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|  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, 2008                                                                  |
|                                                                                                              |
| [  ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES      EXCHANGE ACT OF 1934 |
|                                                                                                              |
| Commission      File Number:  001-33009                                                                 |
|                                                                                                    |
| Britton      & Koontz Capital Corporation                                                                     |
| (Exact      name of registrant as specified in its charter)                                                       |
|                                                                                                              |

|                                                                |                                      |
|---------------------------------------------------------------------|-------------------------------------------|
| Mississippi                                                         | 64-0665423                                |
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification No.) |
|                                                                |                                      |

| 500      Main Street                                           |
|----------------------------------------------------------------|
| Natchez,      Mississippi 39120                                |
| (Address      of principal executive offices) (Zip Code)       |
|                                                           |
| (601)      445-5576                                            |
| (Registrant’s      Telephone Number, Including AreaCode) |

| Securities      registered pursuant to Section 12(b) of the Exchange  Act: |
|----------------------------------------------------------------------------|

| Title      of each class                       | Common      Stock, $2.50 Par Value |
|------------------------------------------------|------------------------------------|
| Name      of each exchange on which registered | The      NASDAQ Capital Market     |

|                                                                       |
|----------------------------------------------------------------------------|
| Securities      registered pursuant to Section 12(g) of the Exchange  Act: |
| None                                                                       |

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| Large      accelerated filer [  ]                                                                        |  Accelerated      filer                  [  ]  |
|--------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Non-accelerated      filer   [  ] (Do      not check if a smaller reporting company) | Smaller      reporting company [X]                                                                                                                           |

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C

|                 |   | PART I                                                                                                                   | Page      No.  |
|----------------------|--------|--------------------------------------------------------------------------------------------------------------------------|----------------|
| ITEM  1.   | *      | BUSINESS                                                                                                                 | 1              |
| ITEM      1A.        | *      | RISK FACTORS                                                                                                             | 7              |
| ITEM      1B.        | *      | UNRESOLVED STAFF COMMENTS                                                                                                | 7              |
| ITEM  2.   | *      | PROPERTIES                                                                                                               | 7              |
| ITEM  3.   | *      | LEGAL PROCEEDINGS                                                                                                        | 8              |
| ITEM  4.   | *      | SUBMISSION OF MATTERS TO A VOTE OF SECURITY      HOLDERS                                                                 | 8              |
|                 |   |                                                                                                                     |           |
|                 |   | PART II                                                                                                                  |           |
| ITEM  5.   | *      | MARKET FOR REGISTRANT’S COMMON EQUITY , RELATED STOCKHOLDER      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 8              |
| ITEM  6.   | *      | SELECTED FINANCIAL DATA                                                                                                  | 9              |
| ITEM  7.   | *      | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION      AND RESULTS OF OPERATIONS                         | 9              |
| ITEM  7A.  | *      | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK                                                          | 25             |
| ITEM  8.   | *      | FINANCIAL STATEMENTS AND SUPPLEMENTARY    DATA                                                                           | 25             |
| ITEM  9.   | *      | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING      AND FINANCIAL DISCLOSURE                                | 68             |
| ITEM      9A(T).     | *      | CONTROLS AND PROCEDURES                                                                                                  | 68             |
| ITEM      9B.        | *      | OTHER INFORMATION                                                                                                        | 68             |
|                 |   |                                                                                                                     |           |
|                 |   | PART III                                                                                                                 |           |
| ITEM      10.        | **     | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE      GOVERNANCE                                                              | 69             |
| ITEM      11.        | **     | EXECUTIVE COMPENSATION                                                                                                   | 70             |
| ITEM      12         | **     | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND      MANAGEMENT AND RELATED STOCKHOLDER MATTERS                      | 70             |
| ITEM      13         | **     | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND      DIRECTOR INDEPENDENCE                                           | 71             |
| ITEM      14.        | **     | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                                   | 71             |
|                 |   |                                                                                                                     |           |
|                 |   | PART IV                                                                                                                  |           |
| ITEM      15         | *      | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                                  | 71             |
|  SIGNATURES     |   |                                                                                                                     |        73 |
|        EXHIBITS |   |                                                                                                                     |        74 |

| ** | Incorporated      by reference from Britton & Koontz Capital Corporation’s Definitive      Proxy Statement for its 2009 Annual Meeting of Shareholders in accordance      with Instruction G(3) of Form10-K. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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PART I

I

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I

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|  Location                                                             |  Own/Lease   |  Use                      | Approximate      OfficeSpace (square feet) |
|----------------------------------------------------------------------------|-------------------|--------------------------------|--------------------------------------------|
|  Natchez                                                              |              |                           |                                       |
| 500      Main StreetNatchez,      Mississippi 39120                   |  Owned       |  Main      Office         |  33,790                               |
| 411      Highway 61 N.Natchez,      Mississippi 39120                      |  Owned       |  Branch      Office       |  1,671                                |
|                                                                       |              |                           |                                       |
| 55A      Sgt. Prentiss DriveNatchez,      Mississippi 39120                |  Owned       |  Branch      Office       |  10,720                               |
|  Vicksburg                                                            |              |                           |                                       |
| 2059      Highway 61 N.Vicksburg,      Mississippi 39183                   |  Owned       |  Branch      Office       |  3,050                                |
|                                                                       |              |                           |                                       |
| 2150      S. Frontage RoadVicksburg,      Mississippi 39180                |  Owned       |  Branch      Office       |  4,570                                |
|  Baton      Rouge                                                     |              |                           |                                       |
| 8810      BluebonnetSuites      A & BBaton      Rouge, Louisiana 70810 |   Lease |   Branch      Office |   5,112                          |

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PART II

Item 5.

|             | DividendsPer      Share                 |   |  High        |   |  Low         |
|------------------|-----------------------------------------|--------|-------------------|--------|-------------------|
| 2008             |                                    |   |              |   |              |
| 4th      Quarter | $    .18            |   | $13.49            |   | $10.10            |
| 3rd      Quarter |       .18 |   |   16.00 |   |   11.05 |
| 2nd      Quarter |       .18 |   |   16.40 |   |   12.00 |
| 1st      Quarter |       .18 |   |   18.00 |   |   15.32 |
|             |                                    |   |              |   |              |
|             | DividendsPer      Share                 |   |  High        |   |  Low         |
| 2007             |                                    |   |              |   |              |
| 4th      Quarter | $    .18            |   | $17.69            |   | $15.55            |
| 3rd      Quarter |       .18 |   |   17.99 |   |   15.90 |
| 2nd      Quarter |       .18 |   |   19.67 |   |   17.75 |
| 1st      Quarter |       .18 |   |   20.50 |   |   18.56 |
|             |                                    |   |              |   |              |

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|                                      |   |     |        |   | Amortized      Cost |   |        |     |   |
|-------------------------------------------|--------|----------|-------------|--------|---------------------|--------|-------------|----------|--------|
|                                      |   |     |        |   |                |   |        |     |   |
|                                      |   | 12/31/08 |        |   | 12/31/07            |   |        | 12/31/06 |   |
| Obligations      of other U.S. Government |   |     |        |   |                |   |        |     |   |
| Agencies      and Corporations            |   | $        | 123,834,755 |   |                | $      | 84,741,030  |     |   | $ | 68,015,850 |   |
| Obligations      of State and             |   |     |        |   |                |   |        |     |   |   |   |   |
| Political      Subdivisions               |   |     | 39,529,246  |   |                |   | 38,004,634  |     |   |   | 36,175,580 |   |
|                                      |   |     |        |   |                |   |        |     |   |   |   |   |
|                                      |   | $        | 163,364,001 |   |                | $      | 122,745,664 |     |   | $ | 104,191,430 |   |

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|                                             |   | 12/31/08 |        |   | 12/31/07 |   |        | 12/31/06 |   |   | 12/31/05    |   |   | 12/31/04 |        |
|--------------------------------------------------|--------|----------|-------------|--------|----------|--------|-------------|----------|--------|--------|-------------|--------|--------|----------|-------------|
| Commercial,      financial and agricultural |   | $        | 25,128,000  |   |     | $      | 25,884,000  |     |   | $      | 28,385,000  |   |   | $        | 32,868,000  |   |   | $ | 31,589,000 |   |
| Real      estate-construction                    |   |     | 30,910,000  |   |     |   | 45,097,000  |     |   |   | 44,592,000  |   |   |     | 30,069,000  |   |   |   | 18,360,000 |   |
| Real      estate-residential                     |   |     | 74,923,000  |   |     |   | 72,438,000  |     |   |   | 83,256,000  |   |   |     | 98,488,000  |   |   |   | 92,889,000 |   |
| Real      Estate-other                           |   |     | 88,341,000  |   |     |   | 72,123,000  |     |   |   | 76,473,000  |   |   |     | 70,875,000  |   |   |   | 63,685,000 |   |
| Installment                                      |   |     | 6,038,000   |   |     |   | 7,550,000   |     |   |   | 10,680,000  |   |   |     | 12,478,000  |   |   |   | 14,229,000 |   |
| Other                                            |   |     | 171,000     |   |     |   | 261,000     |     |   |   | 203,000     |   |   |     | 306,000     |   |   |   | 249,000 |   |
|                                             |   |     |        |   |     |   |        |     |   |   |        |   |   |     |        |   |   |   |   |   |
| Total      loans                                 |   | $        | 225,511,000 |   |     | $      | 223,353,000 |     |   | $      | 243,589,000 |   |   | $        | 245,084,000 |   |   | $ | 221,001,000 |   |

|                                        |   |          |       |   | Due      after  |   |       |            |   |   |    |   |
|---------------------------------------------|--------|---------------|------------|--------|-----------------|--------|------------|-----------------|--------|--------|---------|--------|
|                                        |   | Due      in   |       |   | one      year   |   |       |            |   |   |    |   |
|                                        |   | one      year |       |   | through         |   |       | Due      after  |   |   |    |   |
|                                        |   | or      less  |       |   | five      years |   |       | five      years |   |   | Total   |   |
|                                        |   |          |       |   |            |   |       |            |   |   |    |   |
| Commercial,      financial and agricultural |   | $             | 15,844,000 |   |            | $      | 9,201,000  |            |   | $      | 83,000  |   |   | $ | 25,128,000 |   |
| Real      estate-construction               |   |          | 27,043,000 |   |            |   | 3,686,000  |            |   |   | 181,000 |   |   |   | 30,910,000 |   |
|                                        |   |          |       |   |            |   |       |            |   |   |    |   |   |   |   |   |
| Total                                       |   | $             | 42,887,000 |   |            | $      | 12,887,000 |            |   | $      | 264,000 |   |   | $ | 56,038,000 |   |
|                                        |   |          |       |   |            |   |       |            |   |   |    |   |   |   |   |   |
|                                        |   |          |       |   |            |   |       |            |   |   |    |   |   |   |   |   |
| Predetermined      interest rates           |   |          |       |   |            | $      | 12,861,000 |            |   | $      | 264,000 |   |   |   |   |   |
|                                        |   |          |       |   |            |   |       |            |   |   |    |   |   |   |   |   |
| Floating      or adjustable interest rates  |   |          |       |   |            | $      | 26,000     |            |   | $      | -       |   |   |   |   |   |
|                                        |   |          |       |   |            |   |       |            |   |   |    |   |   |   |   |   |

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|                                     |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |
|------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| (Dollars      in thousands)              |   | 12/31/08 |   |   | 12/31/07 |   |   | 12/31/06 |   |   | 12/31/05 |   |   | 12/31/04 |   |
|                                     |   |     |   |   |     |   |   |     |   |
| Non-accrual      loans by type           |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |
| Real      estate                         |   | $        | 3,364  |   |     | $      | 992    |     |   | $      | 829      |   |   | $        | 413    |   |   | $ | 532 |   |
| Installment                              |   |     | 86     |   |     |   | 87     |     |   |   | 13       |   |   |     | 72     |   |   |   | 26 |   |
| Commercial      and all other loans      |   |     | 118    |   |     |   | 223    |     |   |   | 351      |   |   |     | 574    |   |   |   | 214 |   |
| Total      non-accrual loans             |   |     | 3,568  |   |     |   | 1,302  |     |   |   | 1,193    |   |   |     | 1,059  |   |   |   | 772 |   |
| Loans      past due 90 days or more      |   |     | 518    |   |     |   | 12     |     |   |   | 232      |   |   |     | 201    |   |   |   | 129 |   |
| Total      nonperforming loans           |   |     | 4,086  |   |     |   | 1,314  |     |   |   | 1,425    |   |   |     | 1,260  |   |   |   | 901 |   |
| Other      real estate owned (net)       |   |     | 919    |   |     |   | 747    |     |   |   | 1,257    |   |   |     | 1,471  |   |   |   | 1,320 |   |
| Total      nonperforming assets          |   | $        | 5,005  |   |     | $      | 2,061  |     |   | $      | 2,682    |   |   | $        | 2,731  |   |   | $ | 2,221 |   |
| Nonperforming      loans as a percent    |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| of      loans, net of unearned interest  |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| and      loans held for sale             |   |     | 1.81   | %      |     |   | .59    | %        |   |   | .59      | %      |   |     | .51    | % |   |   | .41 | % |
| Additional      interest income foregone |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
|  on      non-accrual loans          |   | $        | 191    |   |     | $      | 36     |     |   | $      | 31       |   |   | $        | 24     |   |   | $ | 38 |   |

