Intesa Sanpaolo and Banca IMI did the structuring of the transaction as Arrangers. Banca IMI acted as Lead Manager and Book Runner.

The transaction consists of one single senior tranche (class A) of 12,174 million euro - WAL 5 years, listed on the Luxembourg Stock Exchange and rated AAA by Fitch - as well as one junior tranche (class B) of 876 million euro.

The Notes are issued at a price equal to 100% of their nominal amount and pay a floating rate coupon based on the 6 month Euribor rate.

Both classes of Notes have been fully underwritten by Intesa Sanpaolo.

Intesa Sanpaolo did the structuring of the transaction as Arranger. Banca IMI acted as Lead Manager and Book Runner.

The transaction consists of one single senior tranche (class A) of 5,281 million euro - WAL 4.9 years, listed on the Luxembourg Stock Exchange and rated AAA by Standard & Poor’s - as well as one junior tranche (class B) of 398 million euro.

The Notes are issued at a price equal to 100% of the nominal amount of the Notes and pay a floating rate coupon based on the 6 month Euribor rate.

Both classes of Notes have been fully underwritten by Intesa Sanpaolo.

On a year to date basis, the organization had a net loss of $5,537,000. Despite the net loss, all regulatory capital ratios remain above the levels necessary to be considered a “well capitalized” institution.

“The exceptionally challenging economy has had an adverse effect on our Bank. Our internal risk management processes have done a good job at identifying and containing the risk in much of our loan portfolio. Like many other banks, our home equity products have seen higher than expected losses. The third quarter results reflect additional charge-offs and an expansion of the allowance for loan losses for the home equity portfolio. We have increased our allowance for loan losses up to 1.62% of loans outstanding as of September 30, 2008. Our nonperforming assets were $24.3 million as of the beginning of the year and have migrated down to $22.3 million as of September 30, 2008, with two additional properties selling in October reducing the total by another $3.5 million to $18.7 million. We feel many of the actions taken by the Federal Government over the past year and specifically in the past two months will have long-term positive benefits to the local real estate economy, our clients and Alliance. Historians many look back at 2008 as a deep recession that rivals the great depression and the strong capital position of Alliance will allow us the opportunity to continue to work with our clients and weather the storm,” said Thomas A. Young, Jr., President & CEO.

Total loans declined by approximately $25.3 million from September 30, 2007 to September 30, 2008. Total loans were $370.8 million as of September 30, 2008, however, exposure to construction and land loans has been reduced by nearly 25% in 2008, a trend we expect to continue. New loan demand is evident in some segments of income producing (leased) commercial properties and closed end, modest loan to value consumer second trusts. We expect commercial and consumer borrowers to remain cautious in the current economic environment despite government efforts to stimulate lending. Total assets were $552.8 million as of September 30, 2008 or $16.2 million less than the September 30, 2007 position of $569.0 million or $11.5 million greater than the December 31, 2007 level of $541.3 million. The year over year reduction in assets was primarily the result of the previously reported plan to reduce our investment portfolio and our exposure to mortgage related securities.

Our non-interest bearing deposits decreased by $9.4 million over the past year. Total non-interest bearing deposits were $74.2 million or 18.5% of total deposits as of September 30, 2008. Our non-interest bearing deposits increased by $8.0 million or 12.1%, over the December 31, 2007 level of $66.2 million. The growth is coming from both existing clients and the expansion of our title and escrow services client base which has led to significant amount of new accounts during 2008. Our total deposits grew to $401.4 million as of September 30, 2008 or $25.9 million greater than the September 30, 2007 level of $375.5 and $36.1 million greater than the December 31, 2007 level of $365.3 million.

During the quarter we had success in selling two residential properties out of the non-performing assets. In addition, two other nonperforming assets totaling $3.5 million were sold in October. We have expressions of interest in several of the OREO properties and we continue to work on achieving the proper balance between value and liquidation of OREO.

