverse conditions in the real estate market and in the general economy.

Commercial loans involve a higher risk of default than residential mortgage loans of like duration since their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of collateral, if any. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans.

The following table sets forth activity in our allowance for loan losses for the years indicated.

	At or For the Years Ended December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)

Balance at beginning of year	$	4,785		$	3,227		$	2,852		$	2,659		$	2,700

Charge-offs:
Loans:
Commercial real estate		199			1,036			50			161			221
Commercial		4,720			295			692			1,127			1,443
Residential real estate		24			58			48			24			—
Consumer		58			117			35			78			91
Total charge-offs		5,001			1,506			825			1,390			1,755

Recoveries:
Loans:
Commercial real estate		2			—			1			9			7
Commercial		36			33			5			5			6
Residential real estate		40			3			5			12			—
Consumer		31			3			—			14			7
Total recoveries		109			39			11			40			20

Net (charge-offs)		(4,892	)		(1,467	)		(814	)		(1,350	)		(1,735	)
Provision for loan losses		5,112			3,025			1,189			1,543			1,694

Balance at end of year	$	5,005		$	4,785		$	3,227		$	2,852		$	2,659

Ratios:
Net charge-offs to average loans outstanding		1.35	%		0.55	%		0.38	%		0.67	%		0.90	%
Allowance for loan losses to non-performing loans at end of year		112.35	%		196.43	%		290.46	%		219.72	%		93.96	%
Allowance for loan losses to total loans at end of year		1.40	%		1.31	%		1.44	%		1.38	%		1.33	%

Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category, the total loan balances by category, and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

	At December 31,
	2010					2009					2008
	Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)

Loans:
Commercial real estate	$	1,215		48.71	%	$	1,214		46.64	%	$	1,144		47.93	%
Commercial		3,252		30.08			2,993		31.73			1,730		30.38
Residential real estate		331		15.52			351		15.13			225		15.85
Consumer		135		5.69			105		6.50			114		5.84
Total allocated allowance		4,933		100.00	%		4,663		100.00	%		3,213		100.00	%
Unallocated		72					122					14
Total	$	5,005				$	4,785				$	3,227

	At December 31,
	2007					2006
	Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Loans:
Commercial real estate	$	939		47.55	%	$	958		47.75	%
Commercial		1,567		30.92			1,300		29.67
Residential real estate		225		15.12			216		15.95
Consumer		119		6.41			143		6.63
Total allocated allowance		2,850		100.00	%		2,617		100.00	%
Unallocated		2					42
Total	$	2,852				$	2,659

Investments

Our Board of Directors has primary responsibility for establishing and overseeing our investment policy. The investment policy is reviewed at least annually by the Board of Directors. This policy dictates that investment decisions give consideration to the safety of the investment, liquidity requirements, potential returns, the ability to provide collateral for pledging requirements, consistency with our interest rate risk management strategy and support of the local community through the purchase of local bonds. Our Chief Financial Officer or President and Chief Executive Officer execute First Sentry Bank’s securities portfolio transactions. All purchase and sale transactions are formally reviewed by the Board of Directors monthly.

Our current investment policy permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. The investment policy also permits, with certain limitations, investments in debt securities issued by the United States Government, agencies of the United States Government or United States Government-sponsored enterprises, commercial paper, money market funds, federal funds, investment grade corporate bonds, municipal bonds and certificates of deposit.

Our current investment policy does not permit investment in most equity securities other than limited exceptions such as our required investment in the common stock of the Federal Home Loan Bank of Pittsburgh along with stripped mortgage backed securities, mortgaged backed residuals and mutual funds. As of December 31, 2010, we held no asset-backed securities other than mortgage-backed securities.

Our current investment policy does not permit hedging through the use of such instruments as financial futures, interest rate options and swaps.

GAAP requires that, at the time of purchase, we designate a security as either held to maturity, available-for-sale, or trading, based upon our ability and intent. Securities available-for-sale are reported at estimated market value, trading securities are reported at estimated fair value and securities held to maturity are reported at amortized cost. A periodic review and evaluation of the available-for-sale and held-to-maturity securities portfolios is conducted to determine if the fair value of any security has declined below its carrying value and whether such decline is other-than-temporary. If such decline is deemed to be other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged against earnings. The fair values of our securities, which, at December 31, 2010, consisted primarily of U.S. agency securities, mortgage-backed-securities and state and political securities, are based on published or securities dealers’ market values. The market for these securities primarily consists of other financial institutions, insurance companies, real estate investment trusts, and mutual funds.

Our available-for-sale securities portfolio at December 31, 2010, consisted of securities with the following amortized cost: $35.5 million of U.S. agency securities, $14.7 million of pass-through mortgage-backed securities issued by Fannie Mae, Freddie Mac or Ginnie Mae, and $11.5 million of state and political securities, consisting of general obligation and revenue municipals.

Our held-to-maturity securities portfolio at December 31, 2010, consisted of securities with the following amortized cost: $21.6 million of state and political subdivision securities, consisting of general obligation and revenue municipals, and $1.4 million of corporate bonds.

At December 31, 2010, we had no securities classified as trading securities.

U.S. Government and Federal Agency Obligations. While U.S. Government and federal agency securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and as an interest rate risk hedge in the event of significant mortgage loan prepayments.

Mortgage-Backed Securities. We purchase mortgage-backed securities insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. We invest in mortgage-backed securities to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae.

Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages. Certain types of mortgage-backed securities are commonly referred to as “pass-through” certificates because the principal and interest of the underlying loans is “passed through” to investors, net of certain costs, including servicing and guarantee fees. Mortgage-backed securities typically are collateralized by pools of one- to four-family or multifamily mortgages, although we invest primarily in mortgage-backed securities backed by one- to four-family mortgages. The issuers of such securities pool and resell the participation interests in the form of securities to investors such as First Sentry Bank. The interest rate of the security is lower than the interest rates of the underlying loans to allow for payment of servicing and guaranty fees. Ginnie Mae, a United States Government agency, and government sponsored enterprises, such as Fannie Mae and Freddie Mac, either guarantee the payments or guarantee the timely payment of principal and interest to investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are more liquid than individual mortgage loans since there is an active trading market for such securities. In addition, mortgage-backed securities may be used to collateralize our specific liabilities and obligations. Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

State and Political Securities. State and political securities consist primarily of general obligation bonds, with some revenue bonds, of state and political subdivisions located throughout the United States. All the bonds are bank qualified with either underlying investment grade ratings or investment grade ratings provided through insurance. When available and appropriate for our investment portfolio, West Virginia municipal bonds are purchased, providing support for local government. The bonds generally have longer maturities, including longer call features, and provide a tax equivalent yield greater than our agency and mortgage backed securities. The longer average life and superior yield of these bonds help offset declines in our interest margin during a falling interest rate cycle.

Corporate Bonds. Our corporate bond portfolio consists of bonds in the banking industry. Although corporate bonds may offer higher yields than U.S. Government Agencies of comparable duration, corporate bonds also have a higher risk of default due to possible adverse changes in the credit-worthiness of the issuer.

The following table sets forth the amortized cost and estimated fair value of our available-for-sale and held-to-maturity securities portfolios (excluding Federal Home Loan Bank of Pittsburgh common stock) at the dates indicated. We did not have any trading portfolio at any of the indicated dates.

	At December 31,
	2010				2009				2008
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Investment securities available for sale:
Mortgage backed securities	$	14,698	$	14,680	$	15,536	$	16,006	$	11,394	$	11,836
U.S. agency securities		35,533		35,353		39,284		39,399		50,241		50,969
State and political		11,542		11,515		10,306		10,299		8,495		7,854
Corporate bonds		—		—		97		97		—		—
Total investment securities available for sale	$	61,773	$	61,548	$	65,223	$	65,801	$	70,130	$	70,659

Investment securities held-to-maturity:
Mortgage backed securities	$	—	$	—	$	—	$	—	$	—	$	—
U.S. agency securities		—		—		—		—		—		—
State and political		21,626		21,260		14,778		14,873		7,459		7,459
Corporate bonds		1,384		1,526		1,356		1,497		1,827		1,827
Total investment securities held-to-maturity	$	23,010	$	22,786	$	16,134	$	16,370	$	9,286	$	9,286

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31, 2010 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. State and municipal securities yields have been adjusted to a tax-equivalent basis in the footnote below.

	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)

Investment securities available for sale:
Mortgage backed securities	$	228		1.93	%	$	—		—	%	$	1,499		2.70	%	$	12,971		3.11	%	$	14,698	$	14,680		3.05	%
U.S. agency securities		1,011		2.09			4,297		2.32			4,946		2.61			25,279		2.17			35,533		35,353		2.25
State and political(1)		1,012		2.10			3,851		2.36			3,644		3.93			3,035		4.79			11,542		11,515		3.47
Corporate bonds		—		—			—		—			—		—			—		—			—		—		—
Total investment securities available for sale	$	2,251		2.08	%	$	8,148		2.34	%	$	10,089		3.10	%	$	41,285		2.66	%	$	61,773	$	61,548		2.67	%


Investment securities held-to-maturity:
State and political(2)	$	1,621		2.94	%	$	1,606		5.44	%	$	8,164		3.54	%	$	10,235		3.91	%	$	21,626	$	21,260		3.81	%
Corporate bonds		498		5.52			—		—			—		—			886		9.07			1,384		1,526		7.79
Total investment securities held-to-maturity	$	2,119		3.55	%	$	1,606		5.44	%	$	8,164		3.54	%	$	11,121		4.32	%	$	23,010	$	22,786		4.05	%

(1)

The tax equivalent yield of the state and political securities portfolio was 2.98% for maturities of one year or less, 3.38% for maturities of more than one year through five years, 5.76% for maturities of more than five years through 10 years, 7.06% for maturities of more than 10 years and 5.06% for the total state and political securities portfolio at December 31, 2010.

(2)

The tax equivalent yield of the state and political securities portfolio was 4.26% for maturities of one year or less, 8.04% for maturities of more than one year through five years, 5.17% for maturities of more than five years through 10 years, 5.73% for maturities of more than 10 years and 5.57% for the total state and political securities portfolio at December 31, 2010.

Sources of Funds

General. Deposits traditionally have been our primary source of funds for our investment and lending activities. We also borrow, primarily from the Federal Home Loan Bank of Pittsburgh and through securities sold under agreements to repurchase, to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage our cost of funds. Our additional sources of funds are scheduled loan payments, maturing investments, loan prepayments, retained earnings and income on other earning assets.

Deposits. We accept deposits from the areas in which our offices are located. We rely on our competitive pricing, convenient locations and customer service to attract and retain deposits. We offer deposit accounts with a range of interest rates and terms. Our deposit accounts consist of savings accounts, certificates of deposit, money market accounts, NOW accounts and non-interest bearing checking accounts. Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market interest rates, liquidity requirements and our deposit growth goals.

We accept brokered deposits. At December 31, 2010, we had $79.7 million of brokered deposits. We participate in the CDARS network which comprised $24.6 million of our brokered deposits at December 31, 2010. When a customer gives us a deposit and requests the full protection of Federal Deposit Insurance Corporation insurance where such deposit exceeds applicable limits, we use the CDARS network to place the funds into certificates of deposit issued by banks in the network. This occurs in increments of less than $250,000 to ensure that both principal and interest are eligible for full Federal Deposit Insurance Corporation insurance. The CDARS network matching system allows network members to exchange funds. This exchange occurs on a dollar-for-dollar basis, so that the equivalent of the original deposit comes back to us. We also participate in the Insured Network Deposits (“IND”) program which comprised $38.5 million of our brokered deposits at December 31, 2010. The program provides stable, floating rate funding as a partial hedge for our floating rate loans. The IND accounts are approximately 95% money market accounts and 5% NOW accounts that come from brokerage accounts across the nation in increments of $250,000 or less in order to provide full Federal Deposit Insurance Corporation insurance. Both programs have greatly assisted our deposit gathering activities.

At December 31, 2010, we had a total of $211.0 million in certificates of deposit, of which $129.1 million had remaining maturities of one year or less. Based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity.

The following tables set forth the distribution of our total deposit accounts, by account type, for the periods indicated.

	For the Years Ended
	2010								2009								2008
	Average Outstanding Balance		Percent			Weighted Average Rate			Average Outstanding Balance		Percent			Weighted Average Rate			Average Outstanding Balance		Percent			Weighted Average Rate
	(Dollars in thousands)
Deposit type:
Savings accounts	$	19,334		4.79	%		0.18	%	$	14,037		4.66	%		0.20	%	$	9,623		4.10	%		0.42	%
Certificates of deposit		222,753		55.18			2.40			171,847		57.02			3.46			130,090		55.46			4.71
Money market		59,489		14.74			0.45			33,521		11.12			0.50			30,6264		13.06			1.81
NOW		48,877		12.11			0.35			40,139		13.32			0.30			30,476		12.99			1.56
Checking		53,195		13.18			—			41,839		13.88			—			33,751		14.39			—

Total deposits	$	403,648		100.00	%		1.44	%	$	301,383		100.00	%		2.08	%	$	234,586		100.00	%		3.07	%

As of December 31, 2010, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $114.9 million. The following table sets forth the maturity of those certificates as of December 31, 2010.

	At December 31, 2010
	(In thousands)

Three months or less	$	24,949
Over three months through six months		14,447
Over six months through one year		34,239
Over one year to three years		30,752
Over three years		10,510

Total	$	114,897

Borrowings. Our borrowings consist primarily of securities sold under agreements to repurchase (repurchase agreements) as well as advances from the Federal Home Loan Bank of Pittsburgh, borrowings from our other correspondent banking relationships and trust preferred securities. As of December 31, 2010, our repurchase agreements totalled $19.4 million, or 4.3% of total liabilities, and our Federal Home Loan Bank advances totalled $33.7 million, or 7.4% of total liabilities. At December 31, 2010, we had the ability to borrow an additional $89.0 million under our credit facilities with the Federal Home Loan Bank of Pittsburgh. Repurchase agreements are secured by agency and mortgage-backed securities. Advances from the Federal Home Loan Bank of Pittsburgh are secured by our investment in the common stock of the Federal Home Loan Bank of Pittsburgh as well as by a blanket pledge of our mortgage portfolio not otherwise pledged.

The following table sets forth information concerning balances and interest rates on our Federal Home Loan Bank of Pittsburgh borrowings at and for the periods shown:

	At or For the Years Ended December 31,
	2010			2009			2008
	(Dollars in thousands)

Balance at end of year	$	33,721		$	39,891		$	35,560
Average balance during year	$	28,647		$	37,247		$	29,970
Maximum outstanding at any month end	$	36,221		$	49,184		$	42,462
Weighted average interest rate at end of year		2.03	%		2.30	%		3.07	%
Average interest rate during year		2.44	%		3.05	%		3.57	%

The following table sets forth information concerning balances and interest rates on our repurchase agreements at the dates and for the periods indicated.

	At or For the Years Ended December 31,
	2010			2009			2008
	(Dollars in thousands)

Balance at end of year	$	19,375		$	20,730		$	12,498
Average balance during year	$	19,191		$	14,667		$	11,604
Maximum outstanding at any month end	$	20,675		$	25,204		$	12,952
Weighted average interest rate at end of year		1.96	%		1.96	%		3.66	%
Average interest rate during year		2.07	%		2.84	%		4.21	%

At December 31, 2010, our borrowings also consisted of $9.0 million in Floating Rate Trust Preferred Securities. Of the total, $5.0 million was issued on April 23, 2007 and $4.0 million was issued on June 26, 2003, by way of two distinct special purpose subsidiaries. The $5.0 million Floating Rate Trust Preferred Security bears interest at a floating rate that adjusts quarterly by 158 basis points above the LIBOR rate. The $5.0 million Floating Rate Trust Preferred Security is callable at the option of First Sentry Bancshares, Inc. on or after June 15, 2012, and will fully mature on June 15, 2037. At December 31, 2010, and December 31, 2009, the interest rate on the $5.0 million Floating Rate Trust Preferred Security was 1.88% and 1.83%, respectively. On September 25, 2009, in connection with the merger of Guaranty Financial Services, Inc., we assumed a $4.0 million Floating Rate Trust Preferred Security that is callable at the option of First Sentry Bancshares, Inc. after June 26, 2008 and has a final maturity of June 26, 2033. The $4.0 million Floating Rate Trust Preferred Security bears interest at a floating rate that adjusts quarterly by 310 basis points above the LIBOR rate. At December 31, 2010, and December 31, 2009, the interest rate on the $4.0 million Floating Rate Trust Preferred Security was 3.40% and 3.35%, respectively.