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|  (Dollars      in thousands)                  |   | 12/31/08 |   |   | 12/31/07 |   |   | 12/31/06 |   |   | 12/31/05 |   |   | 12/31/04 |   |
|----------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|  Balance      at beginning of year            |   | $        | 2,431  |   |     | $      | 2,344  |     |   | $      | 2,378    |   |   | $        | 2,237  |   |   | $ | 2,070 |   |
| Charge-offs:                                       |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| Commercial,      financial & agricultural      |   |     | (541   | )      |     |   | (87    | )        |   |   | (571     | )      |   |     | (54    | ) |   |   | (108 | ) |
| Real      Estate-construction                      |   |     | (166   | )      |     |   | (25    | )        |   |   | (3       | )      |   |     | (0     | ) |   |   | (22 | ) |
| Real      Estate-residential                       |   |     | (410   | )      |     |   | (257   | )        |   |   | (5       | )      |   |     | (40    | ) |   |   | (29 | ) |
| Real      Estate-other                             |   |     | (7     | )      |     |   | (2     | )        |   |   | 0        |   |   |     | (109   | ) |   |   | (62 | ) |
| Installment      and other                         |   |     | (39    | )      |     |   | (136   | )        |   |   | (64      | )      |   |     | (48    | ) |   |   | (47 | ) |
| Recoveries:                                        |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| Commercial,      financial & agricultural      |   |     | 190    |   |     |   | 110    |     |   |   | 26       |   |   |     | 22     |   |   |   | 23 |   |
| Real      Estate-construction                      |   |     | 6      |   |     |   | -      |     |   |   | -        |   |   |     | -      |   |   |   | 2 |   |
| Real      Estate-residential                       |   |     | 83     |   |     |   | 5      |     |   |   | 26       |   |   |     | 22     |   |   |   | 0 |   |
| Real      Estate-other                             |   |     | 34     |   |     |   | -      |     |   |   | 51       |   |   |     | 14     |   |   |   | 3 |   |
| Installment      and other                         |   |     | 87     |   |     |   | 39     |     |   |   | 31       |   |   |     | 34     |   |   |   | 17 |   |
| Net      (charge-offs) / recoveries                |   |     | (763   | )      |     |   | (353   | )        |   |   | (509     | )      |   |     | (159   | ) |   |   | (223 | ) |
| Provision      charged to operations               |   |     | 730    |   |     |   | 440    |     |   |   | 475      |   |   |     | 300    |   |   |   | 390 |   |
|                                               |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| Balance      at end of year                        |   | $        | 2,398  |   |     | $      | 2,431  |     |   | $      | 2,344    |   |   | $        | 2,378  |   |   | $ | 2,237 |   |
|                                               |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| Allowance      for loan losses as a percent        |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| of      loans, net of unearned interest and        |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| loans      held for sale                           |   |     | 1.06   | %      |     |   | 1.09   | %        |   |   | .96      | %      |   |     | .97    | % |   |   | 1.02 | % |
|                                               |   |     |   |   |     |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |
| Net      charge-offs as a percent of average loans |   |     | .34    | %      |     |   | .15    | %        |   |   | .21      | %      |   |     | .07    | % |   |   | .10 | % |

|                           |   | Amounts      as of December 31, |   |
|--------------------------------|--------|---------------------------------|--------|
|                           |   | 2008                            |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
| Commercial,      financial and |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   agricultural       |   | $                               | 536    |   |   | $ | 473 |   |   | $ | 426 |   |   | $ | 502 |   |   | $ | 452 |   |
| Real      estate-construction  |   |                            | 241    |   |   |   | 265 |   |   |   | 187 |   |   |   | 77 |   |   |   | 60 |   |
| Real      estate-residential   |   |                            | 225    |   |   |   | 353 |   |   |   | 248 |   |   |   | 162 |   |   |   | 149 |   |
| Real      Estate-other         |   |                            | 842    |   |   |   | 735 |   |   |   | 663 |   |   |   | 787 |   |   |   | 764 |   |
| Installment                    |   |                            | 247    |   |   |   | 335 |   |   |   | 331 |   |   |   | 354 |   |   |   | 361 |   |
| Other                          |   |                            | 307    |   |   |   | 270 |   |   |   | 489 |   |   |   | 496 |   |   |   | 451 |   |
|                           |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans               |   | $                               | 2,398  |   |   | $ | 2,431 |   |   | $ | 2,344 |   |   | $ | 2,378 |   |   | $ | 2,237 |   |
|                           |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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|                           |   | Percent      of loans in each category to total loans |   |
|--------------------------------|--------|-------------------------------------------------------|--------|
|                           |   | 2008                                                  |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
| Commercial,      financial and |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  agricultural             |   |                                                  | 11.14  | % |   |   | 11.59 | % |   |   | 11.65 | % |   |   | 13.41 | % |   |   | 14.29 | % |
| Real      estate-construction  |   |                                                  | 13.71  |   |   |   | 20.19 |   |   |   | 18.31 |   |   |   | 12.27 |   |   |   | 8.31 |   |
| Real      estate-residential   |   |                                                  | 33.22  |   |   |   | 32.29 |   |   |   | 34.18 |   |   |   | 40.18 |   |   |   | 42.03 |   |
| Real      Estate-other         |   |                                                  | 39.17  |   |   |   | 32.43 |   |   |   | 31.40 |   |   |   | 28.92 |   |   |   | 28.82 |   |
| Installment                    |   |                                                  | 2.68   |   |   |   | 3.38 |   |   |   | 4.38 |   |   |   | 5.09 |   |   |   | 6.44 |   |
| Other                          |   |                                                  | .08    |   |   |   | .12 |   |   |   | .08 |   |   |   | .13 |   |   |   | .11 |   |
|                           |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans               |   |                                                  | 100.00 | % |   |   | 100.00 | % |   |   | 100.00 | % |   |   | 100.00 | % |   |   | 100.00 | % |
|                           |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Balance      at December 31, 2007                                   |   |   |   |   | $      | 747    |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|    Write-downs/Reserves                              |   |   | (140   | )      |   |   |   |   |
|    Proceeds      from sales, net of gains and losses |   |   | (990   | )      |   |   |   |   |
|    Foreclosures                                      |   |   | 1,302  |   |   |   | 172    |   |
| Balance      at December 31, 2008                                   |   |   |   |   |   | $      | 919    |   |

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|                                |   | 12/31/08 |       |   | 12/31/07 |   |
|-------------------------------------|--------|----------|------------|--------|----------|--------|
| Time      remaining until maturity: |   |     |       |   |     |   |
| Three      months or less           |   | $        | 21,104,104 |   |     | $      | 13,693,963 |   |
| Over      three through six months  |   |     | 10,266,988 |   |     |   | 16,183,305 |   |
| Over      six through twelve months |   |     | 12,796,081 |   |     |   | 18,119,579 |   |
| Over      twelve months             |   |     | 3,417,858  |   |     |   | 4,210,503 |   |
|                                |   |     |       |   |     |   |   |   |
|                                |   | $        | 47,585,031 |   |     | $      | 52,207,350 |   |
|                                |   |     |       |   |     |   |   |   |

|                                      |   | 12/31/08 |        |   | 12/31/07 |   |        | 12/31/06 |   |
|-------------------------------------------|--------|----------|-------------|--------|----------|--------|-------------|----------|--------|
|                                      |   |     |        |   |     |   |        |     |   |
| Non-interest      bearing demand deposits |   | $        | 51,119,827  |   |     | $      | 47,305,927  |     |   | $ | 50,345,279 |   |
| NOW      accounts                         |   |     | 48,338,323  |   |     |   | 24,056,081  |     |   |   | 24,555,009 |   |
| Money      market deposit accounts        |   |     | 33,662,518  |   |     |   | 34,449,399  |     |   |   | 37,101,457 |   |
| Savings      accounts                     |   |     | 17,736,516  |   |     |   | 17,310,284  |     |   |   | 18,082,839 |   |
| Certificates      of deposit              |   |     | 106,357,236 |   |     |   | 123,272,459 |     |   |   | 123,672,691 |   |
|                                      |   |     |        |   |     |   |        |     |   |   |   |   |
|                                      |   | $        | 257,214,420 |   |     | $      | 246,394,150 |     |   | $ | 253,757,275 |   |
|                                      |   |     |        |   |     |   |        |     |   |   |   |   |

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|                              |   | 2008   |       |   | 2007   |   |       | 2006   |   |
|-----------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                              |   |   |       |   |   |   |       |   |   |
| Year-end      balance             |   | $      | 71,563,000 |   |   | $      | 39,964,000 |   |   | $ | 39,393,000 |   |
| Maximum      month-end balance    |   |   | 86,688,000 |   |   |   | 67,385,000 |   |   |   | 49,510,000 |   |
| Year      to date average balance |   |   | 60,190,000 |   |   |   | 50,488,000 |   |   |   | 38,091,000 |   |
| Weighted      average rate        |   |   | 2.39       | %      |   |   | 5.07       | %      |   |   | 4.26 | % |
|                              |   |   |       |   |   |   |       |   |   |   |   |   |

|                              |   | 2008   |       |   | 2007   |   |       | 2006   |   |
|-----------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                              |   |   |       |   |   |   |       |   |   |
| Year-end      balance             |   | $      | 54,929,000 |   |   | $      | 26,735,000 |   |   | $ | 26,244,000 |   |
| Maximum      month-end balance    |   |   | 68,864,000 |   |   |   | 48,153,000 |   |   |   | 34,493,000 |   |
| Year      to date average balance |   |   | 44,533,000 |   |   |   | 36,378,000 |   |   |   | 27,255,000 |   |
| Weighted      average rate        |   |   | 1.98       | %      |   |   | 4.67       | %      |   |   | 4.21 | % |
|                              |   |   |       |   |   |   |       |   |   |   |   |   |