“As the U.S. and global economies have suffered record problems, our company has worked hard to manage through this challenging period. Our management team is working diligently to reduce the levels of non-performing assets and we anticipate the levels of non-performing assets to continue to drop over the coming quarters. Our management team is focused on balancing growth with conservative views surrounding credit and developing valuable long-term client relationships. It is in times of difficulty that true character is displayed,” said Harvey E. Johnson, Jr., Chairman of the Board.

Much of this loss can be attributed to $566,000 in direct OREO expenses and a $610,000 increase in our loan loss provision. On a year to date basis, the organization had a net loss of $3,166,000. Despite the net loss, all regulatory capital ratios remain above the levels necessary to be considered a “well capitalized” institution.

“Needless to say, our management team is less than pleased with the performance levels as they are not reflective of our typical performance or long term expectations, however, we believe the second quarter results reflect several bright spots as we continue to deal with this very unusual and challenging real estate recession. During the quarter, we recorded a fair value gain of $166,000 which is a significant improvement over the first quarter fair value adjustment. This is the result of a restructuring of our balance sheet which has placed the company in a more balanced position relative to fair value. In addition, we sold several pieces of other real estate owned (OREO) which led to a reduction of nonperforming assets by $2.6MM and we have seen a more stable credit quality picture. Lastly, we continue to look closely at all of our expense areas and are making difficult decisions where necessary,” said Thomas A. Young, Jr., President & CEO.

Total loans declined by approximately $17.4 million from June 30, 2007 to June 30, 2008. Total loans were $372.2 million as of June 30, 2008. Total assets were $569.6 million as of June 30, 2008 or $11.5 million less than the June 30, 2007 position of $581.1 million or $28.3 million greater than the December 31, 2007 level of $541.3 million. The modest year over year reduction in assets was primarily the result of the previously reported plan to reduce our investment portfolio and our exposure to mortgage related securities.

Our non-interest bearing deposits decreased by $24.1 million over the past year. Total non-interest bearing deposits were $89.2 million or 20.9% of total deposits as of June 30, 2008. Our non-interest bearing deposits increased by $23 million or 34.8%, over the December 31, 2007 level of $66.2 million. The growth is coming from both existing clients and the expansion of our title and escrow services client base which has led to significant amount of new accounts during 2008. Our total deposits grew to $426.3 million as of June 30, 2008 or $37.0 million greater than the June 30, 2007 level of $389.3 and $61.0 million greater than the December 31, 2007 level of $365.3 million.

Total non-performing assets amounted to $21.9 million as of June 30, 2008 which is down $2.7 million from the March 31, 2008 level of $24.6 million and $2.4 million down from the December 31, 2007 level of $24.3 million. During the quarter we had success in moving two residential properties out of the non-performing assets. The attached schedule reflects the individual properties in the non-performing status. We have expressions of interest in several of the OREO properties and we expect potential contracts in the near term. We recognize several of the development projects may have longer resolution time horizons due to the current real estate slowdown.

“The board and management remain committed to the vision of performance improvement. The management team has taken a variety of proactive steps over the year to improve core performance. As the newspapers, newscasts and the internet reflect each day, this is one of the toughest economic cycles America has faced in a long time. Our management team is working diligently to reduce the levels of non-performing assets as fast as can be reasonably expected. We anticipate the levels of non-performing assets to drop in a systematic fashion over the coming quarters. Our base franchise is an excellent banking company located in one of the key metropolitan areas in the United States. As the economy improves the metropolitan Washington, DC area we will clearly benefit. The support of shareholders during these trying times is greatly appreciated, said Harvey E. Johnson, Jr., Chairman of the Board.

• 70% of the 3 year credit will be covered by a SACE guarantee
• Intesa Sanpaolo has filed an application with the Vietnamese authorities to open a representative office in Vietnam

In the context of Italo-Vietnamese commercial relations, it is significant that the largest Bank in Italy and the Italian company leader in Export Credit have agreed jointly to take this important initiative with the leading Vietnamese banking institution. In this way, Intesa Sanpaolo and SACE strengthen their involvement in the Asian market that offers great opportunities for Italian businesses. Through its agreements with large Italian and local banks, SACE supports the market penetration of “Made in Italy” in these emerging countries and makes the companies more competitive against major foreign competitors.