Subsidiary Activities

First Sentry Bancshares, Inc. has three subsidiaries, First Sentry Bank, a West Virginia chartered commercial bank, First Sentry Bancshares Capital Trust II, a Delaware statutory business trust whose sole asset is the $5.0 million Floating Rate Trust Preferred Security and Guaranty Financial Statutory Trust I, a Connecticut trust whose sole asset is the $4.0 million Floating Rate Trust Preferred Security.

Personnel

As of December 31, 2010, we had 75 full-time employees and 9 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good relations with our employees.

FEDERAL AND STATE TAXATION

Federal Taxation

General. First Sentry Bancshares, Inc. and First Sentry Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. First Sentry Bancshares, Inc. files consolidated tax returns with First Sentry Bank, its wholly-owned subsidiary.

First Sentry Bancshares, Inc.’s consolidated federal tax returns are not currently under audit, and have not been audited during the past five years. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to First Sentry Bancshares, Inc. or First Sentry Bank.

Method of Accounting. For federal income tax purposes, First Sentry Bancshares, Inc. currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal and state income tax returns.

Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, less any available exemption. The alternative minimum tax is imposed to the extent it exceeds the regular income tax. Net operating losses can offset no more than 90% of alternative taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. At December 31, 2010, First Sentry Bancshares, Inc.’s consolidated group has an alternative minimum tax carryover of approximately $84,000.

Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years, as allowed by Internal Revenue Code Section 381. At the date of the merger, Guaranty Financial Services, Inc. had approximately $2.5 million in net operating losses available for carryforward that First Sentry Bancshares, Inc., as the surviving company in the merger, assumed. For the year ended December 31, 2010, First Sentry Bancshares, Inc. utilized the remaining carryforward of approximately $2.0 million, and at December 31, 2010, First Sentry Bancshares, Inc.’s consolidated group had no net operating loss carryforwards for federal income tax purposes.

Corporate Dividends-Received Deduction. First Sentry Bancshares, Inc. may exclude from its federal taxable income 100% of dividends received from First Sentry Bank as a wholly-owned subsidiary. The corporate dividends-received deduction is 80% when the corporation receiving the dividend owns at least 20% of the stock of the distributing corporation.

State Taxation

General. First Sentry Bancshares, Inc. and First Sentry Bank are subject to state income taxations in the same general manner as other West Virginia corporations, with some exceptions discussed below. First Sentry Bancshares, Inc. files consolidated state income tax returns with First Sentry Bank, its wholly owned subsidiary. Current state income tax rates are 8.50%.

First Sentry Bancshares, Inc.’s consolidated state income tax returns are not currently under audit, and have not been during the past five years. The following is not a comprehensive description of the state income tax rules applicable to First Sentry Bancshares, Inc. or First Sentry Bank.

Method of Accounting. For state income tax purposes, the same method of accounting for federal income tax purposes is used. State taxable income calculation begins with the federal taxable income reported, further adjusted for modifications increasing or decreasing federal taxable income.

Modifications. Items added back to federal taxable income for state income tax purposes include items such as interest and dividends from any state or local government bonds and securities that was excluded from federal taxable income, and income taxes imposed by the State of West Virginia, based upon net income that were expensed for federal income tax purposes. Deductions from federal taxable income for state purposes include items such as interest expense on obligations or securities of any state or local political subdivisions disallowed in determining federal taxable income, and the calculated allowance for U.S. obligations and obligations secured by real estate.

Net Operating Loss Carryovers. West Virginia law allows certain tax provisions to be in conformity with the application of federal tax laws. Net operating loss carryovers and carrybacks are treated in the same manner as for federal income tax purposes and are adjusted for current year modifications in determining the amount for state carryback or carryover losses. At December 31, 2010, First Sentry Bancshares, Inc.’s consolidated group had no remaining net operating loss carryforwards for state income tax purposes.

Regulation and Supervision

Set forth below is a brief description of various laws, regulatory authorities and associated regulations affecting First Sentry Bancshares, Inc.’s operations. The description of laws and regulations contained in this document does not purport to be complete and is qualified in its entirety by reference to such laws and regulations.

New Federal Legislation. Congress has recently enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act which will significantly change the current bank regulatory structure and affect the lending, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act will eliminate the Office of Thrift Supervision. The Dodd-Frank Act also authorizes the Board of Governors of the Federal Reserve System to supervise and regulate all savings and loan holding companies, in addition to bank holding companies which it currently regulates. The Dodd-Frank Act also requires the Federal Reserve Board to set minimum capital levels for bank holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital would be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. Bank holding companies with assets of less than $500 million are exempt from these capital requirements. Under the Dodd-Frank Act, the proceeds of trust preferred securities are excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by bank or savings and loan holding companies with less than $15 billion of assets. The legislation also establishes a floor for capital of insured depository institutions that cannot be lower than the standards in effect today, and directs the federal banking regulators to implement new leverage and capital requirements within 18 months that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act also creates a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as the Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators. The new legislation also weakens the federal preemption available for national banks and federal savings associations, and gives state attorneys general the ability to enforce applicable federal consumer protection laws.

The legislation also broadens the base for Federal Deposit Insurance Corporation insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2012. The Dodd-Frank Act will increase stockholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not. Further, the legislation requires that originators of securitized loans retain a percentage of the risk for transferred loans, directs the Federal Reserve Board to regulate pricing of certain debit card interchange fees and contains a number of reforms related to mortgage origination. Many of the provisions of Dodd-Frank involve delayed effective dates and/or require implementing regulations. Accordingly, it will be some time before management can assess the full impact on operations. However, there is a significant possibility that the Dodd-Frank Act will, at a minimum, result in an increased regulatory burden and compliance, operating and interest expense for First Sentry Bank and First Sentry Bancshares, Inc.

First Sentry Bancshares, Inc. and Bank Holding Company Regulation. First Sentry Bancshares, Inc. is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended. As such, it is subject to regulation, examination, supervision and reporting requirements of the Federal Reserve Board. The Federal Reserve Board also has enforcement authority over any non-bank subsidiaries, and the Federal Deposit Insurance Corporation and the West Virginia Division of Banking have enforcement authority over First Sentry Bank. Among other things, this authority permits the Federal Reserve Board, the Federal Deposit Insurance Corporation or the West Virginia Division of Banking to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of First Sentry Bank. Additionally, the Federal Reserve Board imposes capital requirements on bank holding companies with more than $500 million in consolidated assets, which may apply to First Sentry Bancshares, Inc. in the future. These capital requirements generally parallel the capital requirement for First Sentry Bank. See “Regulation and Supervision – Capital Ratios.”

As a bank holding company, First Sentry Bancshares, Inc. may engage, subject to prior notice to or approval of the Federal Reserve Board, in certain activities determined by the Federal Reserve Board to be closely related to banking, or acquire directly or indirectly more than 5% of another bank or non-banking company. Additionally, the Federal Reserve Board permits bank holding companies that meet certain capital, management and regulatory standards to engage in a broader range of non-banking activities by electing to be treated as a “financial holding company.” Generally, financial holding companies may engage in activities such as banking, insurance and securities activities, as well as merchant banking activities under certain circumstances. At this time, First Sentry Bancshares, Inc. has not elected to make the financial holding company election because it does not engage in any of the expanded activities.

The Change in Bank Control Act, as amended, provides that no person, acting directly or indirectly or through or in concert with one or more other persons, may acquire control of First Sentry Bancshares, Inc. unless the Federal Reserve Board has been given 60 days prior written notice. The Bank Holding Company Act provides that no company may acquire control of a bank without the prior approval of the Federal Reserve Board. Any company that acquires such control becomes a bank holding company subject to registration, examination and regulation by the Federal Reserve Board. Under the Bank Holding Company Act, control of a bank holding company is conclusively deemed to have been acquired by, among other things, the acquisition of 25% or more of any class of voting stock of the company or the ability to control the election of a majority of the directors of the company. Moreover, control is presumed to have been acquired, subject to rebuttal, upon the acquisition of more than 10% of any class of voting stock, but less than 25% of any class of stock of a bank holding company, where certain enumerated control factors are also present in the acquisition. The Federal Reserve Board may prohibit an acquisition of control if it would result in a monopoly or substantially lessen competition, the financial condition of the acquiring person might jeopardize the financial stability of the bank or the bank holding company, or the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or the public to permit the acquisition of control by such person.

The Federal Reserve Board has issued a policy statement regarding the payment of cash dividends by bank holding companies. This policy statement expresses the Federal Reserve Board’s view that a bank holding company should pay cash dividends only to the extent that a company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the company’s capital needs, asset quality and overall financial condition. The Federal Reserve Board also indicated that it would be inappropriate for a bank holding company experiencing serious financial problems to borrow funds to pay dividends. Under the prompt corrective action regulations adopted by the Federal Reserve Board, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.” See “Regulation and Supervision – Capital Ratios.”

Bank holding companies are required to give the Federal Reserve Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve Board order, or any condition imposed by, or written agreement with, the Federal Reserve Board. This notification requirement does not apply to any bank holding company that is well-capitalized, well managed and is not subject to any unresolved supervisory issues.

The USA Patriot Act was signed into law on October 26, 2001. The USA Patriot Act gave the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. The USA Patriot Act also requires the federal banking agencies to take into consideration the effectiveness of controls designed to combat money laundering activities in determining whether to approve a merger or other acquisition application of a member institution.

The Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002. The Sarbanes-Oxley Act of 2002 is a law that addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by Section 302(a) of Sarbanes-Oxley Act of 2002, First Sentry Bancshares, Inc.’s Chief Executive Officer and Chief Financial Officer are each required to certify that First Sentry Bancshares, Inc.’s quarterly and annual reports do not contain any untrue statement of a material fact. The rules have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal controls; and they have included information in our quarterly and annual reports about their evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation. First Sentry Bancshares, Inc. is subject to further reporting and audit requirements beginning with this annual report for the year ended December 31, 2010 under the requirements of Sarbanes-Oxley. First Sentry Bancshares, Inc. has existing policies, procedures and systems designed to comply with these regulations, and is further enhancing and documenting such policies, procedures and systems to ensure future compliance with these regulations.

Bank Operations. First Sentry Bank is subject to extensive regulation, examination and supervision by the Federal Deposit Insurance Corporation, as their primary federal regulator, and the West Virginia Division of Banking. Such regulation and supervision:

·	establishes a comprehensive framework of activities in which the Bank can engage;

·	limits the types and amounts of investments permissible for the Bank;

·	limits the ability of the Bank to extend credit to any given borrower;

·	significantly limits the transactions in which the Bank may engage with its affiliates;

·	places limitations on capital distributions by the Bank;

·	imposes assessments to the West Virginia Division of Banking to fund its operations;

·	establishes a continuing and affirmative obligation, consistent with the bank’s safe and sound operation, to help meet the credit needs of its community, including low- and moderate-income neighborhoods;

·	requires the Bank to maintain certain non-interest-bearing reserves against its transaction accounts;

·	establishes various capital categories resulting in various levels of regulatory scrutiny applied to the institution in a particular category; and

·	establishes standards for safe and sound operations.

First Sentry Bank must submit annual financial reports audited by independent auditors to the Federal Deposit Insurance Corporation and the West Virginia Division of Banking. Auditors must receive examination reports, supervisory correspondence and reports of enforcement actions. In addition, an attestation by the auditor regarding the statements of management relating to the internal controls must be submitted to the Federal Deposit Insurance Corporation and the West Virginia Division of Banking. The audit committee of First Sentry Bank must include members with experience in banking or financial management, must have access to outside counsel and must not include representatives of large customers. The regulatory structure is designed primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities. Any change in these regulations, whether by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the West Virginia Division of Banking or the U.S. Congress, could have a material impact on First Sentry Bank and its operations.

Transactions with Affiliates. Sections 23A and 23B of the Federal Reserve Act and its implementing regulations, govern transactions between depository institutions and their affiliates. In a holding company structure, the parent holding company of a bank and any companies that are controlled by the parent holding company are affiliates of the bank. Section 23A limits the extent to which the bank or its subsidiaries may engage in certain transactions with its affiliates. These transactions include, among other things, the making of loans or other extensions of credit to an affiliate and the purchase of assets from an affiliate. Generally, these transactions between the bank and any one affiliate cannot exceed 10% of the bank’s capital stock and surplus, and these transactions between the bank and all of its affiliates cannot, in the aggregate, exceed 20% of the bank’s capital stock and surplus. Section 23A also establishes specific collateral requirements for loans or extensions of credit to an affiliate, and for guarantees or acceptances on letters of credit issued on behalf of an affiliate. Applicable regulations prohibit a bank from lending to any affiliate engaged in activities not permissible for a bank holding company or for the purpose of acquiring the securities of most affiliates. Section 23B requires that transactions covered by Section 23A and a broad list of other specified transactions be on terms and under circumstances substantially the same, or no less favorable to the bank or its subsidiary, as similar transactions with non-affiliates.

Loans to Insiders. Any loans to executive officers, directors, any owner of 10% or more of stock (each, an insider) and any of certain entities affiliated with any such person (an insider’s related interest) are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and the Federal Reserve Board’s Regulation O thereunder. Under these restrictions, the aggregate amount of the loans to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to national banks. All loans to insiders and insiders’ related interests in the aggregate may not exceed either bank’s unimpaired capital and unimpaired surplus. With certain exceptions, loans to an executive officer, other than loans for the education of the officer’s children and certain loans secured by the officer’s residence, may not exceed the greater of $25,000 or 2.5% of either bank’s capital and unimpaired surplus, provided that such number is equal to or less than $100,000. Regulation O also requires that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of the Board of Directors of the bank, with any interested director not participating in the voting, if such loan, when aggregated with any existing loans to that insider and the insider’s related interests, would exceed either $500,000 or the greater of $25,000 or 5% of the bank’s unimpaired capital and surplus. Generally, such loans must be made on substantially the same terms as, and follow credit underwriting procedures that are not less stringent than, those that are prevailing at the time for comparable transactions with other persons.

An exception is made for extensions of credit made pursuant to a benefit or compensation plan of a bank that is widely available to employees of the bank and that does not give any preference to insiders of the bank over other employees of the bank.

Insurance of Deposit Accounts. The Dodd-Frank Act permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008. Non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2012.

Pursuant to the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”), the Federal Deposit Insurance Corporation is authorized to set the reserve ratio for the Deposit Insurance Fund annually at between 1.15% and 1.5% of estimated insured deposits. The Dodd-Frank Act mandates that the statutory minimum reserve ratio of the Deposit Insurance Fund increase from 1.15% to 1.35% of insured deposits by September 30, 2020. Banks with assets of less than $10 billion are exempt from any additional assessments necessary to increase the reserve fund above 1.15%.

As part of a plan to restore the reserve ratio to 1.15%, the Federal Deposit Insurance Corporation imposed a special assessment equal to five basis points of assets less Tier 1 capital as of June 30, 2009, which was payable on September 30, 2009. In addition, the Federal Deposit Insurance Corporation has increased its quarterly deposit insurance assessment rates and amended the method by which rates are calculated. Beginning in the second quarter of 2009, institutions are assigned an initial base assessment rate ranging from 12 to 45 basis points of deposits depending on risk category. The initial base assessment is then adjusted based upon the level of unsecured debt, secured liabilities, and brokered deposits to establish a total base assessment rate ranging from seven to 77.5 basis points.

On November 12, 2009, the Federal Deposit Insurance Corporation approved a final rule requiring insured depository institutions to prepay on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. Estimated assessments for the fourth quarter of 2009 and for all of 2010 are based upon the assessment rate in effect on September 30, 2009, with three basis points added for the 2011 and 2012 assessment rates. In addition, a 5% annual growth in the assessment base is assumed. Prepaid assessments are to be applied against the actual quarterly assessments until exhausted, and may not be applied to any special assessments that may occur in the future. Any unused prepayments will be returned to the institution on June 30, 2013. On December 30, 2009, we prepaid $1.6 million in estimated assessment fees for the fourth quarter of 2009 through 2012. Because the prepaid assessments represent the prepayment of future expense, they do not affect our regulatory capital (the prepaid asset will have a risk-weighting of 0%) or tax obligations.