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|                                                                      | Average      Balances and Yield Analysis |                                        |
|---------------------------------------------------------------------------|------------------------------------------|---------------------------------------------|
|                                                                      | (dollars      in thousands)              |                                        |
|                                                                      |                                     | Twelve      Months Ended December 31,  |   |
|                                                                      |                                     |                                        |   |   | 2008 |   |   |   |   |   |   |   |   | 2007 |   |   |   |   |   |   |   |   | 2006 |   |   |   |   |
|                                                                      |                                     |                                        |   |   | Interest |   |   | Average |   |   |   |   |   | Interest |   |   | Average |   |   |   |   |   | Interest |   |   | Average |   |
|                                                                      |                                     | Average                                     |   |   | Income/ |   |   | % |   |   | Average |   |   | Income/ |   |   | % |   |   | Average |   |   | Income/ |   |   | % |   |
|                                                                      |                                     | Balance                                     |   |   | Expense |   |   | Yield/Rate |   |   | Balance |   |   | Expense |   |   | Yield/Rate |   |   | Balance |   |   | Expense |   |   | Yield/Rate |   |
| ASSETS                                                                    |                                     |                                        |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                     |                                     | $                                           | 225,633 |   |   | $ | 15,713 |   |   |   | 6.96 | % |   | $ | 237,512 |   |   | $ | 19,010 |   |   |   | 8.00 | % |   | $ | 242,910 |   |   | $ | 18,443 |   |   |   | 7.59 | % |
| Investment      securities:                                               |                                     |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage      Backed Securities                                           |                                     |                                        | 98,987 |   |   |   | 5,234 |   |   |   | 5.29 | % |   |   | 67,345 |   |   |   | 3,514 |   |   |   | 5.22 | % |   |   | 66,425 |   |   |   | 3,045 |   |   |   | 4.58 | % |
| State      & municipal-non taxable                                    |                                     |                                        | 37,341 |   |   |   | 1,668 |   |   |   | 4.47 | % |   |   | 36,367 |   |   |   | 1,654 |   |   |   | 4.55 | % |   |   | 35,146 |   |   |   | 1,641 |   |   |   | 4.67 | % |
| State      & municipal-taxable                                        |                                     |                                        | 945 |   |   |   | 57 |   |   |   | 6.00 | % |   |   | - |   |   |   | - |   |   |   | 0.00 | % |   |   | - |   |   |   | - |   |   |   | 0.00 | % |
| Other                                                                     |                                     |                                        | 3,086 |   |   |   | 94 |   |   |   | 3.05 | % |   |   | 4,959 |   |   |   | 271 |   |   |   | 5.47 | % |   |   | 10,887 |   |   |   | 479 |   |   |   | 4.40 | % |
| Total      investment securities                                          |                                     |                                        | 140,359 |   |   |   | 7,054 |   |   |   | 5.03 | % |   |   | 108,671 |   |   |   | 5,439 |   |   |   | 5.01 | % |   |   | 112,458 |   |   |   | 5,166 |   |   |   | 4.59 | % |
| Interest      bearing bank balances                                       |                                     |                                        | 1,026 |   |   |   | 27 |   |   |   | 2.62 | % |   |   | 3,045 |   |   |   | 140 |   |   |   | 4.61 | % |   |   | 1,435 |   |   |   | 69 |   |   |   | 4.83 | % |
| Federal      funds sold                                                   |                                     |                                        | 218 |   |   |   | 5 |   |   |   | 2.17 | % |   |   | 306 |   |   |   | 15 |   |   |   | 4.86 | % |   |   | 604 |   |   |   | 30 |   |   |   | 4.91 | % |
| Total      earning assets                                                 |                                     |                                        | 367,236 |   |   |   | 22,799 |   |   |   | 6.21 | % |   |   | 349,534 |   |   |   | 24,605 |   |   |   | 7.04 | % |   |   | 357,407 |   |   |   | 23,708 |   |   |   | 6.63 | % |
| Allowance      for loan losses                                            |                                     |                                        | (2,402 | ) |   |   |   |   |   |   |   |   |   |   | (2,440 | ) |   |   |   |   |   |   |   |   |   |   | (2,444 | ) |   |   |   |   |   |   |   |   |
| Cash      & due from banks, non-interest bearing                      |                                     |                                        | 5,968 |   |   |   |   |   |   |   |   |   |   |   | 6,435 |   |   |   |   |   |   |   |   |   |   |   | 7,419 |   |   |   |   |   |   |   |   |   |
| Bank      premises & equipment                                        |                                     |                                        | 7,067 |   |   |   |   |   |   |   |   |   |   |   | 7,565 |   |   |   |   |   |   |   |   |   |   |   | 7,901 |   |   |   |   |   |   |   |   |   |
| Cash      Value Life Insurance and other                                  |                                     |                                        | 1,037 |   |   |   |   |   |   |   |   |   |   |   | 997 |   |   |   |   |   |   |   |   |   |   |   | 957 |   |   |   |   |   |   |   |   |   |
| Other      assets                                                         |                                     |                                        | 4,257 |   |   |   |   |   |   |   |   |   |   |   | 4,675 |   |   |   |   |   |   |   |   |   |   |   | 5,386 |   |   |   |   |   |   |   |   |   |
| TOTAL      ASSETS                                                         |                                     | $                                           | 383,163 |   |   |   |   |   |   |   |   |   |   | $ | 366,765 |   |   |   |   |   |   |   |   |   |   | $ | 376,626 |   |   |   |   |   |   |   |   |   |
|  LIABILITIES      AND STOCKHOLDERS' EQUITY                           |                                     |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits:                                           |                                     |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                                                                   |                                     | $                                           | 17,778 |   |   | $ | 148 |   |   |   | 0.83 | % |   | $ | 18,207 |   |   | $ | 186 |   |   |   | 1.02 | % |   | $ | 20,623 |   |   | $ | 249 |   |   |   | 1.21 | % |
| Interest      bearing checking                                            |                                     |                                        | 27,744 |   |   |   | 270 |   |   |   | 0.97 | % |   |   | 25,028 |   |   |   | 408 |   |   |   | 1.63 | % |   |   | 23,711 |   |   |   | 334 |   |   |   | 1.41 | % |
| Money      rate savings                                                   |                                     |                                        | 35,495 |   |   |   | 689 |   |   |   | 1.94 | % |   |   | 36,380 |   |   |   | 1,049 |   |   |   | 2.88 | % |   |   | 38,709 |   |   |   | 968 |   |   |   | 2.50 | % |
| Certificates      of deposit and other time deposits                      |                                     |                                        | 112,731 |   |   |   | 4,228 |   |   |   | 3.75 | % |   |   | 129,857 |   |   |   | 6,066 |   |   |   | 4.67 | % |   |   | 123,198 |   |   |   | 4,918 |   |   |   | 3.99 | % |
| Total      interest bearing deposits                                      |                                     |                                        | 193,748 |   |   |   | 5,335 |   |   |   | 2.75 | % |   |   | 209,472 |   |   |   | 7,708 |   |   |   | 3.68 | % |   |   | 206,241 |   |   |   | 6,469 |   |   |   | 3.14 | % |
| Short      term borrowed funds                                            |                                     |                                        | 60,190 |   |   |   | 1,439 |   |   |   | 2.39 | % |   |   | 50,488 |   |   |   | 2,560 |   |   |   | 5.07 | % |   |   | 38,091 |   |   |   | 1,623 |   |   |   | 4.26 | % |
| Long      term debt                                                       |                                     |                                        | 40,989 |   |   |   | 1,980 |   |   |   | 4.83 | % |   |   | 22,865 |   |   |   | 997 |   |   |   | 4.36 | % |   |   | 46,241 |   |   |   | 2,114 |   |   |   | 4.57 | % |
| Total      interest bearing liabilities                                   |                                     |                                        | 294,927 |   |   |   | 8,754 |   |   |   | 2.97 | % |   |   | 282,825 |   |   |   | 11,265 |   |   |   | 3.98 | % |   |   | 290,542 |   |   |   | 10,206 |   |   |   | 3.51 | % |
| Non-interest      bearing deposits                                        |                                     |                                        | 47,355 |   |   |   |   |   |   |   |   |   |   |   | 45,598 |   |   |   |   |   |   |   |   |   |   |   | 49,472 |   |   |   |   |   |   |   |   |   |
| Other      liabilities                                                    |                                     |                                        | 4,262 |   |   |   |   |   |   |   |   |   |   |   | 4,188 |   |   |   |   |   |   |   |   |   |   |   | 4,364 |   |   |   |   |   |   |   |   |   |
| Shareholders'      equity                                                 |                                     |                                        | 36,619 |   |   |   |   |   |   |   |   |   |   |   | 34,153 |   |   |   |   |   |   |   |   |   |   |   | 32,248 |   |   |   |   |   |   |   |   |   |
| TOTAL      LIABILITIES & STOCKHOLDERS' EQUITY                         |                                     | $                                           | 383,163 |   |   | $ | 8,754 |   |   |   |   |   |   | $ | 366,765 |   |   | $ | 11,265 |   |   |   |   |   |   | $ | 376,626 |   |   | $ | 10,206 |   |   |   |   |   |
|  Interest      income and rate earned                                |                                     |                                        |   |   |   | $ | 22,799 |   |   |   | 6.21 | % |   |   |   |   |   | $ | 24,605 |   |   |   | 7.04 | % |   |   |   |   |   | $ | 23,708 |   |   |   | 6.63 | % |
| Interest      expense and rate paid                                       |                                     |                                        |   |   |   |   | 8,754 |   |   |   | 2.97 | % |   |   |   |   |   |   | 11,265 |   |   |   | 3.98 | % |   |   |   |   |   |   | 10,206 |   |   |   | 3.51 | % |
| Interest      rate spread                                                 |                                     |                                        |   |   |   |   |   |   |   |   | 3.24 | % |   |   |   |   |   |   |   |   |   |   | 3.06 | % |   |   |   |   |   |   |   |   |   |   | 3.12 | % |
|  NET      INTEREST INCOME & NET YIELD ON AVERAGE EARNINGS ASSETS |                                     |                                        |   |   |   | $ | 14,045 |   |   |   | 3.82 | % |   |   |   |   |   | $ | 13,340 |   |   |   | 3.82 | % |   |   |   |   |   | $ | 13,502 |   |   |   | 3.78 | % |
|                                                                      |                                     |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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|                              |   | December      31, 2008 |    |   | December      31, 2007 |   |
|-----------------------------------|--------|------------------------|---------|--------|------------------------|--------|
|                              |   | Company                |    |   | Bank                   |   |   | Company |   |   | Bank |   |
| Risk-based      capital:          |   |                   |    |   |                   |   |   |   |   |   |   |   |
| Total                             |   | $                      | 44,283  |   |                   | $      | 39,335 |   |   | $ | 42,217 |   |   | $ | 38,285 |   |
| Tier      1                       |   |                   | 41,885  |   |                   |   | 36,937 |   |   |   | 39,786 |   |   |   | 35,854 |   |
| Leverage                          |   |                   | 41,885  |   |                   |   | 36,937 |   |   |   | 39,786 |   |   |   | 35,854 |   |
| Assets:                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Quarterly      average assets (1) |   |                   | 399,321 |   |                   |   | 394,715 |   |   |   | 362,493 |   |   |   | 364,418 |   |
| Risk-weighted      assets         |   |                   | 255,841 |   |                   |   | 255,619 |   |   |   | 258,194 |   |   |   | 257,968 |   |
| Ratios:                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total      risk-based capital     |   |                   | 17.31   | %      |                   |   | 15.39 | % |   |   | 16.36 | % |   |   | 14.84 | % |
| Tier      1 risk-based capital    |   |                   | 16.37   | %      |                   |   | 14.45 | % |   |   | 15.42 | % |   |   | 13.90 | % |
| Leverage                          |   |                   | 10.49   | %      |                   |   | 9.36 | % |   |   | 10.98 | % |   |   | 9.84 | % |

| (1)   | Excludes      disallowed assets |
|-----------------|---------------------------------|

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|                                  |   | 2008   |   |   | 2007   |   |   | 2006   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                  |   |   |   |   |   |   |   |   |   |
| Return      on average assets         |   |   | .91    | %      |   |   | .82    | %      |   |   | .95 | % |
| Return      on average equity         |   |   | 9.57   | %      |   |   | 8.80   | %      |   |   | 11.09 | % |
| Dividend      payout ratio            |   |   | 43.64  | %      |   |   | 50.70  | %      |   |   | 42.60 | % |
| Average      equity to average assets |   |   | 9.56   | %      |   |   | 9.31   | %      |   |   | 8.56 | % |
| Net      interest margin              |   |   | 3.82   | %      |   |   | 3.82   | %      |   |   | 3.78 | % |
| Basic      income per share           |   | $      | 1.65   |   |   | $      | 1.42   |   |   | $ | 1.69 |   |
| Diluted      income per share         |   | $      | 1.65   |   |   | $      | 1.42   |   |   | $ | 1.69 |   |

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|                                                 |                              | Volume/Rate      Analysis  |   |
|------------------------------------------------------|-----------------------------------|----------------------------|--------|
|                        |                              | 2008      change from 2007 |   |   | 2007      change from 2006 |   |
|                                                 |                              | Total                      |   |   | Volume |   |   | Rate |   |   | Total |   |   | Volume |   |   | Rate |   |
|                                                 |  (dollars      in thousands) |                       |
|                                                 |                              |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                |                              | $                          | (3,297 | ) |   | $ | (916 | ) |   | $ | (2,381 | ) |   | $ | 567 |   |   | $ | (416 | ) |   | $ | 983 |   |
| Investment      securities:                          |                              |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage      Backed Securities                      |                              |                       | 1,721  |   |   |   | 1,673 |   |   |   | 48 |   |   |   | 469 |   |   |   | 43 |   |   |   | 426 |   |
| State      & municipal-non taxable               |                              |                       | 14     |   |   |   | 44 |   |   |   | (30 | ) |   |   | 13 |   |   |   | 56 |   |   |   | (43 | ) |
| State      & municipal-taxable                   |                              |                       | 57     |   |   |   | 57 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                                                |                              |                       | (177   | ) |   |   | (82 | ) |   |   | (95 | ) |   |   | (208 | ) |   |   | (305 | ) |   |   | 97 |   |
| Total      investment securities                     |                              |                       | 1,615  |   |   |   | 1,692 |   |   |   | (77 | ) |   |   | 274 |   |   |   | (206 | ) |   |   | 480 |   |
| Interest      bearing bank balances                  |                              |                       | (114   | ) |   |   | (69 | ) |   |   | (45 | ) |   |   | 71 |   |   |   | 74 |   |   |   | (3 | ) |
| Federal      funds sold                              |                              |                       | (10    | ) |   |   | (3 | ) |   |   | (7 | ) |   |   | (15 | ) |   |   | (15 | ) |   |   | - |   |
| Total      earning assets                            |                              | $                          | (1,806 | ) |   | $ | 704 |   |   | $ | (2,510 | ) |   | $ | 897 |   |   | $ | (563 | ) |   | $ | 1,460 |   |
| Interest      bearing deposits:                      |                              |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                                              |                              |                       | (37    | ) |   |   | (4 | ) |   |   | (33 | ) |   |   | (64 | ) |   |   | (27 | ) |   |   | (37 | ) |
| Interest      bearing checking                       |                              |                       | (138   | ) |   |   | 40 |   |   |   | (178 | ) |   |   | 74 |   |   |   | 19 |   |   |   | 55 |   |
| Money      rate savings                              |                              |                       | (360   | ) |   |   | (25 | ) |   |   | (335 | ) |   |   | 80 |   |   |   | (61 | ) |   |   | 141 |   |
| Certificates      of deposit and other time deposits |                              |                       | (1,838 | ) |   |   | (737 | ) |   |   | (1,101 | ) |   |   | 1,149 |   |   |   | 277 |   |   |   | 872 |   |
| Total      interest bearing deposits                 |                              |                       | (2,373 | ) |   |   | (726 | ) |   |   | (1,647 | ) |   |   | 1,239 |   |   |   | 208 |   |   |   | 1,031 |   |
| Short      term borrowed funds                       |                              |                       | (1,121 | ) |   |   | 423 |   |   |   | (1,544 | ) |   |   | 937 |   |   |   | 592 |   |   |   | 345 |   |
| Long      term debt                                  |                              |                       | 983    |   |   |   | 865 |   |   |   | 118 |   |   |   | (1,117 | ) |   |   | (1,023 | ) |   |   | (94 | ) |
| Total      interest bearing liabilities              |                              | $                          | (2,511 | ) |   | $ | 562 |   |   | $ | (3,073 | ) |   | $ | 1,059 |   |   | $ | (223 | ) |   | $ | 1,282 |   |
| Change      in Interest Earning Assets               |                              |                       | (1,806 | ) |   |   | 704 |   |   |   | (2,510 | ) |   |   | 897 |   |   |   | (563 | ) |   |   | 1,460 |   |
| Change      in Interest Bearing Liabilities          |                              |                       | (2,511 | ) |   |   | 562 |   |   |   | (3,073 | ) |   |   | 1,059 |   |   |   | (223 | ) |   |   | 1,282 |   |
| Change      in Net Interest Income                   |                              | $                          | 705    |   |   | $ | 142 |   |   | $ | 563 |   |   | $ | (162 | ) |   | $ | (340 | ) |   | $ | 178 |   |