In Asia, Intesa Sanpaolo has been present for several decades through its branches in Hong Kong, Singapore, Shanghai, Tokyo and through various representative offices. It offers debt financing, trade financing, structured and project finance, treasury and direct investment services.

Intesa Sanpaolo, which has been named 2007 and 2008 Best Trade Finance Italian Bank by Global Finance magazine, handles more than 30% of Italian trade with Vietnam. It is a market towards which the Group’s attention has grown and consolidated in time, in order to meet corporate customers’ interests and to be their point of reference and support also in the larger region. The Group has recently filed an application with the local authorities to open a representative office in Vietnam, underlining the long term potential it has identified in the country.

Intesa Sanpaolo Group is the leading banking group in Italy, with over 6,500 branches and about 11.5 million customers, and one of the most important in Europe. The Group is a leader in Italy in financial assets for household and enterprises, particularly in pension funds (33% market share), foreign transactions (about 27% of foreign trade payments), asset management (27%), factoring (25%) and banking (18% in customer loans and deposits).

Intesa Sanpaolo is present in more than 40 countries. The group enjoys a strategic coverage in retail banking in several Central-European countries and in the Mediterranean basin, with over 8 million customers and about 1,900 branches in 13 countries. In order to support the corporate customers abroad, the Bank is present in 34 countries with a specialised network of branches, representative offices and subsidiaries which deal in corporate banking. Furthermore, relationships exist with some 4,000 correspondent banks.
The SACE Group is an Italian leader in loan insurance, investment protection and contractual guarantees by covering political and commercial risks. The Group has customers in more than 150 countries. It has an office in Hong Kong and pays particularly attention to the dynamic Asian market that offers great opportunities for Italian businesses. Through its agreements with large Italian and local banks, SACE can help companies penetrate the emerging markets and make them more competitive against major foreign competitors.

Headquartered in Hanoi, Vietcombank is the largest partially state-owned commercial bank in Vietnam with USD 12.2 billion in total assets as at 31 December 2007. The Bank was established in 1963 and remains the leading provider of financial services in international trade; it also dominates in areas of traditional expertise such as treasury, fund mobilisation, credit, project financing and card services. Vietcombank commands significant market shares in various businesses: lending (12%), deposits (20%), international settlement (28%), card payment (40%). It has a domestic network of 60 branches, 150 sub-branches and 1100 ATMs. Vietcombank is the most profitable banking and financial services group in Vietnam, generating approximately USD 267 million of pre-provision operating profit as at 31 December 2007.

Recently, Vietcombank has been awarded the “Best Domestic Bank in Vietnam 2008” by Asiamoney Magazine and the ‘Best Local Trade Bank in Vietnam’ by the readers of Trade Finance Magazine, a print and website publication from the Euromoney Institutional Investor group, in the annual ‘Asia Awards for Excellence poll’, conducted alongside the annual ‘Global Awards for Excellence poll’.

We had a net loss of $2,078,000 for the first quarter 2008 compared to the first quarter 2007 net income of $1,207,000.

The earnings were impacted by the mismatch of fair value assets and liabilities, the cost to carry nonperforming assets and higher interest expense levels. Despite the net loss, all regulatory capital ratios remain above the levels necessary to be considered a “well capitalized” institution.

“As we stated at year end, we are operating in a challenging real estate environment that is impacting us in a number of ways. At the same time, several bright spots appeared in the first quarter results. Gross insurance revenues for the quarter exceeded $1 million for the first time, approximately $2.1 million of OREO was sold during the quarter and approximately $3.0 million is under contract and is expected to settle in the second quarter of 2008. In addition, significant headway occurred in curing the fair value asset and liability mismatch,” said Thomas A. Young, Jr., President & CEO.