In February 2011, as required by the Dodd-Frank Act, the Federal Deposit Insurance Corporation adopted a final rule revising the assessment base to consist of average consolidated total assets during the assessment period minus the average tangible equity during the assessment period. In addition, the final rule eliminates the adjustment for secured borrowings and make certain other changes to the impact of unsecured borrowings and brokered deposits on an institution’s deposit insurance assessment. The proposed rule also revises the assessment rate schedule to provide assessments ranging from five to 45 basis points. The final rule is effective April 1, 2011.

Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

In addition to the Federal Deposit Insurance Corporation assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended December 31, 2010, the annualized FICO assessment was equal to 1.04 basis points for each $100 in domestic deposits maintained at an institution.

Temporary Liquidity Guarantee Program. On October 14, 2008, the Federal Deposit Insurance Corporation announced a new program – the Temporary Liquidity Guarantee Program, which guarantees newly issued senior unsecured debt of a participating organization, up to certain limits established for each institution, issued between October 14, 2008 and June 30, 2009. The Federal Deposit Insurance Corporation extended this component of the program to cover debt issued through October 31, 2009. The Federal Deposit Insurance Corporation will pay the unpaid principal and interest on FDIC-guaranteed debt instruments upon the uncured failure of the participating entity to make timely payments of principal or interest in accordance with the terms of the instrument. The guarantee will remain in effect until December 31, 2012. In return for the Federal Deposit Insurance Corporation’s guarantee, participating institutions will pay the Federal Deposit Insurance Corporation a fee based on the amount and maturity of the debt. We opted not to participate in this part of the Temporary Liquidity Guarantee Program. The other part of the Temporary Liquidity Guarantee Program provided full federal deposit insurance coverage for noninterest-bearing transaction deposit accounts, regardless of dollar amount, until December 31, 2010. Through December 31, 2009, an annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 was assessed on a quarterly basis to insured depository institutions that have not opted out of this component of the Temporary Liquidity Guarantee Program. Beginning January 1, 2010, the fees are based on the institution’s risk category rating assigned with respect to regular Federal Deposit Insurance Corporation assessments. Institutions in Risk Category I (generally well-capitalized institutions with composite CAMELS 1 or 2 ratings) pay an annualized assessment rate of 15 basis points. Institutions in Risk Category II (generally adequately capitalized institutions with composite CAMELS 3 or better) pay an annualized assessment rate of 20 basis points. Institutions in Risk Category III or IV (generally under capitalized or composite CAMELS 4 or 5) pay an annualized assessment rate of 25 basis points. We opted to participate in this component of the Temporary Liquidity Guarantee Program. The Dodd-Frank Act extended the unlimited coverage for certain non-interest bearing transaction accounts through December 31, 2012 with no opt out option. The cost is included in the regular Federal Deposit Insurance Corporation assessment.

U.S. Treasury’s Troubled Asset Relief Program Capital Purchase Program. The Emergency Economic Stabilization Act of 2008, which was enacted on October 3, 2008, provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to U.S. financial markets. One of the programs resulting from the legislation is the Troubled Asset Relief Program Capital Purchase Program (“CPP”), which provides direct equity investment by the U.S. Treasury Department in perpetual preferred stock of qualified financial institutions. The program is voluntary and requires an institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and declaration of dividends. The CPP provides for a minimum investment of one percent of total risk-weighted assets and a maximum investment equal to the lesser of three percent of total risk-weighted assets or $25 billion. Participation in the program is not automatic and is subject to approval by the U.S. Treasury Department. We opted not to participate in the CPP.

Capital Ratios. Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

The Federal Deposit Insurance Corporation has adopted regulations to implement the prompt corrective action legislation. An institution is deemed to be:

·	“well capitalized” if it has a total risk-based capital ratio of 10% or greater and a leverage ratio of 5% or greater;

·	“adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4% or greater and generally a leverage ratio of 4% or greater;

·	“undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a leverage ratio of less than 4%;

·	“significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier I risk-based capital ratio of less than 3%, or a leverage ratio of less than 3%; and

·	“critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%.

As of December 31, 2010, First Sentry Bank was a “well capitalized” institution, with a total risk-based capital ratio of 11.62% and a leverage ratio of 7.19%.

“Undercapitalized” institutions must adhere to growth, capital distribution and dividend and other limitations and are required to submit a capital restoration plan with the Federal Deposit Insurance Corporation within 45 days after the bank receives notice of such undercapitalization. A bank’s compliance with its capital restoration plan is required to be guaranteed by any company that controls the “undercapitalized” institution in an amount equal to the lesser of 5% of total assets when deemed “undercapitalized” or the amount necessary to achieve the status of “adequately capitalized.” If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” institutions must comply with one or more of a number of additional restrictions, including an order by the Federal Deposit Insurance Corporation to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets and cease receipt of deposits from correspondent banks or dismiss directors or officers, and restriction on interest rates paid on deposits, compensation of executive officers and capital distributions to the parent holding company. “Critically undercapitalized” institutions must comply with additional sanctions, including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains this status.

Dividend Limitations. First Sentry Bank may pay dividends as declared from time to time by the Board of Directors out of funds legally available, subject to certain restrictions. Under West Virginia Banking law, First Sentry Bank may not pay a cash dividend until its surplus fund equals its common stock, unless there has been carried to the surplus fund not less than 1/10th of net profits of the preceding half year in the case of quarterly dividends. Prior approval of the Commissioner is required if the total of all dividends in any calendar year exceeds the total of net profits of that year combined with its retained net profits of the preceding two years. In addition, First Sentry Bank cannot pay dividends in amounts that would reduce its capital below regulatory imposed minimums.

Federal Reserve System. The Federal Reserve Board regulations require all depository institutions to maintain non-interest earning reserves at specified levels against their transaction accounts (primarily NOW and regular checking accounts). At December 31, 2010, First Sentry Bank was in compliance with the Federal Reserve Board’s reserve requirements. Depository institutions, such as First Sentry Bank, are authorized to borrow from the Federal Reserve Bank “discount window.” First Sentry Bank is deemed by the Federal Reserve Board to be generally sound and thus eligible to obtain primary credit from its Federal Reserve Bank. Generally, primary credit is extended on a very short-term basis to meet the liquidity needs of the institution. Loans must be secured by acceptable collateral and carry a rate of interest of 100 basis points above the Federal Open Market Committee’s federal funds target rate.

Check Clearing for the 21st Century Act. This law, which became effective in October 2003, gives the same legal weight to a digital image of a check as to the actual check. First Sentry Bank processes customer checks in compliance with the requirements of this law.

Federal Securities Laws

First Sentry Bancshares, Inc. filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the registration of the shares of common stock issued pursuant to the merger with Guaranty Financial Services, Inc. First Sentry Bancshares, Inc. common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. First Sentry Bancshares, Inc. is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

The registration under the Securities Act of 1933 of shares of common stock issued in the merger does not cover the resale of those shares. Shares of common stock received by persons who are not affiliates of First Sentry Bancshares, Inc. may be resold without registration. Shares received by an affiliate of First Sentry Bancshares, Inc. will be subject to the resale restrictions of Rule 144 under the Securities Act of 1933. If First Sentry Bancshares, Inc. meets the current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate of First Sentry Bancshares, Inc. that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of First Sentry Bancshares, Inc., or the average weekly volume of trading in the shares during the preceding four calendar weeks. In the future, First Sentry Bancshares, Inc. may permit affiliates to have their shares registered for sale under the Securities Act of 1933.

ITEM 1A.

Risk Factors

Not applicable to a smaller reporting company.

ITEM 1B.

Unresolved Staff Comments

Not applicable to a smaller reporting company.

ITEM 2.

Properties

As of December 31, 2010, the net book value of our properties was $3.9 million. The following is a list of our current offices:

Location	Leased or Owned	Year Acquired or Leased	Square Footage		Net Book Value of Real Property
					(In thousands)
Main Office:

823 Eighth Street, Huntington, West Virginia	Owned	1998		16,800	$	2,922

Branch Offices:

6501 Mud River Road, Barboursville, West Virginia	Land lease	2004		3,200		940

5604 US Route 60 East, Huntington, West Virginia	Leased	2009		3,161		—

5 Second Street, Hamlin, West Virginia	Land lease	2009		1,440		70

517 Ninth Street, Huntington, West Virginia (drive-through only)	Leased	2009		N/A		—

We believe that current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion.

ITEM 3.

Legal Proceedings

From time to time, we are involved as plaintiff or defendant in various legal proceedings arising in the ordinary course of business. At December 31, 2010, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

ITEM 4.

Removed and Reserved

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Our common stock is traded on the Pink Sheets under the symbol “FTSB.PK.” The approximate number of holders of record of First Sentry Bancshares, Inc.’s common stock as of December 31, 2010 was 738. Certain shares of First Sentry Bancshares, Inc. are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. The following table presents quarterly market information for First Sentry Bancshares, Inc.’s common stock for the last two years. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The following information was based on trades reported to us.

Fiscal 2010	High Bid		Low Bid		Dividends
Quarter ended December 31, 2010	$	25.00	$	24.50	$	0.20
Quarter ended September 30, 2010		25.00		25.00		0.20
Quarter ended June 30, 2010		25.00		25.00		0.20
Quarter ended March 31, 2010		25.00		25.00		0.20

Fiscal 2009	High Bid		Low Bid		Dividends
Quarter ended December 31, 2009	$	25.00	$	25.00	$	0.20
Quarter ended September 30, 2009		25.00		25.00		0.20
Quarter ended June 30, 2009		25.00		25.00		0.20
Quarter ended March 31, 2009		25.00		25.00		0.20

Dividend payments by First Sentry Bancshares, Inc. are dependent primarily on dividends it receives from First Sentry Bank, because First Sentry Bancshares, Inc. will have no source of income other than dividends from First Sentry Bank. For a discussion of the restrictions on the ability of First Sentry Bank to pay dividends to First Sentry Bancshares, Inc., please see “Item 1. Business―Supervision and Regulation ―Dividend Limitations.”

(b) Not applicable.

ITEM 6.

Selected Financial Data

The summary information presented below at the dates or for each of the years presented is derived in part from First Sentry Bancshares, Inc.’s audited consolidated financial statements. The following information is only a summary, and should be read in conjunction with First Sentry Bancshares, Inc. consolidated financial statements and notes beginning on page 49 of this Annual Report.

	At December 31,
	2010		2009		2008		2007		2006
	(In thousands)
Selected Financial Condition Data:

Total assets	$	490,684	$	488,500	$	338,496	$	269,025	$	249,762
Cash and cash equivalents		21,120		17,943		7,534		7,129		13,937
Interest-earning deposits		12,331		5,832		18,677		2,000		—
Trading assets		—		—		—		3,996		—
Investment securities available for sale		61,548		65,801		70,659		41,346		20,948
Investment securities held to maturity		23,010		16,134		9,286		—		9,085
Federal Home Loan Bank stock, at cost		2,886		3,038		2,177		1,176		723
Loans, net of allowance		351,901		360,761		220,945		204,438		197,444
Deposits		398,672		389,471		265,200		214,895		209,712
Securities sold under agreements to repurchase		19,375		20,730		12,498		10,922		10,285
Federal Home Loan Bank advances		33,721		39,891		35,560		19,221		8,721
Trust Preferred Securities		9,000		9,000		5,000		5,000		4,000
Stockholders’ equity		29,009		28,110		18,684		17,837		16,252

	Years Ended December 31,
	2010		2009		2008		2007		2006
	(In thousands, except per share amounts)
Selected Operating Data:

Interest income	$	23,533	$	19,684	$	17,845	$	17,947	$	16,380
Interest expense		7,160		7,979		8,999		9,049		7,743
Net interest income		16,373		11,705		8,846		8,898		8,637
Provision for loan losses		5,112		3,025		1,189		1,543		1,694
Net interest income after provision for loan losses		11,261		8,680		7,657		7,355		6,943
Other income		2,203		761		735		1,121		1,084
Other expenses		9,907		8,620		5,661		5,137		4,815
Income before income tax		3,557		821		2,731		3,339		3,212
Income tax expense		1,006		93		876		1,185		1,196
Net income	$	2,551	$	728	$	1,855	$	2,154	$	2,016
Income per common share	$	1.77	$	0.63	$	1.76	$	2.04	$	1.91

	At or For the Years Ended December 31,
	2010			2009			2008			2007			2006

Selected Financial Ratios and Other Data:

Performance Ratios:
Return on average assets (ratio of net income to average total assets)		0.52	%		0.19	%		0.62	%		0.84	%		0.85	%
Return on average equity (ratio of net income to average equity)		8.63	%		3.32	%		9.97	%		12.65	%		12.72	%
Dividend payout ratio(1)		45.08	%		126.51	%		45.55	%		29.42	%		31.43	%
Interest rate spread (2)		3.34	%		2.85	%		2.52	%		2.87	%		3.12	%
Net interest margin(3)		3.55	%		3.19	%		3.05	%		3.64	%		3.81	%
Efficiency ratio (4)		53.33	%		66.48	%		59.09	%		51.27	%		49.53	%
Non-interest expense to average total assets		2.02	%		2.25	%		1.88	%		2.01	%		2.03	%
Average interest-earning assets to average interest-bearing liabilities		113.22	%		115.62	%		117.11	%		120.65	%		120.17	%
Average equity to average total assets		6.02	%		5.72	%		6.19	%		6.67	%		6.69	%

Asset Quality Ratios:
Non-performing assets to total assets		1.34	%		0.96	%		0.77	%		1.11	%		1.13	%
Non-performing loans to total loans		1.25	%		0.67	%		0.50	%		0.63	%		1.41	%
Allowance for loan losses to non-performing loans		112.35	%		196.43	%		290.46	%		219.72	%		93.96	%
Allowance for loan losses to total loans		1.40	%		1.31	%		1.44	%		1.38	%		1.33	%

Capital Ratios:
Total capital (to risk-weighted assets)		11.65	%		10.88	%		11.90	%		12.70	%		12.02	%
Tier I capital (to risk-weighted assets)		10.39	%		9.63	%		10.65	%		11.45	%		10.77	%
Tier I capital (to average assets)		7.23	%		6.90	%		7.24	%		8.63	%		8.22	%

Other Data:
Number of full service offices		4			4			2			2			2
Full time equivalent employees		80			77			54			51			47

(1)	The dividend payout ratio is calculated using dividends declared divided by net income.

(2)	The average interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the year.

(3)	The net interest margin represents net interest income as a percent of average interest-earning assets for the year.

(4)	The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income.

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section is intended to help potential investors understand our financial performance through a discussion of the factors affecting our financial condition at December 31, 2010 and 2009 and our consolidated results of operations for the years ended December 31, 2010 and 2009. This section should be read in conjunction with the consolidated financial statements and notes to the financial statements that appear elsewhere in this Annual Report.

Overview

Our results of operations depend primarily on our net interest income and controlling our non-interest expense. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities (including U.S. agency securities and other securities) and other interest-earning assets and the interest paid on our interest-bearing liabilities, consisting primarily of certificates of deposit, long- and short-term borrowings, Federal Home Loan Bank advances, securities sold under agreements to repurchase, savings accounts, money market accounts, transaction accounts and trust preferred securities. Our results of operations also are affected by our provisions for loan losses, other income and other expenses. Other income currently consists primarily of service fees, securities gains and other charges, commissions and fees. Other expenses currently consist primarily of salaries and employee benefits, equipment and occupancy expenses, data processing, professional fees, taxes, insurance and other expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Critical Accounting Policies

Critical accounting policies are defined as those that involve significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that the most critical accounting policies upon which our financial condition and results of operations depend, and which involve the most complex subjective decisions or assessments, are the following:

Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover probable and reasonably estimatable credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses that is charged against income. In determining the allowance for loan losses, we make significant estimates and, therefore, have identified the allowance as a critical accounting policy. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.