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|                                                                                                                      |
|---------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                      |
|                                                                                                                      |
|                                                                                                                      |
| AUDITED      FINANCIAL STATEMENTS:                                                                                        |
|                                                                                                                      |
| Management’s Annual Report on Internal Control      over Financial Reporting                                        |
|                                                                                                                      |
| Report of Independent Registered Public Accounting      Firm                                                              |
|                                                                                                                      |
| Consolidated Balance Sheets as of December 31, 2008 and      2007                                                         |
|                                                                                                                      |
| Consolidated Statements of Income for the years ended      December 31, 2008, 2007 and 2006                               |
|                                                                                                                      |
| Consolidated Statements of Changes in Stockholders’ Equity      for the years ended December 31, 2008, 2007 and2006 |
|                                                                                                                      |
| Consolidated Statements of Cash Flows for the years ended      December 31, 2008, 2007 and 2006                           |
|                                                                                                                      |
| Notes to the Consolidated Financial      Statements                                                                       |
|                                                                                                                      |
|                                                                                                                      |
|                                                                                                                      |

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B

|                                                                                                                       |   | 2008   |        |   | 2007   |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                                                                                                       |   |   |        |   |   |   |
| ASSETS:                                                                                                                    |   |   |        |   |   |   |
| Cash      and Due from Banks:                                                                                              |   |   |        |   |   |   |
| Non-interest      bearing                                                                                                  |   | $      | 6,752,462   |   |   | $      | 6,102,837 |   |
| Interest      bearing                                                                                                      |   |   | 199,081     |   |   |   | 2,629,470 |   |
|                                                                                                                       |   |   |        |   |   |   |   |   |
| Total      Cash and Due from Banks                                                                                         |   |   | 6,951,543   |   |   |   | 8,732,307 |   |
|                                                                                                                       |   |   |        |   |   |   |   |   |
| Federal      funds sold                                                                                                    |   |   | -           |   |   |   | 245,192 |   |
| Investment      Securities:                                                                                                |   |   |        |   |   |   |   |   |
| Trading      (amortized cost, in 2008 and 2007, of   0      and $19,144,678, respectively)                  |   |   | -           |   |   |   | 19,199,207 |   |
| Available-for-sale      (amortized cost, in 2008 and 2007, of $108,548,988 and $63,612,681,      respectively)             |   |   | 111,895,476 |   |   |   | 63,983,146 |   |
| Held-to-maturity      (market value, in 2008 and 2007, of   $54,843,091 and      $40,639,894, respectively) |   |   | 54,815,013  |   |   |   | 39,988,305 |   |
| Equity      securities                                                                                                     |   |   | 4,009,938   |   |   |   | 2,521,000 |   |
|          Loans, less allowance for loan losses of $2,397,802 in 2008 and $2,430,936      in 2007            |   |   | 223,113,495 |   |   |   | 220,921,727 |   |
| Bank      premises and equipment, net                                                                                      |   |   | 6,922,835   |   |   |   | 7,357,785 |   |
| Other      real estate, net of reserves of $198,390 and $58,350 in 2008 and      2007, respectively                   |   |   | 919,204     |   |   |   | 746,796 |   |
| Accrued      interest receivable                                                                                           |   |   | 2,080,693   |   |   |   | 2,294,235 |   |
| Cash      surrender value of life insurance                                                                                |   |   | 1,055,627   |   |   |   | 1,013,683 |   |
| Core      deposits, net                                                                                                    |   |   | 558,042     |   |   |   | 665,658 |   |
| Other      assets                                                                                                          |   |   | 754,959     |   |   |   | 676,231 |   |
|                                                                                                                       |   |   |        |   |   |   |   |   |
| TOTAL      ASSETS                                                                                                          |   | $      | 413,076,825 |   |   | $      | 368,345,272 |   |
|                                                                                                                       |   |   |        |   |   |   |   |   |

----

Table of Contents

|                                                                                                                                                                          |   | 2008   |        |   | 2007   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                                                                                                                                                          |   |   |        |   |   |   |
| LIABILITIES:                                                                                                                                                                  |   |   |        |   |   |   |
| Deposits:                                                                                                                                                                     |   |   |        |   |   |   |
| Non-interest      bearing                                                                                                                                                     |   | $      | 51,119,827  |   |   | $      | 47,305,927 |   |
| Interest      bearing                                                                                                                                                         |   |   | 206,094,593 |   |   |   | 199,088,223 |   |
| Total      Deposits                                                                                                                                                           |   |   | 257,214,420 |   |   |   | 246,394,150 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| Securities      sold under repurchase agreements                                                                                                                              |   |   | 51.633.835  |   |   |   | 48,229,299 |   |
| Federal      Home Loan Bank advances                                                                                                                                          |   |   | 54,939,931  |   |   |   | 29,160,730 |   |
| Junior      subordinated debentures                                                                                                                                           |   |   | 5,155,000   |   |   |   | 5,155,000 |   |
| Accrued      interest payable (Includes $264,954 on securities sold under repurchase      agreements at December 31, 2008)                                                    |   |   | 1,167,525   |   |   |   | 2,070,075 |   |
| Advances      from borrowers for taxes and insurance                                                                                                                          |   |   | 313,810     |   |   |   | 359,501 |   |
| Accrued      taxes and other liabilities                                                                                                                                      |   |   | 3,111,235   |   |   |   | 1,175,652 |   |
| Total      Liabilities                                                                                                                                                        |   |   | 373,535,756 |   |   |   | 332,544,407 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| STOCKHOLDERS’      EQUITY:                                                                                                                                              |   |   |        |   |   |   |   |   |
| Common      stock, $2.50 par value per share; 12,000,000 shares authorized; 2,132,466      issued and 2,117,966 outstanding, at December 31, 2008, and December 31,      2007 |   |   | 5,331,165   |   |   |   | 5,331,165 |   |
| Additional      paid-in capital                                                                                                                                               |   |   | 7,319,282   |   |   |   | 7,305,970 |   |
| Retained      earnings                                                                                                                                                        |   |   | 25,049,749  |   |   |   | 23,071,921 |   |
| Accumulated      other comprehensive income/(loss)                                                                                                                            |   |   | 2,098,248   |   |   |   | 349,184 |   |
|                                                                                                                                                                          |   |   | 39,798,444  |   |   |   | 36,058,240 |   |
| Less:  Treasury      stock, 14,500 shares, at cost                                                                                                                  |   |   | (257,375    | )      |   |   | (257,375 | ) |
| Total      Stockholders’ Equity                                                                                                                                         |   |   | 39,541,069  |   |   |   | 35,800,865 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                               |   | $      | 413,076,825 |   |   | $      | 368,345,272 |   |

----

Table of Contents

B

|                                                         |   | 2008   |            |   | 2007   |   |       | 2006   |   |
|--------------------------------------------------------------|--------|--------|-----------------|--------|--------|--------|------------|--------|--------|
|                                                         |   |   |            |   |   |   |       |   |   |
| INTEREST      INCOME:                                        |   |   |            |   |   |   |       |   |   |
| Interest      and fees on loans                              |   | $      | 15,713,335      |   |   | $      | 19,010,095 |   |   | $ | 18,443,069 |   |
| Interest      on investment securities:                      |   |   |            |   |   |   |       |   |   |   |   |   |
| Taxable      interest income                                 |   |   | 5,412,107       |   |   |   | 3,927,411  |   |   |   | 3,593,781 |   |
| Exempt      from federal income taxes                        |   |   | 1,668,378       |   |   |   | 1,652,143  |   |   |   | 1,641,361 |   |
| Other      interest income                                   |   |   | 4,735           |   |   |   | 14,853     |   |   |   | 29,672 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| Total      Interest Income                                   |   |   | 22,798,555      |   |   |   | 24,604,502 |   |   |   | 23,707,883 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| INTEREST      EXPENSE:                                       |   |   |            |   |   |   |       |   |   |   |   |   |
| Interest      on deposits                                    |   |   | 5,334,619       |   |   |   | 7,707,969  |   |   |   | 6,468,890 |   |
| Interest      on Federal Home Loan Bank advances             |   |   | 926,113         |   |   |   | 2,181,459  |   |   |   | 2,915,388 |   |
| Interest      on trust preferred securities                  |   |   | 328,470         |   |   |   | 432,118    |   |   |   | 417,930 |   |
| Interest      on securities sold under repurchase agreements |   |   |  2,164,355 |   |   |   | 943,146    |   |   |   | 403,863 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| Total      Interest Expense                                  |   |   | 8,753,557       |   |   |   | 11,264,692 |   |   |   | 10,206,071 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| NET      INTEREST INCOME                                     |   |   | 14,044,998      |   |   |   | 13,339,810 |   |   |   | 13,501,812 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| PROVISION      FOR LOAN LOSSES                               |   |   | 730,000         |   |   |   | 440,000    |   |   |   | 475,000 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| NET      INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     |   |   | 13,314,998      |   |   |   | 12,899,810 |   |   |   | 13,026,812 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| OTHER      INCOME:                                           |   |   |            |   |   |   |       |   |   |   |   |   |
| Service      charges on deposit accounts                     |   |   | 1,777,096       |   |   |   | 1,633,181  |   |   |   | 1,430,164 |   |
| Income      from fiduciary activities                        |   |   | 2,484           |   |   |   | 3,996      |   |   |   | 38,202 |   |
| Income      from networking arrangements                     |   |   | 160,913         |   |   |   | 231,261    |   |   |   | 179,457 |   |
| Net      gain on sales of loans                              |   |   | 229,001         |   |   |   | 278,505    |   |   |   | 313,327 |   |
| Net      gain (loss) on sale of securities                   |   |   | 148,116         |   |   |   | (558,770   | )      |   |   | (30,481 | ) |
| Net      gain on trading securities                          |   |   | -               |   |   |   | 144,892    |   |   |   | - |   |
| Other                                                        |   |   | 460,740         |   |   |   | 495,227    |   |   |   | 520,092 |   |
|                                                         |   |   |            |   |   |   |       |   |   |   |   |   |
| Total      Other Income                                      |   |   | 2,778,350       |   |   |   | 2,228,292  |   |   |   | 2,450,761 |   |
| Income      before Other Expenses                            |   |   | 16,093,348      |   |   |   | 15,128,102 |   |   |   | 15,477,573 |   |