The first quarter 2008 results include a loss of approximately $2.5 million on Fair Value Adjustments and trading activity. As we have repositioned the balance sheet the items accounted for under SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities have generated a net loss for the organization. The bulk of the loss is the mark to market adjustment on liabilities. As the organization entered the first quarter approximately $85.0 million of assets were accounted for on a fair value basis and approximately $187.3 million of liabilities were accounted for on a fair value basis. During the quarter, the organization prepaid $40 million of FHLB advances at rates ranging from 4.21% to 4.71% and had maturities of additional fair value liabilities totaling $32.0 million. As of the beginning of the second quarter 2008, the fair value assets and liabilities are substantially more in balance. Approximately, $89.4 million of trading assets are accounted for on a fair value basis compared to $115.7 million of liabilities accounted for on a fair value basis. The actions taken during the first quarter should reduce the negative earnings volatility experienced in the recent quarters. In addition, the changes made to the fair value liability portfolio will help in lowering our cost of funds.

We experienced an expected migration of non-performing assets as specific loans shifted from impaired to non-accrual to OREO and, as noted above, we were successful in selling approximately $2.1 million of OREO at values equal to or slightly above our carrying values. The chart included later shows this migration. Actual chargeoffs for the quarter at $1.5 million related primarily to reserves established at year end 2007 to address this potential migration.

Total loans declined by approximately $5.4 million from March 31, 2007 to March 31, 2008. Total loans were $378.1 million as of March 31, 2008. Total assets were $554.4 million as of March 31, 2008 or $75.5 million less than the March 31, 2007 position of $629.9 million or $13.1 million greater than the December 31, 2007 level of $541.3 million. The year over year reduction in assets was primarily the result of the previously reported plan to reduce our investment portfolio and our exposure to mortgage related securities.

Our non-interest bearing deposits decreased by $45.9 million over the past year. Total non-interest bearing deposits were $79.0 million or 20.3% of total deposits as of March 31, 2008. In 2007, the impacts of a slowing real estate economy were noted in our balance sheet as deposits from title and escrow service companies decreased significantly over the calendar year 2007. As we enter the traditional spring home selling season we are seeing pockets of improvement. Our non-interest bearing deposits increased by $12.8 million or 19.3%, over the December 31, 2007 level of $66.2 million. The growth is coming from both existing clients and expansion of our title and escrow services client base.

Harvey E. Johnson, Jr., Chairman of the Board stated, “We are pleased with the action management has taken during the quarter. The significant reduction in fair value liabilities will help the organization as we go forward in 2008 and beyond. During the quarter we saw several properties identified as nonaccrual or performing with a specific allocation of the allowance for loan losses migrate into OREO. This natural progression makes sense and gives Alliance the ability to control the properties. The bright spots noted by our President are key indicators of the attention and focus management placed on the challenges. As we manage through the real estate recession our management team continues to take proactive measures to position the organization for the future.”

The sale will become effective only at the time of the securities issue which is expected to occur during the second quarter of 2008. The sale price is equivalent to the book value of the loans and shall be paid upon underwriting of securities.

The securities initially underwritten by Intesa Sanpaolo are foreseen to be used as collateral for a programme of Covered Bonds expected to be launched during 2008.

Securitised loans will be recorded in the financial statements as loans sold but not derecognised therefore non reducing consolidated assets and net interest income.

• Intesa Sanpaolo is carrying out a trial in Piedmont offering dedicated help-desks for self-employed women and young people
• Unsecured loans of up to 40,000 Euros available

The Bank is making available loans which are backed 80% by a guarantee issued by FinPiemonte against the regional fund. These are initiatives targeted at women with no age limits and young people between 18 and 35 who already run or who are setting up their own business. They can be used to set up systems, make new investments and refurbish premises. The amount varies between 5,000 and 40,000 Euros repayable in 60 months at most. No further personal guarantees or collateral are required. The loans may be requested at all the Piedmont branches of the Intesa Sanpaolo Group.

In order to provide applicants with a particularly focused advisory service, the Bank has created the Corner Rosa. These are areas that are instantly recognisable inside the branch, supervised by women who have followed a training course designed to give advice to other women and young people getting to grips with running a business. There are 20 Corner Rosa, located in Turin, Chieri, Rivoli, Pinerolo, Ivrea, Borgomanero, Omegna, Verbania, Novara, Vercelli, Biella, Alessandria, Asti and Cuneo, which have been operating since 8 March.