The allowance for loan losses has been determined in accordance with GAAP. The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. Allowances for impaired loans are generally determined, based on collateral values or the present value of estimated cash flows. The allowance is determined by establishing a reserve rate based on the type of loan, the collateral securing the loan and the loan’s risk rating. Loans that are classified as substandard or doubtful are individually analyzed. The reserve rate is then calculated and applied to the outstanding balances of loans to determine the allocated portion of the allowance for loan losses. Any unallocated portion of the allowance for loan losses is determined by general changes in the size or composition of our loan portfolio.

Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. In addition, the Federal Deposit Insurance Corporation and the West Virginia Division of Banking, as an integral part of their examination process, will periodically review our allowance for loan losses. Such agency may require us to recognize adjustments to the allowance, based on its judgments about information available to them at the time of their examination.

The allowance is increased by a provision for loan losses, which is charged to expense and reduced by charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses.

This monthly process is performed by credit administration and approved by the Senior Loan Officer. The Chief Financial Officer performs a final review of the calculation. All supporting documentation with regard to the evaluation process is maintained by credit administration. A summary of the allowance for loan losses is presented by the Senior Loan Officer to the Executive Loan Committee, which consists of five directors, including the Chief Executive Officer and the Senior Loan Officer, Chief Financial Officer and Senior Credit Analyst. The Board of Directors also reviews and approves the allowance for loan losses on a monthly basis.

We have a concentration of loans secured by real property located in Cabell County, West Virginia. As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisal valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly impact the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals are reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the collateral. Based on the composition of our loan portfolio, we believe the primary risks are increases in interest rates, a decline in the economy generally, and a decline in real estate market values in West Virginia. Any one or combination of these events may adversely affect our loan portfolio, resulting in increased delinquencies, loan losses and future levels of loan loss provisions.

Income Taxes. Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of the allowance for loan losses and accumulated depreciation. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Business Strategy

Our business strategy is to operate as a profitable community-oriented financial institution dedicated to providing personal service to our individual and business customers. Over the past few years, we have emphasized the origination of commercial real estate loans and commercial loans, and we intend to increase our origination of these loans in the future. We cannot assure you that we will successfully implement our business strategy.

Highlights of our business strategy are as follows:

Maintaining a community focus. Our management and Board of Directors have strong ties to the Huntington and Barboursville, West Virginia communities. Many members of the management team are Huntington natives and are active in the community through non-profit board membership, local business development organizations, and industry associations. In addition, our Board members are well established professionals and respected business people in the Huntington area and throughout West Virginia. Management and the Board are interested in making a lasting contribution to the Huntington community and have succeeded in attracting deposits and loans through attentive and personalized service. To better serve our customers, we have also expanded our products and services by introducing such products as internet and telephone banking, ATM debit cards and CDARS (a type of brokered certificate of deposit that allows a bank to gather large local certificates of deposit that may exceed Federal Deposit Insurance Corporation insurance limits and trade portions of such certificates of deposit with other network members to lower such balances to below Federal Deposit Insurance Corporation insurance limits). On September 25, 2009, in connection with the merger of Guaranty Financial Services, Inc., we acquired a full service branch in Hamlin, West Virginia, located in Lincoln County. We continue to operate at this location as we look to increase our customer base in Lincoln County.

Continuing our Focus on Commercial Real Estate Lending and Commercial Lending. We intend to continue to increase our origination of higher-yielding commercial real estate loans and commercial loans. These loans generally are originated with adjustable interest rates and/or shorter terms, which assists us in managing our interest rate risk. To support this initiative, we have built an infrastructure of seasoned lenders, business developers and underwriters. We originated $44.4 million of commercial real estate loans and $45.2 million of commercial loans during the year ended December 31, 2010. At December 31, 2010, our commercial real estate loans totaled $173.9 million, or 48.7% of total loans, compared to $170.5 million, or 46.6% of total loans at December 31, 2009, and $107.5 million, or 47.9% of total loans at December 31, 2008. Our commercial loans totaled $107.4 million, or 30.1% at December 31, 2010, and $116.0 million, or 31.7% and $68.1 million, or 30.4% at December 31, 2009 and 2008, respectively.

Maintaining High Asset Quality. We have emphasized maintaining strong asset quality by following conservative underwriting guidelines, and originating a substantial amount of our loans secured by real estate. We will continue to emphasize high quality assets as we continue to strive to meet the credit needs of the communities we serve. Our non-performing assets at December 31, 2010 were $6.6 million, or 1.34% of total assets, compared to $4.7 million or 0.96% of total assets at December 31, 2009, and $2.6 million or 0.77% of total assets at December 31, 2008.

Controlling and Managing Operating Expenses. We intend to continue to manage our operating expenses to maximize our growth in a challenging financial market. Historically, we have maintained a low efficiency ratio as compared to our peers. An efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income. For the year ended December 31, 2010, our efficiency ratio was 53.33% and for the years ended December 31, 2009 and 2008, our efficiency ratio was 66.48% and 59.09%, respectively. This means, for example, that we had to spend approximately $0.53 in order to generate $1.00 of income during the year ended December 31, 2010.

Comparison of Financial Condition at December 31, 2010 and 2009

Total assets increased $2.2 million, or 0.4%, to $490.7 million at December 31, 2010, from $488.5 million at December 31, 2009. The slight increase was primarily the result of an increase in cash and cash equivalents, interest-earning deposits and investment securities partially offset by a decrease in loans.

Cash and cash equivalents increased $3.2 million or 17.7% to $21.1 million at December 31, 2010, from $17.9 million at December 31, 2009. The increase in cash reflected a slowdown in loan demand and is expected to be used to pay off short-term Federal Home Loan Bank advances early in 2011.

Interest-earning deposits increased $6.5 million or 111.4% to $12.3 million at December 31, 2010, from $5.8 million at December 31, 2009. The increase in interest-earning deposits was the result of a slowdown in loan demand and was invested in one- to two-year term certificates of deposit.

Investments classified as available for sale decreased $4.3 million, or 6.5%, to $61.5 million at December 31, 2010, from $65.8 million at December 31, 2009. Investments classified as held to maturity were $23.0 million at December 31, 2010, as compared to $16.1 million at December 31, 2009, an increase of $6.9 million, or 42.6%. We purchased $71.7 million of securities during the year ended December 31, 2010. Purchases of investment securities were primarily shorter-term U.S. agency securities, with maturities up to five years or longer-term maturity step bonds, and, to a lesser extent, medium-term mortgage-backed securities, with average remaining lives of less than five years as well as purchases of municipal bonds.

Loans, net of allowance, decreased $8.9 million, or 2.5%, to $351.9 million at December 31, 2010, from $360.8 million at December 31, 2009. During the year ended December 31, 2010, customer demand for loans weakened as the economy slowed in our general market area. Commercial real estate loans increased $3.4 million, or 2.0%, to $173.9 million at December 31, 2010, from $170.5 million at December 31, 2009. The $3.4 million increase in commercial real estate loans was due to our continued emphasis on commercial real estate loan growth in response to customer demand. Commercial loans decreased $8.6 million, or 7.4%, to $107.4 million at December 31, 2010, from $116.0 million at December 31, 2009. The $8.6 million decrease in commercial loans was due to tightened credit standards and the charge off of $4.7 million of commercial loans during 2010. Residential real estate loans increased only $74,000, or 0.1%, to $55.4 million at December 31, 2010, from $55.3 million at December 31, 2009 due to a slowdown in the local housing market. Consumer loans decreased $3.5 million, or 14.6%, to $20.3 million at December 31, 2010, from $23.8 million at December 31, 2009 due to a weakened local economy.

Deposits increased $9.2 million, or 2.4%, to $398.7 million at December 31, 2010, from $389.5 million at December 31, 2009 due to an increase in customers’ savings deposits. Certificates of deposit decreased $11.3 million, or 5.1%, to $211.0 million at December 31, 2010, from $222.3 million at December 31, 2009. The $11.3 million decrease in certificates of deposit was due to weakened demand for certificates of deposit in our general market area. Our core deposits (consisting of checking accounts, NOW accounts, money market accounts and savings accounts) increased $20.5 million, or 12.2%, to $187.7 million at December 31, 2010, from $167.2 million at December 31, 2009. The $20.5 million increase in our core deposits was due to our increased participation in the Insured Network Deposits program due to an increase in the national savings rate by consumers.

Federal Home Loan Bank borrowings decreased $6.2 million, or 15.5%, to $33.7 million at December 31, 2010, from $39.9 million at December 31, 2009 due to weakened loan demand. Securities sold under agreements to repurchase decreased $1.3 million, or 6.5% to $19.4 million at December 31, 2010, from $20.7 million at December 31, 2009. The $1.3 million decrease in our securities sold under agreements to repurchase was due to decreases in daily balances.

Stockholders’ equity increased $899,000, or 3.2%, to $29.0 million at December 31, 2010, from $28.1 million at December 31, 2009. This increase in stockholders’ equity was the result of an increase in retained earnings of $1.4 million, offset by a decrease in accumulated other comprehensive income of $502,000, reflecting market value fluctuations in available for sale investments, net of tax, for 2010. The increase in retained earnings of $1.4 million reflected net income of $2.6 million for 2010, offset by the payment of $1.2 million in cash dividends to stockholders during the year.

Comparison of Operating Results for the Years Ended December 31, 2010 and 2009

General. Net income increased $1.8 million, or 250.4%, to $2.6 million for the year ended December 31, 2010, from $728,000 for the year ended December 31, 2009. The increase reflected a full year of an increase in our net interest margin from the merger with Guaranty Bank that occurred at the end of the third quarter in 2009, coupled with operating synergies realized from the merger.

Interest Income. Interest income increased $3.8 million, or 19.6%, to $23.5 million for the year ended December 31, 2010, from $19.7 million for the year ended December 31, 2009. The increase resulted from an increase in the average balance of interest-earning assets, which increased $94.0 million, or 25.6%, to $461.1 million for the year ended December 31, 2010, from $367.1 million for the year ended December 31, 2009, offset in part by a decline in the average yield on interest-earning assets of 26 basis points to 5.10% for the year ended December 31, 2010, from 5.36% for the year ended December 31, 2009. The increase in the average balance of interest-earning assets was primarily the result of our merger with Guaranty Bank that occurred on September 25, 2009, resulting in a full year of combined assets during 2010 compared to only three months of combined assets during 2009. The decline in our average yield on interest-earning assets during the year ended December 31, 2010, as compared to the prior year, was due to the general low market interest rates as a result of the Federal Reserve Board’s actions to keep interest rates low in order to stimulate the economy.

Interest income on loans increased $4.6 million, or 29.4%, to $20.4 million for the year ended December 31, 2010, from $15.8 million for the year ended December 31, 2009. The average balance of loans increased $94.8 million, or 35.5%, to $362.1 million for the year ended December 31, 2010, from $267.3 million for the year ended December 31, 2009, reflecting a full year of combined loans from the merger with Guaranty Bank in 2009. The average yield on our loan portfolio decreased 27 basis points, to 5.64%, for the year ended December 31, 2010, from 5.91% for the year ended December 31, 2009, primarily as a result of the general low interest rates.

Interest income on investments, including interest-earning cash and cash equivalents, decreased $797,000, or 20.5%, to $3.1 million for the year ended December 31, 2010, from $3.9 million for the year ended December 31, 2009. The decrease resulted primarily from a decrease in the average yield on our securities portfolio of 52 basis points, to 3.58% for the year ended December 31, 2010, from 4.10% for the year ended December 31, 2009, due to low market interest rates. The average yield on our interest-earning cash and cash equivalents decreased 238 basis points, to 1.05% for the year ended December 31, 2010, from 3.43% for the year ended December 31, 2009, due to certificates of deposit maturing and such funds were reinvested at lower rates due to low market interest rates. The average balance of our securities portfolio and interest-earning cash and cash equivalents decreased $1.4 million, or 1.4%, to $96.0 million for the year ended December 31, 2010, from $97.4 million for the year ended December 31, 2009.

Interest Expense. Interest expense decreased by $819,000 to $7.2 million for the year ended December 31, 2010, from $8.0 million for the year ended December 31, 2009. The decrease resulted primarily from a decrease in interest expense on deposits and trust preferred securities reflecting the general low market interest rates. The average rate we paid on deposits decreased 75 basis points to 1.66% for the year ended December 31, 2010, from 2.41% for the year ended December 31, 2009. The average balance of interest-bearing deposits increased $90.9 million, or 35.0%, to $350.4 million for the year ended December 31, 2010, from $259.5 million for the year ended December 31, 2009. The growth in our average deposits was primarily due to our merger with Guaranty Bank that occurred on September 25, 2009, resulting in a full year of combined deposits during 2010 compared to only three months of combined deposits during 2009.

Interest expense on certificates of deposit decreased $594,000, or 10.0%, to $5.3 million for the year ended December 31, 2010, from $5.9 million for the year ended December 31, 2009. The decrease reflected a drop in the average rate paid on certificates of deposit partially offset by an increase in the average balance of certificates of deposit during 2010. The average rate paid on certificates of deposit decreased 106 basis points to 2.40% for the year ended December 31, 2010, from 3.46% for the year ended December 31, 2009, reflecting lower market rates. The average balance of certificates of deposit increased $50.9 million, or 29.6%, to $222.7 million for the year ended December 31, 2010, from $171.8 million for the year ended December 31, 2009, as a result of a full year of combined deposits from the merger with Guaranty Bank in 2009. Interest expense on our core deposits (consisting of checking accounts, NOW accounts, money market accounts and savings accounts) increased $157,000 to $471,000 for the year ended December 31, 2010, from $314,000 for the prior year, due to the increase in average core deposits during 2010 due to a full year of combined core deposits from the merger with Guaranty Bank in 2009. The average balance of core deposits increased $40.0 million, or 45.6%, to $127.7 million for the year ended December 31, 2010, from $87.7 million for the year ended December 31, 2009.

Interest expense on trust preferred securities increased by $75,000 during the year ended December 31, 2010, as compared to the prior year, reflecting an increase in the average balance of trust preferred securities to $9.0 million for the year ended December 31, 2010, from $6.1 million for the year ended December 31, 2009, due to the merger with Guaranty Bank in 2009. Interest expense on FHLB advances decreased by $437,000 to $699,000 for the year ended December 31, 2010, from $1.1 million for the prior year, reflecting lower average balances of FHLB advances and a drop in the average rate paid on FHLB advances during 2010. The average balance of FHLB advances decreased $8.6 million, or 23.1%, to $28.6 million for the year ended December 31, 2010, from $37.2 million for the year ended December 31, 2009, due to an increase in deposits during 2010. The average rate paid on FHLB advances decreased 61 basis points to 2.44% for the year ended December 31, 2010, from 3.05% for the year ended December 31, 2009, reflecting lower advance rates.

Net Interest Income. Net interest income increased by $4.7 million, or 39.9%, to $16.4 million for the year ended December 31, 2010, from $11.7 million for the year ended December 31, 2009. Our net interest rate spread increased 49 basis points to 3.34% for the year ended December 31, 2010, from 2.85% for the year ended December 31, 2009, and our net interest margin increased 36 basis points to 3.55% for the year ended December 31, 2010, from 3.19% for the year ended December 31, 2009. The increase in our net interest rate spread and net interest margin reflected lower funding costs as a result of the Federal Reserve Board’s actions to maintain a low federal funds rate.

Provision for Loan Losses. We recorded a provision for loan losses of $5.1 million for the year ended December 31, 2010, compared to a provision for loan losses of $3.0 million for the year ended December 31, 2009. Net charge-offs increased to $4.9 million for the year ended December 31, 2010, from $1.5 million for the year ended December 31, 2009. The allowance for loans losses was $5.0 million, or 1.40% of total loans receivable at December 31, 2010, compared to $4.8 million, or 1.31% of total loans receivable at December 31, 2009.

The increase in the provision for loan losses for the year ended December 31, 2010, as compared to the prior year was based, in part, on the increase in total non-performing loans of $2.0 million from 2009 to 2010 and, in part, on the increase in commercial loan losses due to weaker economic conditions. The allowance for loan losses as a percentage of non-performing loans was 112.35% at December 31, 2010, as compared to 193.43% at December 31, 2009. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at December 31, 2010 and 2009.