----

Table of Contents

|                                     |   | 2008   |       |   | 2007   |   |       | 2006   |   |
|------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                     |   |   |       |   |   |   |       |   |   |
| OTHER      EXPENSES:                     |   |   |       |   |   |   |       |   |   |
| Salaries                                 |   |   | 5,425,241  |   |   |   | 5,157,330  |   |   |   | 5,003,831 |   |
| Employee      benefits                   |   |   | 730,614    |   |   |   | 760,415    |   |   |   | 747,685 |   |
| Director      fees                       |   |   | 166,050    |   |   |   | 203,425    |   |   |   | 198,012 |   |
| Net      occupancy expense               |   |   | 946,737    |   |   |   | 975,203    |   |   |   | 977,511 |   |
| Equipment      expense                   |   |   | 1,141,943  |   |   |   | 1,147,655  |   |   |   | 1,102,240 |   |
| Other      real estate, net              |   |   | 127,159    |   |   |   | 351,962    |   |   |   | 65,333 |   |
| FDIC      assessment                     |   |   | 49,590     |   |   |   | 30,787     |   |   |   | 32,526 |   |
| Advertising                              |   |   | 219,544    |   |   |   | 165,531    |   |   |   | 207,834 |   |
| Stationery      and supplies             |   |   | 172,059    |   |   |   | 184,719    |   |   |   | 188,057 |   |
| Amortization                             |   |   | 107,616    |   |   |   | 107,616    |   |   |   | 107,616 |   |
| Audit      expense                       |   |   | 219,877    |   |   |   | 183,333    |   |   |   | 186,485 |   |
| Other                                    |   |   | 1,974,161  |   |   |   | 1,998,097  |   |   |   | 1,887,878 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| Total      Other Expenses                |   |   | 11,280,591 |   |   |   | 11,266,073 |   |   |   | 10,705,008 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE    |   |   | 4,812,757  |   |   |   | 3,862,029  |   |   |   | 4,772,565 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| INCOME      TAX EXPENSE                  |   |   | 1,309,994  |   |   |   | 856,248    |   |   |   | 1,193,982 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| NET      INCOME                          |   | $      | 3,502,763  |   |   | $      | 3,005,781  |   |   | $ | 3,578,583 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| PER      SHARE DATA:                     |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic      earnings per share            |   | $      | 1.65       |   |   | $      | 1.42       |   |   | $ | 1.69 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic      weighted shares outstanding   |   |   | 2,117,966  |   |   |   | 2,117,966  |   |   |   | 2,117,529 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| Diluted      earnings per share          |   | $      | 1.65       |   |   | $      | 1.42       |   |   | $ | 1.69 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| Diluted      weighted shares outstanding |   |   | 2,117,966  |   |   |   | 2,119,566  |   |   |   | 2,121,846 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash      dividends per share            |   | $      | 0.72       |   |   | $      | 0.72       |   |   | $ | 0.72 |   |
|                                     |   |   |       |   |   |   |       |   |   |   |   |   |

----

Table of Contents

BR

|                                                                                         |   |   |              |      |   |    |   |      |       |   |   |          |   |   | Accumulated   |       |   |   |   |          |   |   |
|----------------------------------------------------------------------------------------------|--------|--------|-------------------|-----------|--------|---------|--------|-----------|------------|--------|--------|---------------|--------|--------|---------------|------------|--------|--------|--------|---------------|--------|--------|
|                                                                                         |   |   |              |      |   |    |   |      | Additional |   |   |          |   |   | Other         |       |   |   |   |          |   |   |
|                                                                                         |   |   | Common      Stock |      |   | Paid-In |   |      | Retained   |   |   | Comprehensive |   |   | Treasury      |       |   |   |   |
|                                                                                         |   |   | Shares            |      |   | Amount  |   |      | Capital    |   |   | Earnings      |   |   | Income/(loss) |       |   | Stock  |   |          | Total  |   |
| BALANCE,      December 31, 2005                                                              |   |   |              | 2,116,316 |   |    | $      | 5,327,040 |       |   | $      | 7,254,113     |   |   | $             | 19,949,100 |   |   | $      | (1,012,720    | )      |   | $ | (257,375 | ) |   | $ | 31,260,158 |   |
| Comprehensive      Income:                                                                   |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                              |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | 3,578,583  |   |   |   | -             |   |   |   | - |   |   |   | 3,578,583 |   |
| Other      Comprehensive Income                                                              |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
| Change      in fair value of                                                                 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|         available for sale securities,                                             |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|         net of taxes of $ 169,535                                                  |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | 284,982       |   |   |   | - |   |   |   | 284,982 |   |
| Change      in fair value of                                                                 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|         derivatives, net of taxes of                                               |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|             $28,235                                            |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | (47,462       | )      |   |   | - |   |   |   | (47,462 | ) |
| Total      Comprehensive Income                                                              |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | -             |   |   |   | - |   |   |   | 3,816,103 |   |
| Cash      dividends ($0.72 per share)                                                        |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | (1,524,619 | )      |   |   | -             |   |   |   | - |   |   |   | (1,524,619 | ) |
| Fair      Value unexercised stock options                                                    |   |   |              |      |   |    |   |      |       |   |   | 10,003        |   |   |          | -          |   |   |   | -             |   |   |   | - |   |   |   | 10,003 |   |
| Issuance      of common stock                                                                |   |   |              | 1,650     |   |    |   | 4,125     |       |   |   | 31,119        |   |   |          | -          |   |   |   | -             |   |   |   | - |   |   |   | 35,244 |   |
|  BALANCE,      December 31, 2006                                                        |   |   |              | 2,117,966 |   |    |   | 5,331,165 |       |   |   | 7,295,235     |   |   |          | 22,003,063 |   |   |   | (775,200      | )      |   |   | (257,375 | ) |   |   | 33,596,888 |   |
|  Adjustment      to the opening balance, netof      tax for the adoption of SFAS No.159 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          | (411,987   | )      |   |   |          |   |   |   |   |   |   |   | (411,987 | ) |
| Adjusted      opening balance, Jan. 1, 2007                                                  |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          | 21,591,076 |   |   |   |          |   |   |   |   |   |   |   | 33,184,901 |   |
| Comprehensive      Income:                                                                   |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                              |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | 3,005,781  |   |   |   | -             |   |   |   | - |   |   |   | 3,005,781 |   |
| Other      Comprehensive Income:                                                             |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
| Change      in fair value of                                                                 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|         available for sale securities,                                             |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|         net of taxes of $571,276,                                                  |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | 960,279       |   |   |   | - |   |   |   | 960,279 |   |
| Change      in fair value of                                                                 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|         derivatives, net of taxes of                                               |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|             $97,625                                            |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | 164,105       |   |   |   | - |   |   |   | 164,105 |   |
| Total      Comprehensive Income                                                              |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | -             |   |   |   | - |   |   |   | 4,130,165 |   |
| Fair      value of unexercised stock options                                                 |   |   |              | -         |   |    |   | -         |       |   |   | 10,735        |   |   |          | -          |   |   |   | -             |   |   |   | - |   |   |   | 10,735 |   |
| Cash      dividends ($0.72 per share)                                                        |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | (1,524,936 | )      |   |   | -             |   |   |   | - |   |   |   | (1,524,936 | ) |
|  BALANCE,      December 31, 2007                                                        |   |   |              | 2,117,966 |   |    | $      | 5,331,165 |       |   | $      | 7,305,970     |   |   | $             | 23,071,921 |   |   | $      |  349,184 |   |   | $ | (257,375 | ) |   | $ | 35,800,865 |   |
|  Comprehensive      income:                                                             |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                              |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | 3,502,763  |   |   |   | -             |   |   |   | - |   |   |   | 3,502,763 |   |
| Other      comprehensive income, net of tax:                                                 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
| Change      in fair value of                                                                 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|             available for sale securities,                     |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|             net of taxes of $1,110,057                         |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | 1,865,967     |   |   |   | - |   |   |   | 1,865,967 |   |
| Change      in fair value of                                                                 |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|             derivatives, net of tax benefit of            |   |   |              |      |   |    |   |      |       |   |   |          |   |   |          |       |   |   |   |          |   |   |   |   |   |   |   |   |   |
|             $(69,545)                                          |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | (116,903      | )      |   |   | - |   |   |   | (116,903 | ) |
| Total      Comprehensive Income                                                              |   |   |              | -         |   |    |   | -         |       |   |   | -             |   |   |          | -          |   |   |   | -             |   |   |   | - |   |   |   | 5,251,827 |   |
| Fair      value of unexercised stock options                                                 |   |   |              | -         |   |    |   | -         |       |   |   | 13,312        |   |   |          | -          |   |   |   | -             |   |   |   | - |   |   |   | 13,312 |   |
| Cash      Dividends ($0.72 per share)                                                        |   |   |              | -         |   |    |   | -         |       |   |   |          |   |   |          | (1,524,935 | )      |   |   | -             |   |   |   | - |   |   |   | (1,524,935 | ) |
|  BALANCE      at December 31, 2008                                                      |   |   |              | 2,117,966 |   |    | $      | 5,331,165 |       |   | $      | 7,319,282     |   |   | $             | 25,049,749 |   |   | $      | 2,098,248     |   |   | $ | (257,375 | ) |   | $ | 39,541,069 |   |

