On October 21, 2008, our Board of Directors appointed James B. Crouch, Jr. as a member of our Board of Directors. He was also appointed a director of our subsidiary, MidCarolina Bank (the "Bank"). In addition, Mr. Crouch was appointed to serve as a member of the joint Nominating and Corporate Governance Committee and the joint Investment Committee of our and MidCarolina Bank's Boards of Directors.

Mr. Crouch currently serves as Vice President of the financial planning firm of Harris, Crouch, Long, Scott & Miller, Inc. in Burlington, North Carolina. He also serves as President of Crouch Benefit Designs, Inc. and is a partner in Whitsett Partners, LLP.

Mr. Crouch will receive no cash compensation for his services as our director, but will be compensated for his service on the Bank's Board of Directors and committees in accordance with the Bank's standard fee schedule in effect from time to time. For their services, the Bank's outside directors, other than the Chairman and Vice Chairman, currently receive $400 for each Board of Directors meeting, $400 for each Executive Committee meeting, and $300 for each meeting of any other committee on which they serve.

In conjunction with his appointment as a director, on October 21, 2008, our Compensation Committee approved the grant of an award under our 2008 Director Stock Option Plan to Mr. Crouch as described in the following table:

                          Number of         Option
Type of Award              Shares       Exercise Price     Expiration Date         Other Terms
Director Stock Option         2,500    $           8.25    October 21, 2018    Becomes exercisable
                                                                               as to 20% of the
                                                                               covered shares
                                                                               annually, beginning
                                                                               October 21, 2009

The Bank has had, and expects to have in the future, banking transactions in the ordinary course of its business with Mr. Crouch and his related persons. All loans included in those transactions since January 1, 2006, were made in the ordinary course of the Bank's business on substantially the same terms, including interest rates, repayment terms and collateral, as those prevailing at the time the loans were made for comparable transactions with other persons, and those loans did not involve more than the normal risk of collectibility or present other unfavorable features.