Other Income. Other income increased $1.4 million, or 189.5%, to $2.2 million for the year ended December 31, 2010, from $761,000 for the year ended December 31, 2009. In August of 2010, we recognized a $682,000 gain from the sale of $18.1 million of agency bonds and mortgage-backed securities during a bond swap transaction in which we purchased $8.9 million of agency bonds, agency mortgage-backed securities and municipal bonds. In contrast to this gain in 2010, during the first quarter of 2009, we recognized an impairment charge of $500,000 on Silverton Bank corporate bonds that reduced other income in 2009. The Office of the Comptroller of the Currency closed Silverton Bank in May 2009 and the Federal Deposit Insurance Corporation was appointed as receiver. At December 31, 2010, we did not have any remaining investments in Silverton Bank. The remaining increase in other income from 2009 to 2010 was due to the merger with Guaranty bank which increased our service and other fee income.

Other Expenses. Other expenses increased $1.3 million, or 14.9%, to $9.9 million for the year ended December 31, 2010, from $8.6 million for the year ended December 31, 2009. The increase in other expenses was in part attributable to an increase of $989,000 in salaries and employee benefits expense to $4.1 million for the year ended December 31, 2010, from $3.1 million for the year ended December 31, 2009, due primarily to the additional personnel acquired due to the merger with Guaranty Bank. Equipment and occupancy expenses increased $265,000 to $1.4 million for the year ended December 31, 2010, from $1.1 million for the year ended December 31, 2009, primarily due to the addition of two full service branches from the merger with Guaranty Bank. The remainder of the increase in other expenses was primarily the result of increased operating costs due to the merger with Guaranty Bank, partially offset by a reduction in merger related expenses, such as legal and professional fees and data processing conversion costs, incurred during 2009 due to the merger with Guaranty Bank.

Income Tax Expense. The provision for income taxes was $1.0 million for the year ended December 31, 2010, compared with $93,000 for 2009, reflecting the increase in income before income tax between the comparative periods, partially offset by an increase in tax exempt interest income for the year ended December 31, 2010. Our effective tax rate was 28.3% for the year ended December 31, 2010, compared to 11.4% for the year ended December 31, 2009.

Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.


	For the Years Ended December 31,
	2010							2009							2008
		Average Outstanding Balance			Interest	Yield/ Rate			Average Outstanding Balance			Interest	Yield/ Rate			Average Outstanding Balance		Interest		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	362,096		$	20,434	5.64	%	$	267,281		$	15,788	5.91	%	$	212,553	$	14,387		6.77	%
Investment securities		82,720			2,959	3.58	(1)		83,054			3,404	4.10	(1)		58,966		2,799		4.75	(1)
Cash and cash equivalents		13,302			140	1.05			14,363			492	3.43			16,500		609		3.69
Federal Home Loan Bank stock		3,011			—	—			2,423			—	—			1,651		47		2.85
Trading assets		—			—	—			—			—	—			76		2		2.63
Total interest-earning assets		461,129			23,533	5.10			367,121			19,684	5.36			289,746		17,844		6.16
Non-interest-earning assets		30,289							15,448							10,934
Total assets	$	491,418						$	382,569						$	300,680
																0
Interest-bearing liabilities:																0
Savings accounts	$	19,334			35	0.18		$	14,037			28	0.20		$	9,623		40		0.42
Certificates of deposit		222,753			5,354	2.40			171,847			5,948	3.46			130,090		6,127		4.71
Money market		59,489			267	0.45			33,521			167	0.50			30,646		556		1.81
NOW		48,877			169	0.35			40,139			119	0.30			30,476		474		1.56
Total interest-bearing deposits		350,453			5,825	1.66			259,544			6,262	2.41			200,835		7,197		3.58
Federal Home Loan Bank advances		28,647			699	2.44			37,247			1,136	3.05			29,970		1,070		3.57
Securities sold under agreements to repurchase		19,191			397	2.07			14,667			417	2.84			11,604		488		4.21
Trust preferred securities		9,000			239	2.66			6,074			164	2.70			5,000		244		4.88
Total interest-bearing liabilities		407,291			7,160	1.76			317,532			7,979	2.51			247,409		8,999		3.64
Non-interest-bearing checking		53,195							41,839							33,751
Other non-interest-bearing liabilities		1,363							1,301							906
Total liabilities		461,849							360,672							282,066
Stockholders’ equity		29,569							21,897							18,614
Total liabilities and stockholders’ equity	$	491,418						$	382,569						$	300,680

Net interest income				$	16,373						$	11,705					$	8,845
Net interest rate spread (2)						3.34	%						2.85	%						2.52	%
Net interest-earning assets (3)	$	53,838						$	49,589						$	42,337
Net interest margin (4)						3.55	%						3.19	%						3.05	%
Average interest-earning assets to interest-bearing liabilities		113,22	%						115.62	%								117.11	%

(1)	The tax equivalent yield of the investment securities portfolio was 4.86%, 5.40% and 5.05% for the years ended December 31, 2010, 2009 and 2008, respectively.

(2)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4)	Net interest margin represents net interest income divided by average total interest-earning assets.

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	Years Ended December 31, 2010 vs. 2009								Years Ended December 31, 2009 vs. 2008
	Increase (Decrease) Due to					Total Increase			Increase (Decrease) Due to						Total Increase
	Volume		Rate			(Decrease)			Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	5,362	$	(716	)	$	4,646		$	3,229		$	(1,828	)	$	1,401
Investment securities		(12		(433	)		(445	)		988			(383	)		605
Cash and cash equivalents		(11		(341	)		(352	)		(74	)		(43	)		(117	)
Federal Home Loan Bank stock		—		—			—			—			(47	)		(47	)
Trading assets		—		—			—			—			(2	)		(2	)

Total interest-earning assets		5,339		(1,490	)		3,849			4,143			(2,303	)		1,840

Interest-bearing liabilities:
Savings accounts		10		(3	)		7			9			(21	)		(12	)
Certificates of deposit		1,224		(1,818	)		(594	)		1,445			(1,624	)		(179	)
Money market		117		(17	)		100			14			(403	)		(389	)
NOW		30		20			50			29			(384	)		(355	)
Total deposits		1,381		(1,818	)		(437	)		1,497			(2,432	)		(935	)
Federal Home Loan Bank advances		(210		(227	)		(437	)		222			(156	)		66
Securities sold under agreement to repurchase		94		(114	)		(20	)		87			(158	)		(71	)
Trust preferred securities		77		(2	)		75			29			(109	)		(80	)

Total interest-bearing liabilities		1,342		(2,161	)		(819	)		1,835			(2,855	)		(1,020	)

Change in net interest income	$	3,997	$	671		$	4,668		$	2,308		$	552		$	2,860

Liquidity and Capital Resources

Liquidity is the ability to fund assets and meet obligations as they come due. Our primary sources of funds consist of deposit inflows, loan repayments, repurchase agreements with and advances from the Federal Home Loan Bank of Pittsburgh, lines of credit with other financial institutions and maturities and sales of securities. In addition, we have the ability to collateralize borrowings in the wholesale markets. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Board of Directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a ratio of liquid assets (not subject to pledge) as a percentage of deposits and borrowings (not subject to pledge) of 20% or greater. At December 31, 2010, this ratio was 22.2%, slightly above our recommended level, due to an increase in federal funds sold at year end. We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of December 31, 2010.

We regularly adjust our investments in liquid assets based upon our assessment of:

(i) expected loan demand and repayment;

(ii) expected deposit flows;

(iii) yields available on interest-earning deposits and securities; and

(iv) the objectives of our asset/liability management program.

Excess cash is invested generally in interest-earning deposits and short- and intermediate-term securities.

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing and investing activities during any given period. At December 31, 2010, cash and cash equivalents totaled $21.1 million. At December 31, 2010, we had no loans classified as held for sale. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $61.5 million at December 31, 2010, and we had $53.1 million in outstanding borrowings at December 31, 2010.

At December 31, 2010, we had $10.0 million in outstanding loan commitments. In addition to outstanding loan commitments, we had $41.1 million in unused lines of credit to borrowers. Certificates of deposit due within one year of December 31, 2010 totalled $129.1 million, or 32.4% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including loan sales, other deposit products, including replacement certificates of deposit, securities sold under agreements to repurchase (repurchase agreements) and advances from the Federal Home Loan Bank of Pittsburgh and other borrowing sources. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2011. We believe, however, based on past experience, that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated Financial Statements.

Our primary investing activities are purchasing securities and originating loans. During the years ended December 31, 2010 and 2009, we purchased securities classified as available for sale totaling $63.6 million and $39.6 million, respectively. During the years ended December 31, 2010 and 2009, we purchased securities classified as held to maturity totaling $8.1 million and $870,000, respectively. During the years ended December 31, 2010 and 2009, we originated $111.0 million and $129.2 million of loans, respectively.

Financing activities consist primarily of activity in deposit accounts and borrowings (repurchase agreements and Federal Home Loan Bank of Pittsburgh advances). We experienced a net increase in total deposits of $9.2 million for the year ended December 31, 2010 and a net increase of $124.3 million for the year ended December 31, 2009. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, seasonality with respect to certain government deposits, and by other factors.

We experienced a net decrease in borrowings of $7.5 million for the year ended December 31, 2010 and a net increase of $12.6 million for the year ended December 31, 2009. At December 31, 2010, we had the ability to borrow an additional $89.0 million from the Federal Home Loan Bank of Pittsburgh and up to $21.5 million from lines of credit with other financial institutions.

First Sentry Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At December 31, 2010, First Sentry Bank exceeded all regulatory capital requirements. First Sentry Bank is considered “well capitalized” under regulatory guidelines. See “Regulation and Supervision—Capital Ratios” and Note 15 of the Notes to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements and Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we originate. For additional information, see Note 14 of the Notes to the Consolidated Financial Statements.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities and agreements with respect to investments.

Recent Accounting Pronouncements

In January 2010, compensation guidance was updated to reflect the SEC’s views of when escrowed share arrangements are considered to be compensatory. Historically the SEC staff has expressed the view that an escrowed share arrangement involving the release of shares to certain shareholders based on performance-related criteria is presumed to be compensatory. Facts and circumstances may indicate that the arrangement is an incentive made to facilitate a transaction on behalf of the company if the escrowed shares will be released or canceled without regard to continued employment. In such cases, the SEC staff generally believes that the arrangement should be recognized and measured according to its nature and reflected as a reduction of the proceeds allocated to the newly issued securities. The SEC staff believes that an escrowed share arrangement in which the shares are automatically forfeited if employment terminates is compensation. The guidance is effective upon issuance and had no impact on the Company’s financial statements.

In January 2010, fair value guidance was amended to require disclosures for significant amounts transferred in and out of Levels 1 and 2 and the reasons for such transfers and to require that gross amounts of purchases, sales, issuances and settlements be provided in the Level 3 reconciliation. The new disclosures are effective for the Company for the current quarter and have been reflected in the Fair Value footnote.

Guidance related to subsequent events was amended in February 2010 to remove the requirement for an SEC filer to disclose the date through which subsequent events were evaluated. The amendments were effective upon issuance and had no significant impact on the Company’s financial statements.

Consolidation guidance was amended in February 2010 to defer guidance regarding the analysis of interests in variable interest entities issued in June 2009 for entities having attributes of investment companies or that apply investment company measurement principles. Disclosure requirements provided in the June 2009 guidance were not deferred. The amendments were effective January 1, 2010 and had no effect on the Company’s financial statements.

In March 2010, guidance related to derivatives and hedging was amended to exempt embedded credit derivative features related to the transfer of credit risk from potential bifurcation and separate accounting. Embedded features related to other types of risk and other embedded credit derivative features were not exempt from potential bifurcation and separate accounting. The amendments will be effective for the Company on July 1, 2010 although early adoption is permitted. The Company does not expect these amendments to have any impact on the financial statements.

In July 2010, the Financial Accounting Standards Board issued Accounting Standards Update 2010-20, Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Loss. This Update is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The amendments in this Update apply to all entities, both public and nonpublic. The amendments in this Update affect all entities with financing receivables, excluding short-term trade accounts receivable or receivables measured at fair value or lower of cost or fair value. For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or 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.

In April 2010, amended guidance was issued on the effect of a loan modification when the loan is part of a pool that is accounted for as a single asset. As a result of the amendments, modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The amendment does not affect the accounting for loans that are not accounted for within pools. Loans accounted for individually continue to be subject to the troubled debt restructuring accounting provisions guidance. The guidance is effective for modifications of loans accounted for within pools occurring in the first interim or annual period ending on or after July 15, 2010. The amendment has no significant impact on the Company.

In April 2010, compensation guidance was updated to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The update has no effect on the Company.

In April 2010 income tax guidance was amended to incorporate text of SEC Staff Announcement Accounting for Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Health Care. Under this amendment, the SEC staff would not object to a registrant incorporating the effects of the Health Care and Education Reconciliation Act of 2010 when accounting for the Patient Protection and Affordable Care Act. This view is based in part on the SEC’s understanding that the two Acts, when taken together, represent the current health care reforms as passed by Congress and signed by the President. The SEC staff does not believe that it would be appropriate to analogize to this view in any other fact patterns. The amendment has no significant impact on the Company.

In September 2010 plan accounting for participant loans in defined contribution plans was amended to require participant loans to be classified as notes receivable from participants, which are to be segregated from plan investments. The participant loans are to be measured at their unpaid principal balance plus any accrued but unpaid interest. This guidance should be applied retrospectively to all prior periods presented, effective for fiscal years ending after December 15, 2010. The update has no effect on the Company.

In December 2010 amendments were made to the impairment testing of goodwill and other intangibles. For reporting units with zero or negative carrying amounts, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. The guidance is effective for years beginning after December 15, 2010. The update has no effect on the Company.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Impact of Inflation and Changing Prices

Our consolidated financial statements and related notes have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on our performance than the effects of inflation.

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable to a smaller reporting company.

ITEM 8.

Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

First Sentry Bancshares, Inc.

Huntington, West Virginia

We have audited the accompanying consolidated balance sheets of First Sentry Bancshares, Inc. and Subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Sentry Bancshares, Inc. and Subsidiary as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the three years ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assertion about the effectiveness of First Sentry Bancshares, Inc. and Subsidiary’s internal control over financial reporting as of December 31, 2010, included in Form 10-K and, accordingly, we do not express an opinion thereon.