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|                                                                                                                                                                                                                                                                                          |   | 2008   |        |   | 2007   |   |        | 2006   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| CASH      FLOWS FROM OPERATING ACTIVITIES:                                                                                                                                                                                                                                                    |   |   |        |   |   |   |        |   |   |
| Net      income                                                                                                                                                                                                                                                                               |   | $      | 3,502,763   |   |   | $      | 3,005,781   |   |   | $ | 3,578,583 |   |
| Adjustments      to reconcile net income to                                                                                                                                                                                                                                                   |   |   |        |   |   |   |        |   |   |   |   |   |
| net      cash provided by operating activities:                                                                                                                                                                                                                                               |   |   |        |   |   |   |        |   |   |   |   |   |
| Deferred      taxes                                                                                                                                                                                                                                                                           |   |   | (171,022    | )      |   |   | (131,765    | )      |   |   | (114,945 | ) |
| Provision      for loan losses                                                                                                                                                                                                                                                                |   |   | 730,000     |   |   |   | 440,000     |   |   |   | 475,000 |   |
| Provision      for depreciation                                                                                                                                                                                                                                                               |   |   | 764,645     |   |   |   | 791,330     |   |   |   | 798,221 |   |
| Provision      for losses on foreclosed real estate                                                                                                                                                                                                                                           |   |   | 140,040     |   |   |   | 58,350      |   |   |   | - |   |
| Stock      dividends received                                                                                                                                                                                                                                                                 |   |   | (61,600     | )      |   |   | (167,300    | )      |   |   | (192,200 | ) |
| Write-down      of other real estate                                                                                                                                                                                                                                                          |   |   | -           |   |   |   | 312,859     |   |   |   | 22,178 |   |
| Write-down      of other repossessed assets                                                                                                                                                                                                                                                   |   |   | -           |   |   |   | 15,000      |   |   |   | - |   |
| (Gain)      on sale of loans                                                                                                                                                                                                                                                                  |   |   | (229,001    | )      |   |   | (278,505    | )      |   |   | (313,327 | ) |
| (Gain)      Loss on sale of other repossessed assets                                                                                                                                                                                                                                          |   |   | 22,000      |   |   |   | (1,000      | )      |   |   | - |   |
| (Gain)      Loss on disposition of premises and equipment                                                                                                                                                                                                                                     |   |   | 3,980       |   |   |   | -           |   |   |   | - |   |
| (Gain)      Loss on valuation of trading securities                                                                                                                                                                                                                                           |   |   | -           |   |   |   | (144,892    | )      |   |   | - |   |
| (Gain)      Loss on sale of securities                                                                                                                                                                                                                                                        |   |   | (148,116    | )      |   |   | 558,770     |   |   |   | 30,480 |   |
| (Gain)      Loss on sale of other real estate                                                                                                                                                                                                                                                 |   |   | (84,195     | )      |   |   | 3,850       |   |   |   | (11,032 | ) |
| (Gain)      Loss on sale of other securities                                                                                                                                                                                                                                                  |   |   | 1,285       |   |   |   | -           |   |   |   | - |   |
| Net      amortization (accretion) of securities                                                                                                                                                                                                                                               |   |   | (99,897     | )      |   |   | (48,185     | )      |   |   | 139,519 |   |
| Amortization      of acquisition premium                                                                                                                                                                                                                                                      |   |   | 107,616     |   |   |   | 107,616     |   |   |   | 107,616 |   |
| Purchase      of investment securities held for trading                                                                                                                                                                                                                                       |   |   | -           |   |   |   | (21,149,030 | )      |   |   | - |   |
| Proceeds      from sales, principal paydowns and maturities    of      investment securities held for trading                                                                                                                                                             |   |   | 19,349,806  |   |   |   | 1,692,087   |   |   |   | - |   |
| Net      change in:                                                                                                                                                                                                                                                                           |   |   |        |   |   |   |        |   |   |   |   |   |
| Loans      held for sale                                                                                                                                                                                                                                                                      |   |   | -           |   |   |   | 54,810      |   |   |   | 116,390 |   |
| Accrued      interest receivable                                                                                                                                                                                                                                                              |   |   | 213,542     |   |   |   | 143,152     |   |   |   | (179,162 | ) |
| Cash      surrender value of life insurance                                                                                                                                                                                                                                                   |   |   | (41,944     | )      |   |   | (40,471     | )      |   |   | (36,834 | ) |
| Other      assets                                                                                                                                                                                                                                                                             |   |   | (977,867    | )      |   |   | 80,663      |   |   |   | 198,704 |   |
| Accrued      interest payable                                                                                                                                                                                                                                                                 |   |   | (902,549    | )      |   |   | 283,786     |   |   |   | 347,452 |   |
| Accrued      taxes and other      liabilities                                         |   |   | 1,778,759   |   |   |   | (8,922      | )      |   |   | (558,993 | ) |
|                                                                                                                                                                                                                                                                                          |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      Cash Provided by/ (Used in) Operating Activities                                                                                                                                                                                                                                     |   |   | 23,898,245  |   |   |   | (14,422,014 | )      |   |   | 4,407,650 |   |
|                                                                                                                                                                                                                                                                                          |   |   |        |   |   |   |        |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                                                                                                                                                                                                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| (Increase)      decrease in federal funds sold                                                                                                                                                                                                                                                |   |   | 245,192     |   |   |   | 59,376      |   |   |   | 96,570 |   |
| Proceeds      from sales, principal paydowns and maturities                                                                                                                                                                                                                                   |   |   |        |   |   |   |        |   |   |   |   |   |
| of      investment securities held-to-maturity                                                                                                                                                                                                                                                |   |   | 4,058,669   |   |   |   | 6,036,959   |   |   |   | 1,149,236 |   |
| Proceeds      from sales, principal paydowns and maturities                                                                                                                                                                                                                                   |   |   |        |   |   |   |        |   |   |   |   |   |
| of      investment securities available-for-sale                                                                                                                                                                                                                                              |   |   | 10,661,369  |   |   |   | 59,245,635  |   |   |   | 19,446,947 |   |
| Proceeds      from redemption of Federal Home Loan                                                                                                                                                                                                                                            |   |   |        |   |   |   |        |   |   |   |   |   |
| Bank      stock                                                                                                                                                                                                                                                                               |   |   | 945,400     |   |   |   | 2,013,600   |   |   |   | 1,354,200 |   |
| Purchases      of investment securities held-to-maturity                                                                                                                                                                                                                                      |   |   | (18,918,362 | )      |   |   | (7,418,525  | )      |   |   | (1,774,002 | ) |
| Purchases      of investment securities available-for-sale                                                                                                                                                                                                                                    |   |   | (55,467,275 | )      |   |   | (57,793,573 | )      |   |   | (5,286,957 | ) |
| Purchase      of other equity securities                                                                                                                                                                                                                                                      |   |   | (2,374,000  | )      |   |   | (27,600     | )      |   |   | - |   |
| Net      (increase)/decrease in loans                                                                                                                                                                                                                                                         |   |   | (4,024,927  | )      |   |   | 19,583,636  |   |   |   | 1,013,155 |   |
| Proceeds      from sales of other repossessed assets                                                                                                                                                                                                                                          |   |   | 8,000       |   |   |   | 5,000       |   |   |   | 22,626 |   |
| Proceeds      from sale of other real estate                                                                                                                                                                                                                                                  |   |   | 1,073,908   |   |   |   | 653,948     |   |   |   | 334,461 |   |
| Purchases      of premises and equipment                                                                                                                                                                                                                                                      |   |   | (333,675    | )      |   |   | (430,328    | )      |   |   | (470,831 | ) |
| Proceeds      from sales of premises and equipment                                                                                                                                                                                                                                            |   |   | -           |   |   |   | 491         |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                          |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      Cash Provided by/ (Used in) Investing Activities                                                                                                                                                                                                                                     |   |   | (64,125,701 | )      |   |   | 21,928,619  |   |   |   | 15,885,405 |   |

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|                                                                         |   | 2008   |       |   | 2007   |   |        | 2006   |   |
|------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-------------|--------|--------|
| CASH      FLOWS FROM FINANCING ACTIVITIES:                                   |   |   |       |   |   |   |        |   |   |
| Net      increase (decrease) in customer deposits                            |   |   | 17,219,779 |   |   |   | (6,508,063  | )      |   |   | (4,961,586 | ) |
| Net      increase (decrease) in brokered deposits                            |   |   | (6,399,507 | )      |   |   | (855,062    | )      |   |   | 1,341,951 |   |
| Net      increase (decrease) in Federal Home Loan Bank                       |   |   |       |   |   |   |        |   |   |   |   |   |
| advances                                                                     |   |   | 25,779,200 |   |   |   | (36,507,241 | )      |   |   | (18,528,095 | ) |
| Net      increase (decrease) in securities sold under                        |   |   |       |   |   |   |        |   |   |   |   |   |
| repurchase      agreements                                                   |   |   | 3,404,536  |   |   |   | 40,080,283  |   |   |   | 116,295 |   |
| Increase      (decrease) in advances from borrowers                          |   |   |       |   |   |   |        |   |   |   |   |   |
| for      taxes and insurance                                                 |   |   | (45,691    | )      |   |   | (42,177     | )      |   |   | (35,544 | ) |
| Cash      dividends paid                                                     |   |   | (1,524,936 | )      |   |   | (1,524,936  | )      |   |   | (1,524,619 | ) |
| Cash      received from stock options exercised                              |   |   | -          |   |   |   | -           |   |   |   | 35,244 |   |
| Fair      value of unexercised stock options                                 |   |   | 13,312     |   |   |   | 10,735      |   |   |   | 10,003 |   |
|                                                                         |   |   |       |   |   |   |        |   |   |   |   |   |
| Net      Cash Provided by/(Used in)  Financing Activities          |   |   | 38,446,693 |   |   |   | (5,346,461  | )      |   |   | (23,546,351 | ) |
|                                                                         |   |   |       |   |   |   |        |   |   |   |   |   |
| NET      INCREASE/(DECREASE) IN CASH AND DUE FROM BANKS                      |   |   | (1,780,763 | )      |   |   | 2,160,144   |   |   |   | (3,253,296 | ) |
|  CASH      AND DUE FROM BANKS AT BEGINNING OF YEAR                      |   |   | 8,732,306  |   |   |   | 6,572,163   |   |   |   | 9,825,459 |   |
|  CASH      AND DUE FROM BANKS AT END OF YEAR                            |   | $      | 6,951,543  |   |   | $      | 8,732,307   |   |   | $ | 6,572,163 |   |
|  SUPPLEMENTAL      DISCLOSURES OF CASH FLOW INFORMATION                 |   |   |       |   |   |   |        |   |   |   |   |   |
| Cash      payments for:                                                      |   |   |       |   |   |   |        |   |   |   |   |   |
| Income      taxes                                                            |   | $      | 615,136    |   |   | $      | 950,750     |   |   | $ | 1,609,528 |   |
|  Interest      on deposits and borrowings                               |   | $      | 9,656,107  |   |   | $      | 10,980,905  |   |   | $ | 9,858,619 |   |
|                                                                         |   |   |       |   |   |   |        |   |   |   |   |   |
| SCHEDULE      OF NONCASH INVESTING AND FINANCING ACTIVITIES:                 |   |   |       |   |   |   |        |   |   |   |   |   |
| Transfers      to other real estate/other repossessed assets                 |   | $      | 1,302,159  |   |   | $      | 523,192     |   |   | $ | 169,134 |   |
|                                                                         |   |   |       |   |   |   |        |   |   |   |   |   |
| Change      in unrealized (gains) losses on                                  |   |   |       |   |   |   |        |   |   |   |   |   |
| securities      available-for-sale                                           |   | $      | 2,976,024  |   |   | $      | 1,531,555   |   |   | $ | 454,517 |   |
|                                                                         |   |   |       |   |   |   |        |   |   |   |   |   |
| Change      in the deferred tax effect in unrealized                         |   |   |       |   |   |   |        |   |   |   |   |   |
| gains      (losses) on securities available-for-sale                         |   | $      | 1,110,057  |   |   | $      | 571,276     |   |   | $ | 169,535 |   |
|                                                                         |   |   |       |   |   |   |        |   |   |   |   |   |
| Change      in unrealized gains on derivatives                               |   | $      | (186,448   | )      |   | $      | 261,730     |   |   | $ | (75,697 | ) |
| Change      in the deferred tax effect in unrealized gains on    derivatives |   | $      | (69,545    | )      |   | $      | 97,625      |   |   | $ | (28,235 |  ) |

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|                                              |   | 2008   |      |   | 2007   |   |      | 2006   |   |
|---------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Basic      weighted average shares outstanding    |   |   | 2,117,966 |   |   |   | 2,117,966 |   |   |   | 2,117,529 |   |
| Dilutive      effect of stock options             |   |   | 0         |   |   |   | 1,600     |   |   |   | 4,317 |   |
|                                              |   |   |      |   |   |   |      |   |   |   |   |   |
| Dilutive      weighted average shares outstanding |   |   | 2,117,966 |   |   |   | 2,119,566 |   |   |   | 2,121,846 |   |
| Net      income                                   |   | $      | 3,502,763 |   |   | $      | 3,005,781 |   |   | $ | 3,578,583 |   |
| Net      income per share-basic                   |   | $      | 1.65      |   |   | $      | 1.42      |   |   | $ | 1.69 |   |
| Net      income per share-dilutive                |   | $      | 1.65      |   |   | $      | 1.42      |   |   | $ | 1.69 |   |

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|                                                                                                                                                        |   |      |       |   | Gross      |   |    | Gross      |   |   |     |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|------------|--------|------------|--------|---------|------------|--------|--------|----------|--------|
|                                                                                                                                                        |   | Amortized |       |   | Unrealized |   |    | Unrealized |   |   | Fair     |   |
|                                                                                                                                                        |   | Cost      |       |   | Gains      |   |    | Losses     |   |   | Value    |   |
| Obligations      of State and                                                                                                                               |   |      |       |   |       |   |    |       |   |   |     |   |
| Political      Subdivisions                                                                                                                                 |   | $         | 39,529,246 |   |       | $      | 573,387 |       |   | $      | (842,953 | )      |   | $ | 39,259,680 |   |
| Mortgage-Backed      Securities                                                                                                                             |   |      | 15,285,767 |   |       |   | 297,645 |       |   |   | -        |   |   |   | 15,583,412 |   |
|                          Total |   | $         | 54,815,013 |   |       | $      | 871,032 |       |   | $      | (842,953 | )      |   | $ | 54,843,091 |   |

|                                                                                                                                                        |   |      |        |   | Gross      |   |      | Gross      |   |   |    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|-------------|--------|------------|--------|-----------|------------|--------|--------|---------|--------|
|                                                                                                                                                        |   | Amortized |        |   | Unrealized |   |      | Unrealized |   |   | Fair    |   |
|                                                                                                                                                        |   | Cost      |        |   | Gains      |   |      | Losses     |   |   | Value   |   |
|  Mortgage-Backed      Securities                                                                                                                       |   | $         | 108,548,988 |   |       | $      | 3,365,814 |       |   | $      | (19,325 | )      |   | $ | 111,895,476 |   |
|                          Total |   | $         | 108,548,988 |   |       | $      | 3,365,814 |       |   | $      | (19,325 | )      |   | $ | 111,895,476 |   |

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|                                                                                                                                                        |   |      |       |   | Gross      |   |    | Gross      |   |   |     |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|------------|--------|------------|--------|---------|------------|--------|--------|----------|--------|
|                                                                                                                                                        |   | Amortized |       |   | Unrealized |   |    | Unrealized |   |   | Fair     |   |
|                                                                                                                                                        |   | Cost      |       |   | Gains      |   |    | Losses     |   |   | Value    |   |
| Obligations      of State and                                                                                                                               |   |      |       |   |       |   |    |       |   |   |     |   |
| Political      Subdivisions                                                                                                                                 |   | $         | 38,004,634 |   |       | $      | 926,882 |       |   | $      | (286,861 | )      |   | $ | 38,644,655 |   |
| Mortgage-Backed      Securities                                                                                                                             |   |      | 1,983,671  |   |       |   | 11,568  |       |   |   | -        |   |   |   | 1,995,239 |   |
|                          Total |   | $         | 39,988,305 |   |       | $      | 938,451 |       |   | $      | (286,861 | )      |   | $ | 40,639,894 |   |

|                                                                                                                                                        |   |      |       |   | Gross      |   |    | Gross      |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|------------|--------|------------|--------|---------|------------|--------|--------|--------|--------|
|                                                                                                                                                        |   | Amortized |       |   | Unrealized |   |    | Unrealized |   |   | Fair   |   |
|                                                                                                                                                        |   | Cost      |       |   | Gains      |   |    | Losses     |   |   | Value  |   |
|  Mortgage-Backed      Securities                                                                                                                       |   | $         | 63,612,681 |   |       | $      | 376,987 |       |   | $      | (6,522 | )      |   | $ | 63,983,146 |   |
|                          Total |   | $         | 63,612,681 |   |       | $      | 376,987 |       |   | $      | (6,522 | )      |   | $ | 63,983,146 |   |

|                                                                                                                                                        |   |      |       |   | Gross      |   |   | Gross      |   |   |    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|------------|--------|------------|--------|--------|------------|--------|--------|---------|--------|
|                                                                                                                                                        |   | Amortized |       |   | Unrealized |   |   | Unrealized |   |   | Fair    |   |
|                                                                                                                                                        |   | Cost      |       |   | Gains      |   |   | Losses     |   |   | Value   |   |
|  Mortgage-Backed      Securities                                                                                                                       |   | $         | 19,144,678 |   |       | $      | 65,250 |       |   | $      | (10,721 | )      |   | $ | 19,199,207 |   |
|                          Total |   | $         | 19,144,678 |   |       | $      | 65,250 |       |   | $      | (10,721 | )      |   | $ | 19,199,207 |   |