“We realised – explains Marina Tabacco, in charge of the Turin and Province Area and promoter of the initiative – that female businesses have a major need for advice, particularly during the start-up phase, when a business plan has to be prepared. The figures tell us that a large number of female businesses have been created in recent years. However, in the first five years of activity there are problems of business continuity and the risk of closure is well above average. It is for this reason that we want to try to disseminate our experience in an even more direct and forceful manner, making the most of our personnel’s capacity to listen and interact”. The Corner Rosa will also serve as an observation post of entrepreneurship amongst women and young people aimed at promptly understanding their needs. “We’ll cover the need for insurance and pension protection or guidelines on government incentives, markets and administrative processes. We’ll work in conjunction with all the key local players: accountants, trade associations, public bodies, to give across-the-board support”.

In Piedmont there are in the region of 100,000 female-run businesses, representing 24.17% of all existing businesses. Fewer than 70% are sole proprietors, 24% are partnerships and only 5% are limited companies. Female entrepreneurship is a young phenomenon. More than one out of three businesses was formed in the last seven years and the turnover of one out of two does not exceed 250,000 Euros. Piedmont is, however, also one of the Italian regions with the highest rate of female employment: more than 56% (2006 figures), a percentage not far off the Lisbon objective which is aiming for 60% of women to be in employment by 2010.

In fact all costs of the transaction will be borne entirely by the Bank, including notarial expenses and the cost of a possible new survey.

• No cost to new clients for raising the new loan
• Flexibility of duration and option of postponing instalments

The Bank’s initiative aims to encourage the full “portability of loans” completely free of charge, as suggested by law and sought by Consumers’ Associations.

By means of this “subrogation” substitution, the new client will be able to transform the loan raised from another bank into one of Intesa Sanpaolo’s fixed or variable rate loans designed for retail customers. The new loan will be for an amount exactly equal to the residual debt of the pre-existing loan and will be regulated by the conditions which govern Intesa Sanpaolo products.

Under this simple and transparent procedure, free for new customers, Intesa Sanpaolo takes over all rights and guarantees due to the original creditor Bank, avoiding the registration of a new mortgage.

This “subrogation” substitution also carries further advantages, including exemption from substitute tax on the new loan and the maintenance of tax breaks which the original financing may have benefited from (deductibility of interest liabilities and other ancillary costs).

The transfer of the loan to Intesa Sanpaolo also allows the new customer to make use of the services already provided by the Bank to its own clientele, starting with the option of postponing payment of instalments and of altering the duration of the said loan.

We had a net loss of $4,252,000 for the fourth quarter 2007 and a net loss of $2,844,000 for the full year of 2007. The performance is below the 2006 fourth quarter net income of $554,000 and the full year 2006 results of $4,479,000.

The results were impacted largely by three key factors: deteriorated credit quality, increased funding costs throughout the year, and the impact of SFAS No. 159 and the resulting negative mark-to-market primarily on the liability side of the balance sheet. Despite the 2007 net loss, all regulatory capital ratios remain above the levels necessary to be considered a “well capitalized” institution.

“Obviously, the management team and Board of Directors are very disappointed in these results,” stated Thomas A. Young, Jr., President and CEO. “The well documented downturn in the residential real estate markets has impacted us on both sides of our balance sheet. On the asset side, we have seen weakness with a handful of our builders and we have also experienced losses in our home equity product. On the liability side of the balance sheet a number of our real estate service providers have seen their businesses contract significantly which has impacted us in the area of non-interest bearing deposits. While somewhat apparent in earlier quarters, these factors all converged at the end of the year,” Young continued.