/s/ Hess, Stewart & Campbell, PLLC

Beckley, West Virginia

March 25, 2011

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31, 2010 and 2009

	2010			2009
ASSETS
Cash and due from banks	$	16,700,486		$	17,942,673
Federal funds sold		4,420,000			-
Cash and cash equivalents		21,120,486			17,942,673

Interest-earning deposits		12,331,000			5,832,000
Investments available-for-sale		61,548,052			65,801,101
Investments held-to-maturity (fair value approximates $22,785,603
and $16,370,083 at December 31, 2010 and 2009, respectively)		23,010,026			16,134,092
Federal Home Loan Bank stock, at cost		2,885,900			3,037,800

Total loans		356,905,826			365,546,355
Allowance for loan losses		(5,005,000	)		(4,785,000	)
Net loans		351,900,826			360,761,355
Interest receivable		1,964,514			2,152,315
Bank premises and equipment, net		6,695,002			6,928,684
Other assets		9,228,511			9,910,296

	$	490,684,317		$	488,500,316

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing	$	56,661,811		$	59,073,303
Interest-bearing		342,009,960			330,397,695
Total deposits		398,671,771			389,470,998
Securities sold under agreements to repurchase		19,374,521			20,729,501
Federal Home Loan Bank advances		33,720,577			39,890,597
Interest payable		506,336			589,772
Other liabilities		402,053			709,831
		452,675,258			451,390,699

TRUST PREFERRED SECURITIES		9,000,000			9,000,000

STOCKHOLDERS' EQUITY
Common stock, $1 par value, 5,280,000 shares authorized, 1,437,651
issued and outstanding at December 31, 2010 and 2009		1,437,651			1,437,651
Additional paid-in capital		15,293,748			15,293,748
Retained earnings		12,658,288			11,257,159
Accumulated other comprehensive income (loss)		(380,628	)		121,059
		29,009,059			28,109,617

	$	490,684,317		$	488,500,316
See Notes to Consolidated Financial Statements

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2010 and 2009

	2010		2009
INTEREST INCOME
Loans, including fees	$	20,433,823	$	15,788,146
Investment securities		2,959,300		3,403,930
Federal funds sold and interest-earning deposits		140,015		491,925
		23,533,138		19,684,001
INTEREST EXPENSE
Deposits		5,824,255		6,262,085
Securities sold under agreements to repurchase		397,593		416,781
Trust preferred securities		239,040		164,167
Advances		698,789		1,136,336
		7,159,677		7,979,369

NET INTEREST INCOME		16,373,461		11,704,632

PROVISION FOR LOAN LOSSES		5,112,101		3,025,098

NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		11,261,360		8,679,534

OTHER INCOME
Service fees		83,752		69,263
Securities gains (losses)		643,510		(2,997	)
Impairment losses on held-to-maturity securities		-		(500,000	)
Other charges, commissions and fees		1,475,772		1,194,916
		2,203,034		761,182
OTHER EXPENSES
Salaries and employee benefits		4,109,524		3,120,343
Equipment and occupancy expenses		1,367,561		1,102,189
Data processing		394,962		278,713
Professional fees		790,320		896,955
Taxes, other than payroll, property and income		272,615		215,602
Insurance		787,645		747,676
Other expenses		2,184,316		2,258,293
		9,906,943		8,619,771

INCOME BEFORE INCOME TAX		3,557,451		820,945

INCOME TAX EXPENSE		1,006,203		93,195

NET INCOME	$	2,551,248	$	727,750

EARNINGS PER SHARE	$	1.77	$	0.63

See Notes to Consolidated Financial Statements

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2010 and 2009

	2010			2009

NET INCOME	$	2,551,248		$	727,750

Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		(803,205	)		49,778
Less: reclassification adjustment for (gains) losses included in net income		(643,510	)		2,997

		(159,695	)		52,775
Cumulative-effect adjustment to apply
GAAP for transfer of securities from available-for-sale to held-to-maturity		(1,561	)		51,003

Adjustment for income tax expense		(340,431	)		(15,801	)

Other comprehensive income (loss), net of tax		(501,687	)		87,977

COMPREHENSIVE INCOME	$	2,049,561		$	815,727

See Notes to Consolidated Financial Statements

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2010 and 2009

								Accumulated
			Additional					Other			Total
	Common		Paid-in		Retained			Comprehensive			Stockholders'
	Stock		Capital		Earnings			Income (Loss)			Equity

BALANCE, December 31, 2008	$	1,056,000	$	6,144,000	$	11,450,539		$	33,082		$	18,683,621

Net income		-		-		727,750			-			727,750
Change in unrealized gain on securities		-		-		-			36,974			36,974
Amortization under GAAP for transferred
securities to held-to-maturity		-		-		-			51,003			51,003
Issuance of 381,651 shares common stock		381,651		9,149,748		-			-			9,531,399
Dividends, $0.80 per share		-		-		(921,130	)		-			(921,130	)

BALANCE, December 31, 2009		1,437,651		15,293,748		11,257,159			121,059			28,109,617

Net income		-		-		2,551,248			-			2,551,248
Change in unrealized loss on securities		-		-		-			(500,126	)		(500,126	)
Change in unrealized loss on securities
transferred from available-for-sale to
held-to-maturity		-		-		-			(54,259	)		(54,259	)
Amortization under GAAP for transferred
securities held-to-maturity		-		-		-			52,698			52,698
Dividends, $0.80 per share		-		-		(1,150,119	)		-			(1,150,119	)

BALANCE, December 31, 2010	$	1,437,651	$	15,293,748	$	12,658,288		$	(380,628	)	$	29,009,059

See Notes to Consolidated Financial Statements

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2010 and 2009

	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,551,248		$	727,750
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		5,112,101			3,025,098
Depreciation and amortization		573,576			394,475
Subsequent write-downs on other real estate		204,779			752,704
Investment securities amortization net of accretion		483,494			591,278
Amortization of core deposit intangible		34,867			8,717
Securities and trading asset losses (gains)		(643,510	)		2,997
Impairment loss on held-to-maturity securities		-			500,000
Loss on sale of assets		40,751			-
Deferred income taxes		630,446			(593,405	)
Changes in:
Interest receivable		187,801			39,738
Other assets		(64,728	)		(2,675,403	)
Interest payable		(83,436	)		(620,836	)
Income taxes payable		-			(10,762	)
Other liabilities		(307,778	)		291,875
NET CASH PROVIDED BY OPERATING ACTIVITIES		8,719,611			2,434,226

CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-earning deposits		(6,499,000	)		12,845,000
Maturities of investments available-for-sale		945,000			1,765,000
Redemptions of investments available-for-sale		66,594,214			60,125,054
Maturities of investments held-to-maturity		760,000			1,129,700
Redemptions of investments held-to-maturity		362,888			100,000
Purchase of investments available-for-sale		(63,652,014	)		(39,567,131	)
Purchase of investments held-to-maturity		(8,068,974	)		(870,000	)
Purchase (sale) of Federal Home Loan Bank Stock		151,900			(52,100	)
Net (increase) decrease in loans		3,418,428			(35,370,138	)
Proceeds from sale of foreclosed properties		260,000			-
Purchases of premises and equipment		(339,894	)		(625,784	)
NET CASH USED IN INVESTING ACTIVITIES		(6,067,452	)		(520,399	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		9,200,773			10,822,761
Net change in agreements to repurchase securities		(1,354,980	)		(2,724,837	)
Net change in FHLB advances		(6,170,020	)		(8,339,349	)
Net decrease in federal funds purchased		-			(518,000	)
Cash dividends paid		(1,150,119	)		(921,130	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		525,654			(1,680,555	)

NET CHANGE IN CASH AND CASH EQUIVALENTS		3,177,813			233,272

CASH ACQUIRED IN MERGER		-			10,175,218
CASH AND CASH EQUIVALENTS, BEGINNING		17,942,673			7,534,183

CASH AND CASH EQUIVALENTS, ENDING	$	21,120,486		$	17,942,673


See Notes to Consolidated Financial Statements

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2010 and 2009


	2010		2009

SUPPLEMENTAL DISCLOSURES

Cash paid for interest on deposits and borrowings	$	7,243,113	$	8,096,863
Cash paid for income taxes		1,144,303		641,900


SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES

Loans transferred to foreclosed real estate	$	330,000	$	1,530,746
Business acquisitions:
Assets acquired at fair value		-		149,501,288
Liabilities acquired at fair value		-		141,676,971
Common stock issued		-		381,651

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2010 and 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Date of management’s review: Management has evaluated subsequent events through the date which the financial statements were available to be issued.

Nature of operations: Effective January 1, 2002, First Sentry Bank, Inc. (the Bank) merged into First Sentry Bancshares, Inc. (the Company) and became a wholly-owned subsidiary. The shareholders of First Sentry Bank, Inc. became the shareholders of First Sentry Bancshares. Effective September 25, 2009, the Company acquired all of the stock of Guaranty Financial Services, Inc. and Subsidiary (Guaranty). The subsidiary bank, Guaranty Bank and Trust Company (Guaranty Bank), was merged into First Sentry Bank, Inc. First Sentry Bancshares, Inc. is a bank holding company whose principal activity is the ownership and management of First Sentry Bank, Inc. The Bank generates commercial, mortgage and consumer loans and receives deposits from customers in Huntington, West Virginia and the surrounding area. The bank operates under a state bank charter and provides full banking services. As a state bank, the Bank is subject to regulation by the West Virginia State Division of Banking and the Federal Deposit Insurance Corporation (FDIC).

Principles of consolidation: The consolidated statements include the accounts of the Company and its wholly-owned subsidiary, First Sentry Bank, Inc. All significant inter-company balances have been eliminated in consolidation.

Business segments: The Company reports its activities as a single business segment. In determining proper segment definition, the Company considers the materiality of the potential segment and components of the business about which financial information is available and regularly evaluated, relative to resource and performance assessment.

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions.

While management uses available information to recognize losses on loans, future reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Cash and cash equivalents: For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and cash on hand, amounts due from banks, and federal funds sold.

FIRST SENTRY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2010 and 2009

Interest-bearing deposits: Interest-bearing deposits in banks mature within one or two years and are carried at cost

Trading activities: The Company did not hold securities for short-term resale for the years ended December 31, 2010 and 2009, and therefore did not maintain a trading securities portfolio.

Investment securities: Debt securities are classified as held-to-maturity when the Bank has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are carried at amortized cost. The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses reported separately, net of tax, in other comprehensive income. Gains and losses on sales of securities are determined on the specific identification method.

Declines that are other than temporary in the fair value of individual held-to-maturity and available-for-sale securities below their cost result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses.

Loans: Loans are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan fees. Interest income on loans is recognized on the accrual basis except for those loans in a nonaccrual income status. Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method. Amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status. The accrual of interest on impaired loans is discontinued when management believes, after consideration of economic and business conditions and collection efforts, the borrower’s financial conditions are such that collection of interest is doubtful. When interest accrual is discontinued, interest income is subsequently recognized only to the extent cash payments are received.

Allowance for loan losses: The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses.

Premises and equipment: Land is carried at cost. Other premises and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations.

Other real estate owned: Real estate properties acquired through or in lieu of loan foreclosure are initially recorded at the lower of the Bank’s carrying amount or fair value less estimated selling cost at the date of foreclosure. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, these assets are carried at the lower of their new cost basis or fair value less cost to sell. Costs of significant property improvements are capitalized, whereas costs relating to holding property are expensed. The portion of interest costs relating to development of real estate is capitalized. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell.

Comprehensive income: Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains on securities available-for-sale, and unrealized losses related to other credit factors on debt securities available-for-sale.

Income taxes: Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of the allowance for loan losses and accumulated depreciation. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

When tax returns are filed, it is highly certain that some positions would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Management is not aware of any material uncertain tax positions and no liability has been recognized at December 31, 2010. Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.

Advertising costs: Advertising costs are expensed as incurred. Advertising expense for the years presented is not material to the financial statements.

Earnings per share: Earnings per share are computed on the weighted average number of shares outstanding.

Fair value of instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully described in Note 2. Fair value estimates involve uncertainties and matters of judgment. Changes in assumptions or in market conditions could significantly affect the estimates.

Retirement plan: The Company funds retirement costs as incurred.

Current accounting developments: In January 2010, compensation guidance was updated to reflect the SEC’s views of when escrowed share arrangements are considered to be compensatory. Historically the SEC staff has expressed the view that an escrowed share arrangement involving the release of shares to certain shareholders based on performance-related criteria is presumed to be compensatory. Facts and circumstances may indicate that the arrangement is an incentive made to facilitate a transaction on behalf of the company if the escrowed shares will be released or canceled without regard to continued employment. In such cases, the SEC staff generally believes that the arrangement should be recognized and measured according to its nature and reflected as a reduction of the proceeds allocated to the newly issued securities. The SEC staff believes that an escrowed share arrangement in which the shares are automatically forfeited if employment terminates is compensation. The guidance is effective upon issuance and had no impact on the Company’s financial statements.

In March 2010, guidance related to derivatives and hedging was amended to exempt embedded credit derivative features related to the transfer of credit risk from potential bifurcation and separate accounting. Embedded features related to other types of risk and other embedded credit derivative features were not exempt from potential bifurcation and separate accounting. The amendments will be effective for the Company on July 1, 2010, although early adoption is permitted. The Company does not expect these amendments to have any impact on the financial statements.

accounted for within pools occurring in the first interim or annual period ending on or after July 15, 2010. The amendment has no significant impact on the Company.

In April 2010, income tax guidance was amended to incorporate text of SEC Staff Announcement Accounting for Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Health Care. Under this amendment, the SEC staff would not object to a registrant incorporating the effects of the Health Care and Education Reconciliation Act of 2010 when accounting for the Patient Protection and Affordable Care Act. This view is based in part on the SEC’s understanding that the two Acts, when taken together, represent the current health care reforms as passed by Congress and signed by the President. The SEC staff does not believe that it would be appropriate to analogize to this view in any other fact patterns. The amendment has no significant impact on the Company.

In September 2010, plan accounting for participant loans in defined contribution plans was amended to require participant loans to be classified as notes receivable from participants, which are to be segregated from plan investments. The participant loans are to be measured at their unpaid principal balance plus any accrued but unpaid interest. This guidance should be applied retrospectively to all prior periods presented, effective for fiscal years ending after December 15, 2010. The update has no effect on the Company.

In December 2010, amendments were made to the impairment testing of goodwill and other intangibles. For reporting units with zero or negative carrying amounts, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. The guidance is effective for years beginning after December 15, 2010. The update has no effect on the Company.

NOTE 2. FAIR VALUES OF FINANCIAL INSTRUMENTS

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the fair value measurements and disclosures of GAAP, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments.

Under GAAP, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These levels are:

Level 1	Valuation is based upon quoted prices in active markets for identical instruments traded in active markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

A financial instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments carried on the consolidated financial statements at cost and are not measured or recorded at fair value on a recurring basis, unless otherwise noted:

Cash and cash equivalents: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Federal funds sold: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Interest-earning deposits: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Available-for-sale and trading securities: Prices for these securities are obtained through third party data service providers or dealer market participants with whom the Company has historically transacted both purchases and sales of investment securities. Benchmarks and other comparable securities are also used in estimating the values of these investment securities.

Trading assets: For trading assets, fair values are based on quoted market prices or quoted market prices of comparable instruments.

Held-to-maturity securities: Fair values are based on quoted market prices.

Loans: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for other loans (for example, fixed rate commercial real estate and rental property mortgage loans and commercial and industrial loans) are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Deposits: The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows using the rates currently offered for deposits of similar remaining maturities.

Securities sold under agreements to repurchase: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Advances: Rates currently available to the Bank for advances with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments to extend credit and standby letters of credit: Commitments to extend credit and standby letters of credit represent agreements to lend to a customer at the market rate when the loan is extended, thus the commitments and letters of credit are not considered to have a fair value.

The following table presents the assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as reported at December 31, 2010 and 2009.

As required by GAAP, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value Measurements at Reporting Date Using:
			Quoted Prices		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Balance		(Level 1)		(Level 2)		(Level 3)
December 31, 2010:
Assets:
Investment securities:
Available-for-sale	$	61,548,052	$	-	$	61,548,052	$	-

December 31, 2009:
Assets:
Investment securities:
Available-for-sale	$	65,801,101	$	-	$	65,801,101	$	-

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial condition. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in the immediate settlement of the instruments. GAAP excluded certain financial instruments and all nonfinancial disclosure requirements. Accordingly, aggregate fair value estimates do not represent the underlying value of the Bank.

The estimated fair values of the Bank’s financial instruments at December 31, 2010 and 2009, do not significantly differ from their carrying amounts as reported in the balance sheet.

NOTE 3. RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is required to maintain reserve funds in cash or on deposit with the Federal Reserve Bank. The required reserve at December 31, 2010 and 2009, was $4,432,000 and $5,416,000, respectively.