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|                            |   | Less      than 12 Months |       |   | 12      Months or More |   |     | Total  |   |
|---------------------------------|--------|--------------------------|------------|--------|------------------------|--------|----------|--------|--------|
|                            |   | Fair                     |       |   | Unrealized             |   |     | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                            |   | Value                    |       |   | Loss                   |   |     | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
| Held-to-Maturity:               |   |                     |       |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |
|  Obligations      of       |   |                     |       |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| State      and Political        |   |                     |       |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Subdivisions      (38)          |   | $                        | 10,348,081 |   |                   | $      | (541,309 | )      |   | $ | 2,897,458 |   |   | $ | (301,645 | ) |   | $ | 13,245,539 |   |   | $ | (842,954 | ) |
|  Total                     |   | $                        | 10,348,081 |   |                   | $      | (541,309 | )      |   | $ | 2,897,458 |   |   | $ | (301,645 | ) |   | $ | 13,245,539 |   |   | $ | (842,954 | ) |
|                            |   |                     |       |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available      for Sale:        |   |                     |       |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgaged-backed                |   |                     |       |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Securities      (2) |   | $                        | 1,262,919  |   |                   | $      | (19,325  | )      |   |   | - |   |   |   | - |   |   | $ | 1,262,919 |   |   | $ | (19,325 | ) |
|  Total                     |   | $                        | 1,262,919  |   |                   | $      | (19,325  | )      |   |   | - |   |   |   | - |   |   | $ | 1,262,919 |   |   | $ | (19,325 | ) |

|                            |   | Less      than 12 Months |      |   | 12      Months or More |   |     | Total  |   |
|---------------------------------|--------|--------------------------|-----------|--------|------------------------|--------|----------|--------|--------|
|                            |   | Fair                     |      |   | Unrealized             |   |     | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                            |   | Value                    |      |   | Loss                   |   |     | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
| Held-to-Maturity:               |   |                     |      |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |
|  Obligations      of       |   |                     |      |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| State      and Political        |   |                     |      |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Subdivisions      (25)          |   | $                        | 7,167,727 |   |                   | $      | (205,231 | )      |   | $ | 1,683,047 |   |   | $ | (81,630 | ) |   | $ | 8,850,774 |   |   | $ | (286,861 | ) |
|  Total                     |   | $                        | 7,167,727 |   |                   | $      | (205,231 | )      |   | $ | 1,683,047 |   |   | $ | (81,630 | ) |   | $ | 8,850,774 |   |   | $ | (286,861 | ) |
|                            |   |                     |      |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available      for Sale:        |   |                     |      |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgaged-backed                |   |                     |      |   |                   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Securities      (1) |   | $                        | -         |   |                   | $      | -        |   |   | $ | 289,977 |   |   | $ | (6,522 | ) |   | $ | 289,977 |   |   | $ | (6,522 | ) |
|  Total                     |   | $                        | -         |   |                   | $      | -        |   |   | $ | 289,977 |   |   | $ | (6,522 | ) |   | $ | 289,977 |   |   | $ | (6,522 | ) |

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|                                        |   | Securities      held-to-maturity |   |
|---------------------------------------------|--------|----------------------------------|--------|
|                                        |   | Weighted      Average Yield      |   |   | Amortized      Cost |   |   | Market      Value |   |
| Due      in One Year or Less                |   |                             | 5.935  | % |   | $ | 405,000 |   |   | $ | 406,717 |   |
| Due      After One Year through Five Years  |   |                             | 7.277  | % |   |   | 4,384,500 |   |   |   | 4,476,587 |   |
| Due      After Five Years through Ten Years |   |                             | 6.807  | % |   |   | 20,892,895 |   |   |   | 21,228,772 |   |
| Due      After Ten Years                    |   |                             | 5.934  | % |   |   | 29,132,618 |   |   |   | 28,731,015 |   |
|                                        |   |                             | 6.377  | % |   | $ | 54,815,013 |   |   | $ | 54,843,091 |   |

|                                        |   | Securities      available-for-sale |   |
|---------------------------------------------|--------|------------------------------------|--------|
|                                        |   | Weighted      Average Yield        |   |   | Amortized      Cost |   |   | Market      Value |   |
| Due      in One Year or Less                |   |                               | 0.000  | % |   | $ | - |   |   | $ | - |   |
| Due      After One Year through Five Years  |   |                               | 0.000  | % |   |   | - |   |   |   | - |   |
| Due      After Five Years through Ten Years |   |                               | 0.000  | % |   |   | - |   |   |   | - |   |
| Due      After Ten Years                    |   |                               | 5.526  | % |   |   | 108,548,988 |   |   |   | 111,895,476 |   |
|                                        |   |                               | 5.526  | % |   | $ | 108,548,988 |   |   | $ | 111,895,476 |   |

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|    Description                                                                             |   | Balance      Sheet at January 1, 2007, Prior to Adoption |       |   |  Net      Loss Upon Adoption |   |     | Balance      Sheet At January 1, 2007, After Adoption of Fair Value    Option |   |
|-----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|--------|-----------------------------------|--------|----------|-------------------------------------------------------------------------------|--------|
|  Investment      Securities                                                                          |   | $                                                        | 20,387,696 |   |                              | $      | (657,080 | )                                                                             |   | $ | 19,730,616 |   |
|  Increase      in Deferred Tax Asset                                                                 |   |                                                     |       |   |                              |   | 245,091  |                                                                          |   |   |   |   |
|  Cumulative      Effect of the adoption of the Fair Value Option (charged to retained      earnings) |   |                                                     |       |   |                              | $      | (411,989 | )                                                                             |   |   |   |   |

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|    Description |   | Fair      Value Measurements at December 31, 2008 |        | Quoted      Prices in Active Markets for Identical Assets(Level      1) |   |        Significant      Other Observable Inputs(Level      2) |   |         Significant      Unobservable Inputs(Level      3) |
|-------------------------------|--------|---------------------------------------------------|-------------|-------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
|  Available-for-sale      |   | $                                                 | 111,895,476 |                                                                    |   |                                                                                             | $      | 111,895,476                                                                                        |   |   |

|                                        |   | 2008   |        |   | 2007   |   |
|---------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                        |   |   |        |   |   |   |
| Commercial,      Financial and Agricultural |   | $      | 25,128,000  |   |   | $      | 25,884,000 |   |
| Real      Estate-Construction               |   |   | 30,910,000  |   |   |   | 45,097,000 |   |
| Real      Estate-Mortgage                   |   |   | 163,264,000 |   |   |   | 144,561,000 |   |
| Installment                                 |   |   | 6,038,000   |   |   |   | 7,550,000 |   |
| Overdrafts                                  |   |   | 171,000     |   |   |   | 261,000 |   |
|    Total      loans          |   | $      | 225,511,000 |   |   | $      | 223,353,000 |   |
|                                        |   |   |        |   |   |   |   |   |

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|                        |   | 2008   |       |   | 2007   |   |
|-----------------------------|--------|--------|------------|--------|--------|--------|
| Balance      at January 1   |   | $      | 2,406,672  |   |   | $      | 3,255,659 |   |
| New      Loans              |   |   | 949,898    |   |   |   | 840,313 |   |
| Repayments                  |   |   | (1,616,796 | )      |   |   | (1,689,300 | ) |
| Transfers      out          |   |   | (345,681   | )      |   |   | - |   |
| Balance      at December 31 |   | $      | 1,394,093  |   |   | $      | 2,406,672 |   |

|                                        |   | 2008   |       |   | 2007   |   |      | 2006   |   |
|---------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
| Balance      at January 1                   |   | $      | 2,430,936  |   |   | $      | 2,344,434 |   |   | $ | 2,377,840 |   |
| Credits      charged off:                   |   |   |       |   |   |   |      |   |   |   |   |   |
| Real      Estate – Mortgage           |   |   | (582,756   | )      |   |   | (283,733  | )      |   |   | (7,501 | ) |
| Commercial,      Financial and Agricultural |   |   | (541,228   | )      |   |   | (86,854   | )      |   |   | (570,717 | ) |
| Installment      Loans                      |   |   | (38,590    | )      |   |   | (136,380  | )      |   |   | (64,488 | ) |
| Total      Charge-Offs                      |   |   | (1,162,574 | )      |   |   | (506,967  | )      |   |   | (642,706 | ) |
| Recoveries:                                 |   |   |       |   |   |   |      |   |   |   |   |   |
| Real      Estate - Mortgage                 |   |   | 89,052     |   |   |   | 4,703     |   |   |   | 77,198 |   |
| Commercial,      Financial and Agricultural |   |   | 223,462    |   |   |   | 109,714   |   |   |   | 25,991 |   |
| Installment      Loans                      |   |   | 86,926     |   |   |   | 39,052    |   |   |   | 31,111 |   |
| Total      Recoveries                       |   |   | 399,440    |   |   |   | 153,469   |   |   |   | 134,300 |   |
| Net      Credits Charged Off                |   |   | (763,134   | )      |   |   | (353,498  | )      |   |   | (508,406 | ) |
| Provision      for Loan Losses              |   |   | 730,000    |   |   |   | 440,000   |   |   |   | 475,000 |   |
| Balance      at December 31                 |   | $      | 2,397,802  |   |   | $      | 2,430,936 |   |   | $ | 2,344,434 |   |

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|                                  |   | 2008   |       |   | 2007   |   |
|---------------------------------------|--------|--------|------------|--------|--------|--------|
| Buildings      and Improvements       |   | $      | 7,440,015  |   |   | $      | 7,403,176 |   |
| Furniture      and Equipment          |   |   | 5,225,219  |   |   |   | 5,582,038 |   |
|                                  |   |   | 12,665,234 |   |   |   | 12,985,214 |   |
| Less:      Accumulated Depreciation   |   |   | (6,856,953 | )      |   |   | (6,741,982 | ) |
| Land                                  |   |   | 1,114,553  |   |   |   | 1,114,553 |   |
| Bank      Premises and Equipment, Net |   | $      | 6,922,835  |   |   | $      | 7,357,785 |   |

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|                                      |   | 2008   |        |   | 2007   |   |
|-------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Non-Interest      Bearing Demand Deposits |   | $      | 51,119,827  |   |   | $      | 47,305,927 |   |
| NOW      Accounts                         |   |   | 48,338,323  |   |   |   | 24,056,081 |   |
| Money      Market Deposit Accounts        |   |   | 33,662,518  |   |   |   | 34,449,399 |   |
| Savings      Accounts                     |   |   | 17,736,516  |   |   |   | 17,310,284 |   |
| Certificates      of Deposit              |   |   | 106,357,236 |   |   |   | 123,272,459 |   |
|                                      |   | $      | 257,214,420 |   |   | $      | 246,394,150 |   |

|                                |   | 2008   |       |   | 2007   |   |
|-------------------------------------|--------|--------|------------|--------|--------|--------|
| Time      Remaining Until Maturity: |   |   |       |   |   |   |
| Three      Months or Less           |   | $      | 21,104,104 |   |   | $      | 13,693,963 |   |
| Over      Three Through Six Months  |   |   | 10,266,988 |   |   |   | 16,183,305 |   |
| Over      Six Through Twelve Months |   |   | 12,796,081 |   |   |   | 18,119,579 |   |
| Over      Twelve Months             |   |   | 3,417,858  |   |   |   | 4,210,503 |   |
|                                |   | $      | 47,585,031 |   |   | $      | 52,207,350 |   |

| 2009   |   | $      | 95,658,656  |   |
|--------|--------|--------|-------------|--------|
| 2010   |   |   | 5,832,395   |   |
| 2011   |   |   | 1,145,611   |   |
| 2012   |   |   | 1,776,546   |   |
| 2013   |   |   | 1,944,028   |   |
|   |   | $      | 106,357,236 |   |