Our provision for loan losses was $4.7 million in the fourth quarter of 2007 and $5.8 million for the full year of 2007. The significant increase in the fourth quarter provision for loan losses was necessary to cover $3.4 million in chargeoffs for the quarter and to increase the allowance for loan losses to an appropriate level based upon our performing loans and the specific allocations necessary for the impaired loans. As of December 31, 2007, the allowance for loan losses was $6.4 million or 1.61% of loans. The allowance for loan losses has grown from the third quarter 2007 level of $5.1 million or 1.30% of September 30, 2007 loans and the December 31, 2006 level of $4.4 million or 1.16% of the year end 2006 loan. The chargeoffs included $.8 million to resolve a previously reported impaired loan as well as a partial write-down of $1.5 million on a land loan due to a valuation issue. The remaining $1.1 million was spread across 20 smaller credits, primarily home equity loans, where borrowers tied to the residential real estate industry were hit with losses of personal income along with the loss of value and marketability of the underlying property. Approximately $2.2 million of the $6.4 million allowance for loan losses represents our estimate of an appropriate impairment reserve based on a loan by loan analysis.

The fourth quarter results include a loss of approximately $1.3 million on Fair Value Adjustments and trading activity. As we have repositioned the balance sheet the items accounted for under SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities have generated a net loss for the organization. The bulk of the loss is the mark-to-market adjustment on liabilities. As the organization has downsized the total balance sheet, approximately $85.0 million of assets are accounted for on a Fair Value basis and approximately $187.3 million of liabilities are accounted for on a Fair Value basis. The mismatch is causing more volatility in the financial results than expected. We are evaluating various options to reduce the volatility of the results. Recent swings in the interest rate markets will have an adverse effect on our results.

Total loans grew approximately 5% from December 31, 2006 to December 31, 2007. Total loans were $398.2 million as of December 31, 2007. Total assets were $541.3 million as of December 31, 2007 or $103.1 million less than the December 31, 2006 position of $644.4 million. The year over year decline in total assets was part of a planned balance sheet strategy enacted in mid 2007. Our business strategy focused on shrinking the investment portfolio which was $200.8 million as of December 31, 2006 to a significantly smaller portfolio. As of December 31, 2007, our total investments were $111.1 million or a reduction of $89.7 million. Our goal further included rebalancing the portfolio away from mortgage oriented products to SBA and other Government Agency products. The reduction in the investment portfolio was used to reduce reliance on borrowed funds.

Our non-interest bearing deposits decreased by $92.5 million over the past year. Total non-interest bearing deposits were $66.2 million or 18.1% of total deposits as of December 31, 2007. This was a significant decline from the December 31, 2006 levels of $158.7 million or 33.7% of 2006 total deposits. This was tied directly to the reduction in deposit balances in our real estate services relationships and not erosion in the actual numbers of relationships, which continue to grow. The past year has proven to be an exceptionally challenging year in the residential real estate arena in the metropolitan Washington, D.C. “On a positive note, we have actually added new relationship managers and have entered into a strategic alliance to expand this aspect of our business. We are adding new customers daily,” said Frank H. Grace, III, Executive Vice President, the member of the senior management team charged with leading this initiative.

The organization’s capital position remains strong. We have absorbed the 2007 net loss and still have in excess of $45.7 million of common stockholder’s equity. Our risk based capital ratios remain strong and the organization is considered “well capitalized” under regulatory capital measurements.

Alliance Insurance continues to be a bright spot for the company. “Our four offices have done a great job this year in what turned out to be a very challenging environment for the insurance industry,” said Thomas P. Danaher, President of Alliance Insurance. “We were pleased to add the Fredericksburg team led by Randy Thomas to the Alliance family. We have also begun to capitalize on the opportunities presented by the bank’s customers through a stronger working relationship with account managers, which we expect to impact results going forward.”

Harvey E. Johnson, Jr., Chairman of the Board stated, “We are not being complacent about these results. Our officers are working aggressively to resolve non-performing assets. Relationship managers are emphasizing deposit gathering activities. Business initiatives are reviewed regularly with the board and management will be examining all business lines and expense categories to minimize costs where prudent.” He further added, “As we continue to weather the real estate downturn, our core client base is expanding. The products and services we offer remain extremely competitive and the steps management is taking should position the organization for results that are more reflective of our franchise’s capability. The credit issues continue to be concentrated in a small group of relationships that have been significantly impacted by the residential real estate recession. As with any real estate cycle it is difficult to project when the cycle will change. Recent actions by the Federal Reserve should have a positive impact on the Metropolitan Washington, D.C. area economy in the near term.”