NOTE 4. INVESTMENT SECURITIES

The amortized cost of investment securities and their fair values at December 31, 2010 and 2009, are as follows:

	Amortized Cost		Unrealized Gains		Amortized Losses		Fair Value
December 31, 2010:
Held-to-maturity:
State and political securities	$	21,626,024	$	148,718	$	514,679	$	21,260,063
Corporate securities		1,384,002		141,538		-		1,525,540
		23,010,026		290,256		514,679		22,785,603
Available-for-sale:
Mortgage-backed securities		14,697,482		205,400		222,918		14,679,964
U.S. agency securities		35,533,382		241,896		422,044		35,353,234
State and political securities		11,542,318		66,154		93,618		11,514,854
		61,773,182		513,450		738,580		61,548,052

	$	84,783,208	$	803,706	$	1,253,259	$	84,333,655
December 31, 2009:
Held-to-maturity:
State and political securities	$	14,778,108	$	197,861	$	102,753	$	14,873,216
Corporate securities		1,355,984		140,883		-		1,496,867
		16,134,092		338,744		102,753		16,370,083
Available-for-sale:
Mortgage-backed securities		15,536,388		490,819		20,841		16,006,366
U.S. agency securities		39,284,446		377,577		262,529		39,399,494
Corporate securities		96,570		-		-		96,570
State and political securities		10,305,622		76,482		83,433		10,298,671
		65,223,026		944,878		366,803		65,801,101

	$	81,357,118	$	1,283,622	$	469,556	$	82,171,184

The amortized cost and estimated fair value of securities at December 31, 2010 and 2009, by contractual maturity, are as follows:

	Held-to-Maturity				Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
December 31, 2010:
One year or less	$	2,118,579	$	2,132,573	$	2,250,793	$	2,263,560
After one year through five years		1,605,499		1,604,434		8,148,803		8,174,152
After five years through ten years		8,164,296		8,098,597		10,088,730		10,183,000
After ten years		11,121,652		10,949,999		41,284,856		40,927,340

	$	23,010,026	$	22,785,603	$	61,773,182	$	61,548,052
December 31, 2009:
One year or less	$	768,156	$	770,150	$	947,498	$	955,036
After one year through five years		3,429,108		3,462,665		12,231,531		12,344,303
After five years through ten years		3,954,065		3,997,165		15,751,793		15,951,805
After ten years		7,982,763		8,140,103		36,292,204		36,549,957

	$	16,134,092	$	16,370,083	$	65,223,026	$	65,801,101

During the fourth quarter of 2010, management transferred certain securities from the classification of “available-for-sale” to “held-to-maturity” after evaluating the Company’s security investment classifications. The securities transferred included fourteen municipal securities acquired during 2010 with a book value of $8,059,384 and a fair value of $8,005,125 at October 31, 2010. The securities have been transferred under GAAP, and the unrealized losses totaling $54,259 are recorded in other comprehensive income and are being amortized over the life of the securities in a manner consistent with the amortization of any premium or discount. Management’s decision to reclass the securities was based on the change in the Company’s ability and intent to hold these securities to maturity. At October 31, 2010, the Company determined that it had a positive intent to hold to maturity the available-for-sale securities reclassed. Factors used in assessing the ability to hold these securities to maturity were future liquidity needs and sources of funding. The Company does not intend to dispose of these securities in response to needs for liquidity or use as an additional funding source.

Actual maturities of debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to its scheduled maturity.

Proceeds and redemptions of available-for-sale securities for the years ended December 31, 2010 and 2009, totaled $67,539,214 and $61,890,054, respectively. Gains (losses) on maturities and redemptions of securities available-for-sale for the years ended December 31, 2010 and 2009, totaled $643,510 and ($2,997), respectively. Proceeds and redemptions of held-to-maturity securities for the years ended December 31, 2010 and 2009, totaled $1,122,888 and $1,229,700, respectively.

Securities with a carrying value of $47,144,000 and $35,474,000 were pledged at December 31, 2010 and 2009, respectively, to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Information pertaining to securities held-to-maturity and securities available-for-sale with gross unrealized losses at December 31, 2010 and 2009, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	Less Than Twelve Months				Over Twelve Months
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
December 31, 2010:
Held-to-maturity
State and political securities	$	514,679	$	10,570,280	$	-	$	-
Available-for-sale
U.S. agency securities		422,044		23,709,073		-		-
Mortgage-backed securities		222,918		7,644,311		-		-
State and political securities		93,618		3,480,664		-		.-

	$	1,253,259	$	45,404,328	$	-	$	-
December 31, 2009:
Held-to-maturity
State and political securities	$	65,764	$	4,638,041	$	36,989	$	575,192
Available-for-sale
U.S. agency securities		262,529		17,012,130		-		-
Mortgage-backed securities		20,841		3,391,748		-		-
State and political securities		22,064		2,200,112		61,369		441,445

	$	371,198	$	27,242,031	$	98,358	$	1,016,637

At December 31, 2010, sixty-two debt securities with unrealized losses had depreciated 2.69% from the Company’s amortized cost basis. At December 31, 2009, sixty debt securities with unrealized losses had depreciated 1.63% from the Company’s amortized cost basis. These securities are guaranteed by either the U.S. Government or other governments. These unrealized losses relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether the downgrades by bond-rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary. Management does not believe that any individual unrealized loss as of December 31, 2010, represents an other-than-temporary impairment as management mainly attributes the declines in value to changes in interest rates and lack of liquidity in the market place, not credit quality or other factors. Management does not believe it is probable that the Company will not receive all principal and interest payments in accordance with the contractual terms of these securities. The Company has the intent and ability to hold the securities with unrealized losses until maturity.

Federal Home Loan Bank Stock, which represents a required investment in the common stock of the Federal Home Loan Bank of Pittsburgh (FHLB), is carried at cost as a restricted long-term investment at December 31, 2010 and 2009.

Management evaluates the FHLB stock for impairment in accordance with GAAP. When determining if any impairment has occurred, management bases its decision on the ultimate recoverability of the cost rather than recognizing temporary declines in value. Factors that are considered are 1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, 2) commitment by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and 3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB. Management does not believe an impairment charge is required as it relates to FHLB stock as of December 31, 2010.

During 2009, the Company recognized an other-than-temporary impairment charge of $500,000 on Silverton Bank (formerly “The Bankers Bank”) corporate bonds which were previously classified as held-to-maturity securities. In May 2009, the Company had received information that Silverton Bank had been closed by the Office of the Comptroller of Currency and that the Federal Deposit Insurance Corporation (FDIC) had been appointed as receiver. A bridge bank was formed to facilitate liquidation of Silverton Bank. The other-than-temporary impairment charge was recorded based on this information and management’s belief that the market prices of these bonds were unrecoverable. At December 31, 2010, the Company did not have any remaining investments in Silverton Bank corporate bonds.

NOTE 5. LOANS AND ALLOWANCE FOR LOAN LOSSES

Major classifications of loans are as follows:

	December 31,
	2010			2009
Loans
Commercial	$	107,388,340		$	115,995,984
Commercial real estate		173,897,754			170,515,459
Residential real estate		55,405,724			55,332,538
Consumer		20,307,622			23,766,660
		356,999,440			365,610,641
Less deferred loan fees		(93,614	)		(64,286	)
		356,905,826			365,546,355

Allowance for loan losses		(5,005,000	)		(4,785,000	)

	$	351,900,826		$	360,761,355

Changes in the allowance for loan losses for the years ended December 31, 2010 and 2009, are as follows:


		2010			2009

Balance at beginning of year	$	4,785,000		$	3,227,000

Charge-offs:
Loans:
Commercial real estate		199,031			1,034,946
Commercial		4,719,746			295,417
Residential real estate		23,879			58,289
Consumer		58,179			116,934
Total charge-offs		5,000,835			1,505,586

Recoveries:
Loans:
Commercial real estate		2,318			-
Commercial		35,821			32,724
Residential real estate		39,828			2,521
Consumer		30,767			3,243
Total recoveries		108,734			38,488

Net charge-offs		(4,892,101	)		(1,467,098	) )
Provision for loan losses		5,112,101			3,025,098

Balance at end of year	$	5,005,000		$	4,785,000

As disclosed in Note 11, the residential real estate loans secure the Federal Home Loan Bank advances. Overdraft deposit accounts that have been reclassed as loans as of December 31, 2010 and 2009, totaled $362,528 and $476,813, respectively.

As of December 31, 2010, the scheduled maturities of loans are as follows:

	2010

Three months or less	$	60,861,862
Over three months through twelve months		46,846,972
Over one year through three years		77,661,202
Over three years through five years		96,683,161
Over five years through fifteen years		58,535,253
Over fifteen years		16,411,490

	$	356,999,940

Loans classified as nonaccrual totaled $2,694,924 and $1,886,885 as of December 31, 2010 and 2009, respectively. The difference between gross income that would have been earned on nonaccrual loans, had they been current in accordance with their original terms, and recorded interest that was included in income totaled $99,912 and $79,796 for the years ended December 31, 2010 and 2009, respectively. At December 31, 2010, there were no commitments to lend additional funds to customers whose loans are classified as nonaccrual. Total loans past due ninety days or more and still accruing at December 31, 2010 and 2009, totaled $1,759,545 and $548,905 respectively.

Non-performing loans at December 31, 2010 and 2009, are as follows:

	2010		2009
Non-accrual loans:
Commercial real estate	$	1,499,531	$	1,782,920
Commercial		1,190,000		-
Residential real estate		1,441		5,000
Consumer		3,952		98,965
Total non-accrual loans		2,694,924		1,886,885

Loans delinquent 90 days or greater and still accruing:
Commercial real estate		1,059,213		-
Commercial		135,565		-
Residential real estate		400,978		523,083
Consumer		163,789		25,822
Total loans delinquent 90 days or greater and still accruing		1,759,545		548,905

Total non-performing loans	$	4,454,469	$	2,435,790

The average recorded investment in impaired loans at December 31, 2010 and 2009 was $5,049,836 and $1,375,990, respectively. The Company considers nonaccrual loans and loans past-due ninety days or more to be impaired.

The following is a summary of loans considered impaired:

	December 31,
	2010		2009

Gross impaired loans	$	4,454,469	$	2,435,790
Less valuation allowance for impaired loans		1,298,946		515,390

Recorded investment in impaired loans	$	3,155,523	$	1,920,400

The following is a summary of credit exposure using a credit risk profile utilizing internal assigned grades as of December 31, 2010:

			Special
	Pass		Mention		Substandard
Loans
Commercial	$	103,532,236	$	1,355,967	$	2,500,137
Commercial real estate		160,165,443		7,891,920		5,840,391
Residential real estate		53,650,624		661,292		1,093,808
Consumer		20,245,843		55,170		6,609

	$	337,594,146	$	9,964,349	$	9,440,945

In the ordinary course of business, the Bank has, and expects to continue to have, transactions, including loans, with its executive officers, directors, principal shareholders and their related interests. In the opinion of management, such transactions are on substantially the same terms, including interest rates and collateral, as those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the Bank. Loans to such related parties are summarized as follows:

	December 31,
	2010		2009

Beginning balance	$	9,054,520	$	4,987,233
New loans		4,889,903		394,652
Relationship changes		-		3,945,036
		13,944,423		9,326,921
Less payments		1,499,050		272,401

Ending balance	$	12,445,373	$	9,054,520

NOTE 6. PREMISES AND EQUIPMENT

A summary of the cost of premises and equipment and related accumulated depreciation follows:

	December 31,
	2010		2009

Land and improvements	$	3,260,569	$	3,251,047
Buildings		3,629,964		3,539,381
Furniture, fixtures, and equipment		2,547,082		2,537,647
Automobiles		51,234		51,234
		9,488,849		9,379,309
Less accumulated depreciation		2,793,847		2,450,625

	$	6,695,002	$	6,928,684

Depreciation expense for the years ended December 31, 2010 and 2009, was $573,576 and $394,475, respectively.

NOTE 7. OTHER REAL ESTATE OWNED

Activity for other real estate owned included in other assets for December 31, 2010 and 2009, is as follows:

	2010			2009

Balance at beginning of year	$	2,268,704		$	1,490,734
Properties acquired		330,000			1,530,674
Subsequent write-downs		(204,779	)		(752,704
Gross proceeds from sales		(260,000	)		-
Gains (losses) recorded		(31,067	)		-

	$	2,102,858		$	2,268,704

NOTE 8. OTHER ASSETS

As result of the merger with Guaranty Bank, goodwill was included in other assets in the amount of $2,368,278. Goodwill is reviewed annually for impairment in accordance with GAAP. Management has determined that no impairment to goodwill has occurred in 2010. In addition, a core deposit intangible was recorded in the amount of $523,000 and is being amortized over a period of seven years using an accelerated method. The unamortized balance of the core deposit intangible at December 31, 2010, was $479,417.

NOTE 9. DEPOSITS

Deposits consisted of the following:

	December 31,
	2010							2009
					Weighted							Weighted
					Average							Average
	Balance		%		Rate			Balance		%		Rate

Savings	$	18,699,236		4.69		0.18	%	$	18,249,349		4.68		0.20	%
Certificates of deposit		211,010,113		52.93		2.40			222,258,011		57.07		3.46
Money market		67,291,744		16.88		0.45			42,340,174		10.87		0.50
Now		45,008,867		11.29		0.35			47,550,161		12.21		0.30
Checking		56,661,811		14.21		-			59,073,303		15.17		-

	$	398,671,771		100.00		1.44		$	389,470,998		100.00		2.08

Interest expense on deposits for the years ended December 31, 2010 and 2009, consisted of the following:

	2010		2009

Savings	$	34,930	$	28,014
Certificates of deposits		5,353,127		5,948,008
Money market		267,210		167,449
Now		168,988		118,614

	$	5,824,255	$	6,262,085

Scheduled maturities of certificates of deposit at December 31, 2010, are as follows:

	2010

Three months or less	$	41,287,393
Over three months through twelve months		87,822,804
Over one year through three years		58,848,776
Over three years		23,051,140

	$	211,010,113

Deposits from related parties held by the Bank at December 31, 2010, amounted to $8,931,789.

NOTE 10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase generally are held until canceled by either party. Information concerning securities sold under agreements to repurchase at December 31, 2010 and 2009, is summarized as follows:

	2010			2009

Average balance during the year	$	19,190,556		$	14,667,000
Average interest rate during the year		2.07	%		2.84	%
Maximum month-end balance during the year	$	20,675,303		$	25,204,318
U.S. agency securities underlying the agreements		28,614,911			24,544,858

NOTE 11. FEDERAL HOME LOAN BANK ADVANCES

The Bank owns stock of the Federal Home Loan Bank of Pittsburgh (FHLB) which allows the Bank to borrow funds from the FHLB. The Bank’s maximum borrowing capacity from FHLB was $140,718,000 and $154,697,000 at December 31, 2010 and 2009, respectively.

The Bank has advances of long-term debt from the FHLB totaling $33,720,577 and $39,890,597 at December 31, 2010 and 2009, respectively. The advances are secured by residential real estate loans and have various scheduled maturity dates beginning with January 3, 2011, through May 19, 2022. The interest rate is determined at the time the advances are made and currently range from 0.69% to 4.57%.

The FHLB advances are scheduled for repayment as follows:

Year	Amount

2011	$	17,499,999
2012		5,000,000
2013		-
2014		-
2015		-
Thereafter		11,220,578

	$	33,720,577

NOTE 12. LINES OF CREDIT

The Bank has federal funds accommodations with four correspondent banks. The agreements allow the Bank to borrow for 14 days in a calendar month with interest due daily at variable rates. The amounts available for the Bank to borrow under these agreements total $21,500,000. At December 31, 2010 and 2009, no funds were advanced under these agreements.

NOTE 13. TRUST PREFERRED SECURITIES

On April 23, 2007, First Sentry Bancshares Capital Trust II (“Trust II”) issued $5,000,000 of Floating Rate Trust Preferred Securities. Trust II, a Delaware statutory business trust, is a wholly-owned consolidated subsidiary of the Company, with its sole asset being $5,000,000 aggregate principal amount of Floating Rate Junior Subordinated Debt Securities due June 15, 2037, of First Sentry Bancshares, Inc. (the trust debenture).

The trust preferred securities are non-voting, pay quarterly distributions at a variable rate, and carry a liquidation value of $1,000 per share. The variable interest rate is equal to a 3-month LIBOR plus 1.58% (1.88% at December 31, 2010). Distributions for the years ended December 31, 2010 and 2009, totaled $97,214 and $129,960, respectively. The Company has executed a guarantee with regard to the trust preferred securities. The guarantee, when taken together with the Company’s obligations under the trust debenture issued and the applicable trust document, provides a full and unconditional guarantee of the trust’s obligations under the trust preferred securities.

After June 15, 2012, the trust preferred securities are redeemable in part or whole, at the option of the Company, for a redemption price of $1,000 per trust preferred security. The trust preferred securities are subject to mandatory redemption on June 15, 2037, at a redemption price of $1,000 per trust preferred security. First Sentry Bancshares, Inc. may cause the trust to delay payment of distributions on the trust preferred securities for up to twenty consecutive quarterly periods. During such deferral periods, distributions to which holders of the trust preferred securities are entitled will compound quarterly at the applicable rate for each quarterly period.

In the merger with Guaranty Financial Services, Inc. the Company acquired Guaranty Financial Statutory Trust I (the Trust). The Company owns 100% of the common equity of the Trust. The Trust was formed for the purpose of issuing $4,000,000 of corporation-obligated, mandatorily-redeemable securities to third-party investors and investing the proceeds from the sale of the capital securities in junior subordinated debentures. Distributions on the capital securities issued by the Trust are payable quarterly bearing a variable interest rate equal to 3-month LIBOR plus 3.10% (3.40% at December 31, 2010), which is equal to the interest rate being earned by the Trust on the debentures held by the Trust and are recorded as interest expense by the Company. Distributions for the years ended December 31, 2010 and 2009, totaled $141,826 and $34,207, respectively. The Company has the option to defer payment of the distributions for an extended period up to five years, so long as the Company is not in default of the terms of the debentures.

The capital securities have a term of 30 years and have a final maturity at June 26, 2033. They are subject to mandatory redemption in whole or in part, upon repayment of the debentures. After June 26, 2008, the trust preferred securities are redeemable in part or whole, at the option of the Company, for a par value of $1,000 per trust preferred security. The Company has entered into agreements that fully and unconditionally guarantee the capital securities subject to the terms of the guarantee.

NOTE 14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

In the normal course of business, the Bank has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet. Financial instruments whose contract amount represents credit risk at December 31, 2010 and 2009, are as follows:

	2010		2009

Commitments to extend credit	$	51,098,474	$	49,912,068
Standby letters of credit		7,800,962		9,124,712

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount and type of collateral obtained, if deemed necessary by the Bank upon extension of credit, varies and is based on management’s credit evaluation of the counter party.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and generally require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.

NOTE 15. STOCKHOLDERS’ EQUITY

Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net income, as defined, combined with the retained earnings of the preceding two years, subject to the capital requirements as defined below.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum regulatory capital requirements can initiate certain mandatory, and possible additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital to risk-weighted assets (as defined in the regulations), and of Tier 1 capital to average assets (as defined). Management believes, as of December 31, 2010 and 2009, that the Bank meets all the capital adequacy requirements to which it is subject. As of November 9, 2009, the date of the most recent notification from the West Virginia Division of Banking, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. As of December 31, 2010 and 2009, the Bank is categorized as well capitalized as disclosed in the following table.

The Bank’s actual and required capital amounts and ratios as of December 31, 2010 and 2009, are as follows:

											To Be Well
											Capitalized
											Under The Prompt
						For Capital					Corrective
	Actual					Adequate Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio

December 31, 2010:
Total Risk-Based Capital
(to Risk-Weighted Assets)
Bank	$	39,770,000		11.62	%	$	27,381,000		8	%	$	34,226,000		10	%
Consolidated		39,826,000		11.65	%		27,349,000		8	%		34,186,000		10	%

Tier l Capital
(to Risk-Weighted Assets)
Bank		35,484,000		10.37	%		13,688,000		4	%		20,531,000		6	%
Consolidated		35,542,000		10.39	%		13,684,000		4	%		20,525,000		6	%

Tier l Capital
(to Adjusted Total Assets)
Bank		35,484,000		7.19	%		19,741,000		4	%		24,676,000		5	%
Consolidated		35,542,000		7.23	%		19,664,000		4	%		24,580,000		5	%

December 31, 2009:
Total Risk-Based Capital
(to Risk-Weighted Assets)
Bank	$	38,165,000		10.81	%	$	28,249,000		8	%	$	35,311,000		10	%
Consolidated		38,404,000		10.88	%		28,238,000		8	%		35,298,000		10	%

Tier l Capital
(to Risk-Weighted Assets)
Bank		33,747,000		9.56	%		14,124,000		4	%		21,187,000		6	%
Consolidated		38,404,000		9.63	%		15,952,000		4	%		23,928,000		6	%

Tier l Capital
(to Adjusted Total Assets)
Bank		33,747,000		6.91	%		19,529,000		4	%		24,411,000		5	%
Consolidated		33,988,000		6.90	%		19,703,000		4	%		24,629,000		5	%

Earnings per share are computed on the weighted average number of shares outstanding of 1,437,651 at December 31, 2010, and 1,157,425 at December 31, 2009.

NOTE 16. INCOME TAXES

The provision for income taxes consists of the following:

	Years Ended December 31,
	2010		2009
Current tax expense
Federal	$	274,802	$	542,953
State		100,955		143,647
Deferred tax expense (benefit)
Federal		539,022		(459,417	)
State		91,424		(133,988	)

	$	1,006,203	$	93,195

A reconciliation of the income tax expense at the Federal statutory rate of 34% is as follows:

	Year Ended December 31,
	2010			2009

Federal statutory income tax	$	1,209,533		$	279,121
State income tax, net of federal
tax benefit		66,630			94,807
Tax exempt interest income		(382,888	)		(276,294	)
Other		112,928			(4,439	)

	$	1,006,203		$	93,195

The Company files income tax returns in the U.S. federal jurisdiction and the State of West Virginia. The Company has evaluated the tax positions taken or expected to be taken in its tax returns and does not believe it has any additional liability related to uncertain tax positions. Interest and penalties associated with any tax assessments are recorded as interest expense and noninterest expense, respectively. The years ended December 31, 2007, through December 31, 2010, remain open for audits by tax authorities.

For the year ended December 31, 2010, the Company utilized the remaining NOL carryforward of $1,656,152 that was available from the acquisition of Guaranty Bank.

A cumulative net deferred tax asset is included in other assets. The components of the asset are as follows:

	December 31,
	2010		2009
Deferred tax assets:
Allowance for loan losses	$	965,631	$	1,116,104
NOL carryforward		-		774,857
Acquisition costs		137,731		137,731
OREO write-downs		374,004		291,688
Nonaccrual interest		54,940		-
AMT credit carryforward		83,942		-
OTTI securities		179,278		179,278
Unrealized loss on securities		85,549		-
		1,881,075		2,499,658
Deferred tax liabilities:
Depreciation		243,400		216,569
Accretion of discounts, net		54,477		45,700
Unrealized gain on securities		-		217,529
		297,877		479,798

Net deferred tax asset	$	1,583,198	$	2,019,860

NOTE 17. PROFIT SHARING PLAN

The Bank instituted a 401(k) profit sharing plan in 1999 covering all employees. The plan permits employee contributions up to the maximum allowed by Internal Revenue Service regulations ($16,500 for 2010). Employer contributions are discretionary and totaled $75,265 and $60,033 for the years ended December 31, 2010 and 2009, respectively.

NOTE 18. OPERATING LEASES

During November 2002, the Bank signed a ten-year lease for land on which a branch is located. Lease payments are $3,750 per month through October 2012. At that time, providing the lease is still in effect, the lease will be automatically renewed for a series of twelve renewals of five years each, plus a final thirteenth renewal for nineteen years. Upon each renewal, the lease provides for an increase in the rental payments of ten percent over the preceding term. Lease payments totaled $45,000 each year for the years ended December 31, 2010 and 2009. Lease payments made during 2003 were included in other assets as prepaid rents and are being amortized over the remaining life of the lease.

The Bank has assumed a lease with a related party as the result of the merger with Guaranty Bank. Under the remaining terms of the twenty-year lease scheduled to expire in 2020, monthly lease payments are $6,000 through March 2015, and in April 2015, the monthly lease payments will increase to $6,500 for the remaining term of the lease. Lease payments totaled $70,500 and $16,500 for the years ended December 31, 2010 and 2009, respectively.

The following is a schedule by year of future minimum rental payments required under lease agreements:


Year Ending December 31,	Amount
2011	$	117,000
2012		109,500
2013		72,000
2014		72,000
2015		76,500
Thereafter		331,500

	$	778,500

NOTE 19. CONCENTRATION OF CREDIT RISK

The Bank grants commercial, residential and consumer related loans to customers primarily located in Cabell, Wayne and the adjoining counties of West Virginia, Ohio, and Kentucky. Although the Bank has a diverse loan portfolio, a substantial portion of its debtors’ ability to repay is dependent on the economic conditions of the counties in which they operate.

NOTE 20. MERGER

On September 25, 2009, the Company acquired 100% of the outstanding stock of Guaranty Financial Services, Inc. (Guaranty), a one bank holding company located in Huntington, West Virginia. Guaranty operated a bank subsidiary, Guaranty Bank & Trust Company, which has three branch locations in the Huntington area. The merger strengthened the Company’s banking services to the community.

Under terms of the agreement, the Company paid $25.00 per share of Guaranty Financial Services, Inc. stock, or approximately $9,531,399, in the form of First Sentry Bancshares, Inc. stock. Guaranty shareholders received one share of First Sentry Bancshares, Inc. stock for each share of Guaranty stock, resulting in the issuance of 381,651 shares. The common stock issued was valued at $25.00.

The assets and liabilities of Guaranty were recorded on the Consolidated Balance Sheets at their respective fair values as of the closing date. The results of operations were included in the Consolidated Statements of Income from the date of acquisition. During 2009, acquisition related costs that were charged against current earnings totaled $363,495.

NOTE 21. PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information of First Sentry Bancshares, Inc. (Parent Company) is presented below:

BALANCE SHEETS	December 31,
	2010			2009
ASSETS
Investments in subsidiary	$	37,949,696		$	36,819,489
Other assets		71,369			299,710

	$	38,021,065		$	37,119,199

LIABILITIES
Total liabilities	$	9,012,006		$	9,009,582
Total stockholders’ equity		29,009,059			28,109,617

	$	38,021,065		$	37,119,199

STATEMENTS OF INCOME	Years Ended December 31,
		2010			2009
Income:
Dividends from subsidiary	$	899,735		$	916,505
Other income		31,627			25,243
		931,362			941,748
Expenses:
Other		-			-

Income before income taxes and equity
in undistributed income of subsidiary		931,362			941,748

Federal and state income tax expense		(12,006	)		(9,582	)

Income before equity in undistributed income
of subsidiary		919,356			932,166

Equity in undistributed income of subsidiary		1,631,892			(204,416	)

	$	2,551,248		$	727,750

NOTE 21. PARENT COMPANY FINANCIAL INFORMATION (continued)

STATEMENTS OF CASH FLOWS	Years Ended December 31,
		2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,551,248		$	727,750
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in equity in undistributed income of
subsidiary		(1,631,892	)		204,416
Decrease in other assets		228,339			20
Increase in other liabilities		2,424			(1,180	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		1,150,119			931,006

CASH FLOWS FROM INVESTING
ACTIVITIES
Capitalization of subsidiaries		-			(9,876	)

NET CASH USED IN INVESTING ACTIVITIES		-			(9,876

CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid		(1,150,119	)		(921,130	)

NET CASH USED IN FINANCING ACTIVITIES		(1,150,119	)		(921,130	)

NET CHANGE IN CASH		-			-

CASH, BEGINNING		-			-

CASH, ENDING	$	-		$	-

ITEM 9.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

ITEM 9A.

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined by the Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b) Management’s Report on Internal Control over Financial Reporting

The management of First Sentry Bancshares, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even an effective system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on that assessment, management concludes that, as of December 31, 2010, the Company’s internal control over financial reporting is effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in the annual report.

We maintain internal control over financial reporting. There have not been any significant changes in such internal control over the financial reporting in the last quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

Other Information

None.

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

First Sentry Bancshares, Inc. has adopted a Code of Ethics that applies to First Sentry Bancshares, Inc.’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics is filed as Exhibit 14 to the Form 10-K for the year ended December 31, 2009. A copy of the Code will be furnished without charge upon written request to the Secretary, First Sentry Bancshares, Inc., 823 Eighth Street, Huntington, West Virginia 25701.

Information concerning Directors and executive officers of First Sentry Bancshares, Inc. is incorporated herein by reference from our definitive Proxy Statement (the “Proxy Statement”), specifically the section captioned “Proposal I—Election of Directors.”

ITEM 11.

Executive Compensation

Information concerning executive compensation is incorporated herein by reference from our Proxy Statement, specifically the section captioned “Proposal I — Election of Directors.”

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information concerning security ownership of certain owners and management is incorporated herein by reference from our Proxy Statement, specifically the sections captioned “Voting Securities and Principal Holders Thereof” and “Proposal I — Election of Directors.”

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

Information concerning relationships and transactions is incorporated herein by reference from our Proxy Statement, specifically the section captioned “Transactions with Certain Related Persons.”

ITEM 14.

Principal Accountant Fees and Services

Information concerning principal accountant fees and services is incorporated herein by reference from our Proxy Statement, specifically the section captioned “Proposal II-Ratification of Appointment of Independent Registered Public Accounting Firm.”

PART IV

ITEM 15.

Exhibits and Financial Statement Schedules

3.1

Articles of Incorporation of First Sentry Bancshares, Inc.*

3.2

Bylaws of First Sentry Bancshares, Inc.*

Form of Common Stock Certificate of First Sentry Bancshares, Inc.*

10.1

Employment Agreement with Geoffrey S. Sheils*

10.2

Form of Consulting Agreement for Marc A. Sprouse*

10.3

Form of Retention Agreement for Larry E. Plantz*

Code of Ethics**

Subsidiaries of Registrant*

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

______

______________________________

*	Incorporated by reference to the Registration Statement on Form S-4 of First Sentry Bancshares, Inc. (File No. 333-156180), originally filed with the Securities and Exchange Commission on December 16, 2008, as amended.

**	Incorporated by reference to Exhibit 14 to the Annual Report on Form 10-K of First Sentry Bancshares, Inc. filed with the Securities and Exchange Commission on March 31, 2010 (File No. 000-53790).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	FIRST SENTRY BANCSHARES, INC.


Date: March 25, 2011	By:	/s/ Geoffrey S. Sheils
	Geoffrey S. Sheils
	President and Chief Executive Officer
	(Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Title	Date

/s/ Geoffrey S. Sheils	President and Chief	March 25, 2011
Geoffrey S. Sheils	Executive Officer (Principal Executive Officer)

/s/ Richard D. Hardy	Senior Vice President and
Richard D. Hardy	Chief Financial Officer (Principal Financial and Accounting Officer)	March 25, 2011

/s/ Robert H. Beymer	Chairman of the Board	March 25, 2011
Robert H. Beymer

/s/ Kerry P. Dillard	Director	March 25, 2011
Kerry P. Dillard


/s/ Jeffrey E. Hood	Director	March 25, 2011
Jeffrey E. Hood

/s/ Johnnie Jones	Director	March 25, 2011
Johnnie Jones

/s/ Nester S. Logan	Director	March 25, 2011
Nester S. Logan

/s/ Charles H. McKown, Jr. MD	Director	March 25, 2011
Charles H. McKown, Jr. MD

/s/ Robert L. Shell, Jr.	Director	March 25, 2011
Robert L. Shell, Jr.

/s/ Paul L. Turman, II	Director	March 25, 2011
Paul L. Turman, II

/s/ Joseph Williams	Director	March 25, 2011
Joseph Williams

/s/ S. Kenneth Wolfe, MD	Director	March 25, 2011
S. Kenneth Wolfe, MD

/s/ Marc A. Sprouse	Director	March 25, 2011
Marc A. Sprouse

/s/ David Fox, III	Director	March 25, 2011
David Fox, III

/s/ J. Grant McGuire	Director	March 25, 2011
J. Grant McGuire

/s/ Edward W. Morrison, Jr.	Director	March 25, 2011
Edward W. Morrison, Jr.

/s/ Sally C.B. Oxley	Director	March 25, 2011
Sally C.B. Oxley

/s/ George A. Patterson, III	Director	March 25, 2011
/George A. Patterson, III

/s/ Paul B. Riedel	Director	March 25, 2011
Paul B. Riedel

/s/ J. Roger Smith	Director	March 25, 2011
J. Roger Smith

/s/ John Jay White	Director	March 25, 2011
John Jay White

First Sentry Bancshares, Inc. - FORM 10-K - March 25, 2011

Attached files

First Sentry Bancshares, Inc. Reports