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| 2009   |   | $      | 54,929,107 |   |
|--------|--------|--------|------------|--------|
| 2010   |   |   | 10,824     |   |
|   |   | $      | 54,939,931 |   |

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| The      summary of stock option activity is shown below: |   |        |    |   | Weighted            |   |
|-----------------------------------------------------------|--------|-------------|---------|--------|---------------------|--------|
|                                                      |   | Options     |    |   | Average             |   |
|                                                      |   | Outstanding |    |   | Exercise      Price |   |
| December      31, 2006                                    |   |        | 28,370  |   |                | $      | 17.51 |   |
| Options      granted                                      |   |        | 14,000  |   |                |   | 19.02 |   |
| Options      expired                                      |   |        | (12,500 | )      |                |   | 19.94 |   |
| Options      forfeited                                    |   |        | (2,000  | )      |                |   | 14.50 |   |
| December      31, 2007                                    |   |        | 27,870  |   |                | $      | 17.40 |   |
| Options      granted                                      |   |        | -       |   |                |   | - |   |
| Options      expired                                      |   |        | -       |   |                |   | - |   |
| Options      forfeited                                    |   |        | (750    | )      |                |   | 14.50 |   |
| December      31, 2008                               |   |        | 27,120  |   |                | $      | 17.48 |   |

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| Exercise      Price     | Options      Outstanding | Remaining      Contractual Life |
|-------------------------|--------------------------|---------------------------------|
| $      19.02            | 14,000                   | 3.4      years                  |
|    14.50 |   8,120        | 2.9      years                  |
|    18.00 |   5,000        | 1.3      years                  |

| Assumption               | 2007         |
|--------------------------|--------------|
|                     |         |
| Dividend      yield      | 3.76%        |
| Risk      free rate      | 5.06%        |
| Expected      life       | 5      years |
| Expected      volatility | 21.23%       |

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| 2009                         |   | $      | 105,792 |   |
|------------------------------|--------|--------|---------|--------|
| 2010                         |   |   | 105,792 |   |
| 2011                         |   |   | 105,792 |   |
| 2012                         |   |   | 105,792 |   |
| 2013                         |   |   | 83,844  |   |
|    Thereafter |   |   | 13,500  |   |
|                         |   | $      | 520,512 |   |

|     |   | 2008   |      |   | 2007   |   |     | 2006   |   |
|----------|--------|--------|-----------|--------|--------|--------|----------|--------|--------|
| Current  |   | $      | 1,481,016 |   |   | $      | 988,013  |   |   | $ | 1,308,927 |   |
| Deferred |   |   | (171,022  | )      |   |   | (131,765 | )      |   |   | (114,945 | ) |
|     |   | $      | 1,309,994 |   |   | $      | 856,248  |   |   | $ | 1,193,982 |   |

|                             |   | 2008   |      |   | 2007   |   |      | 2006   |   |
|----------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
|                             |   |   |      |   |   |   |      |   |   |
| Tax      Based on Statutory Rate |   | $      | 1,636,337 |   |   | $      | 1,313,090 |   |   | $ | 1,622,672 |   |
| State      Taxes                 |   |   | 153,470   |   |   |   | 129,291   |   |   |   | 108,971 |   |
| Effect      of Tax-Exempt Income |   |   | (571,665  | )      |   |   | (568,290  | )      |   |   | (565,412 | ) |
| Other                            |   |   | 91,852    |   |   |   | (17,843   | )      |   |   | 27,751 |   |
|                             |   |   |      |   |   |   |      |   |   |   |   |   |
|                             |   | $      | 1,309,994 |   |   | $      | 856,248   |   |   | $ | 1,193,982 |   |

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|                                                  |   | 2008   |       |   | 2007   |   |       | 2006   |   |
|-------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Deferred      Tax Liabilities:                        |   |   |       |   |   |   |       |   |   |
| Unrealized      gain on available-for-sale securities |   | $      | (1,248,240 | )      |   | $      | (138,183   | )      |   | $ | - |   |
| Unrealized      gain on derivatives                   |   |   | -          |   |   |   | (69,545    | )      |   |   | - |   |
| Depreciation                                          |   |   | (916,118   | )      |   |   | (954,487   | )      |   |   | (978,128 | ) |
| Federal      Home Loan Bank dividends                 |   |   | (129,121   | )      |   |   | (160,248   | )      |   |   | (271,687 | ) |
| Mark      to Market trading securities                |   |   | -          |   |   |   | (54,045    | )      |   |   | - |   |
| Other                                                 |   |   | -          |   |   |   | -          |   |   |   | (6,869 | ) |
|                                                  |   |   | (2,293,479 | )      |   |   | (1,376,508 | )      |   |   | (1,256,685 | ) |
| Deferred      Tax Assets:                             |   |   |       |   |   |   |       |   |   |   |   |   |
| Unrealized      Loss on available-for-sale securities |   |   | -          |   |   |   | -          |   |   |   | 433,083 |   |
| Unrealized      loss on derivatives                   |   |   | -          |   |   |   | -          |   |   |   | 28,080 |   |
| Provision      for loan losses                        |   |   | 604,579    |   |   |   | 616,938    |   |   |   | 584,673 |   |
| Other      real estate                                |   |   | 111,635    |   |   |   | 59,400     |   |   |   | 19,463 |   |
| Voluntary      severance                              |   |   | -          |   |   |   | -          |   |   |   | 35,293 |   |
| Other                                                 |   |   | 180,267    |   |   |   | 172,662    |   |   |   | 165,713 |   |
|                                                  |   |   | 896,481    |   |   |   | 849,000    |   |   |   | 1,266,305 |   |
|  Net      Deferred Tax Asset/(Liability)         |   | $      | (1,396,998 | )      |   | $      | (527,508   | )      |   | $ | 9,620 |   |

|                                               |   | 2008   |       |   | 2007   |   |     | 2006   |   |
|----------------------------------------------------|--------|--------|------------|--------|--------|--------|----------|--------|--------|
| Balance      at beginning of year                  |   | $      | (527,508   | )      |   | $      | 9,620    |   |   | $ | 35,974 |   |
| Deferred      tax expense, charged to operations   |   |   | 171,022    |   |   |   | 131,764  |   |   |   | 114,945 |   |
| Other      comprehensive income, charged to equity |   |   | (1,040,512 | )      |   |   | (668,892 | )      |   |   | (141,299 | ) |
|  Balance      at end of year                  |   | $      | (1,396,998 | )      |   | $      | (527,508 | )      |   | $ | 9,620 |   |

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|                            |   | Actual                      |   |   | Minimum      Capital Requirement |   |   | Minimum      To Be Well Capitalized Under Prompt Corrective Action      Provisions |   |
|---------------------------------|--------|-----------------------------|--------|--------|----------------------------------|--------|--------|-----------------------------------------------------------------------------------------|--------|
|                            |   | Amount                      |   |   | Ratio                            |   |   | Amount                                                                                  |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                            |   | (dollars      in thousands) |   |
| As      of December 31, 2008    |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Total      Capital (to Risk-    |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Weighted      Assets)           |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
|    Consolidated  |   | $                           | 44,283 |   |                             |   | 17.31  | %                                                                                       |   | $ | 20,467 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|    The      Bank |   | $                           | 39,335 |   |                             |   | 15.39  | %                                                                                       |   | $ | 20,450 |   |   |   | 8.00 | % |   | $ | 25,562 |   |   |   | 10.00 | % |
| Tier      I Capital (to Risk-   |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      Assets)           |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Consolidated  |   | $                           | 41,885 |   |                             |   | 16.37  | %                                                                                       |   | $ | 10,234 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|    The      Bank |   | $                           | 36,937 |   |                             |   | 14.45  | %                                                                                       |   | $ | 10,225 |   |   |   | 4.00 | % |   | $ | 15,337 |   |   |   | 6.00 | % |
| Tier      I Capital (to Average |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets)                         |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Consolidated  |   | $                           | 41,885 |   |                             |   | 10.49  | %                                                                                       |   | $ | 15,973 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|    The      Bank |   | $                           | 36,937 |   |                             |   | 9.36   | %                                                                                       |   | $ | 15,789 |   |   |   | 4.00 | % |   | $ | 19,736 |   |   |   | 5.00 | % |

|                            |   | Actual                      |   |   | Minimum      Capital Requirement |   |   | Minimum      To Be Well Capitalized Under Prompt Corrective Action      Provisions |   |
|---------------------------------|--------|-----------------------------|--------|--------|----------------------------------|--------|--------|-----------------------------------------------------------------------------------------|--------|
|                            |   | Amount                      |   |   | Ratio                            |   |   | Amount                                                                                  |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                            |   | (dollars      in thousands) |   |
| As      of December 31, 2007    |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Total      Capital (to Risk-    |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Weighted      Assets)           |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
|    Consolidated  |   | $                           | 42,217 |   |                             |   | 16.36  | %                                                                                       |   | $ | 20,643 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|    The      Bank |   | $                           | 38,285 |   |                             |   | 14.84  | %                                                                                       |   | $ | 20,637 |   |   |   | 8.00 | % |   | $ | 25,797 |   |   |   | 10.00 | % |
| Tier      I Capital (to Risk-   |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      Assets)           |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Consolidated  |   | $                           | 39,786 |   |                             |   | 15.42  | %                                                                                       |   | $ | 10,321 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|    The      Bank |   | $                           | 35,854 |   |                             |   | 13.90  | %                                                                                       |   | $ | 10,319 |   |   |   | 4.00 | % |   | $ | 15,478 |   |   |   | 6.00 | % |
| Tier      I Capital (to Average |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets)                         |   |                        |   |   |                             |   |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Consolidated  |   | $                           | 39,786 |   |                             |   | 10.98  | %                                                                                       |   | $ | 14,500 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|    The      Bank |   | $                           | 35,854 |   |                             |   | 9.84   | %                                                                                       |   | $ | 14,577 |   |   |   | 4.00 | % |   | $ | 18,221 |   |   |   | 5.00 | % |

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|                                          |   | 2008       |    |   | 2007                        |   |
|-----------------------------------------------|--------|------------|---------|--------|-----------------------------|--------|
|                                          |   | Carrying   |    |   | Fair                        |   |   | Carrying |   |   | Fair |   |
|                                          |   | Amount     |    |   | Value                       |   |   | Amount |   |   | Value |   |
|                                          |   |       |    |   | (dollars      in Thousands) |   |   |   |   |
| Financial      Assets:                        |   |       |    |   |                        |   |   |   |   |   |   |   |
| Cash      and due from banks                  |   | $          | 6,951   |   |                        | $      | 6,951 |   |   | $ | 8,732 |   |   | $ | 8,732 |   |
| Federal      funds sold                       |   |       | -       |   |                        |   | - |   |   |   | 245 |   |   |   | 245 |   |
| Investment      securities:                   |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|    Held-to-maturity            |   |       | 54,815  |   |                        |   | 54,843 |   |   |   | 39,988 |   |   |   | 40,640 |   |
|    Available-for-sale          |   |       | 111,895 |   |                        |   | 111,895 |   |   |   | 63,983 |   |   |   | 63,983 |   |
| Trading                                       |   |       | -       |   |                        |   | - |   |   |   | 19,199 |   |   |   | 19,199 |   |
|    Equity      securities      |   |       | 4,010   |   |                        |   | 4,010 |   |   |   | 2,521 |   |   |   | 2,521 |   |
| Cash      surrender value of life insurance   |   |       | 1,056   |   |                        |   | 1,056 |   |   |   | 1,014 |   |   |   | 1,014 |   |
| Loans,      net                               |   |       | 223,114 |   |                        |   | 224,428 |   |   |   | 220,922 |   |   |   | 234,744 |   |
|                                          |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Financial      Liabilities:                   |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                      |   |       | 257,214 |   |                        |   | 258,320 |   |   |   | 246,394 |   |   |   | 246,659 |   |
| Short-term      borrowings                    |   |       | 54,121  |   |                        |   | 54,107 |   |   |   | 26,735 |   |   |   | 26,738 |   |
| Long-term      borrowings                     |   |       | 819     |   |                        |   | 825 |   |   |   | 2,426 |   |   |   | 2,423 |   |
| Securities      sold under                    |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|    repurchase      agreements: |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Retail                                        |   |       | 11,634  |   |                        |   | 11,638 |   |   |   | 8,229 |   |   |   | 7,122 |   |
| Structured                                    |   |       | 40,000  |   |                        |   | 44,185 |   |   |   | 40,000 |   |   |   | 41,581 |   |
| Junior      subordinated debentures           |   |       | 5,155   |   |                        |   | 5,155 |   |   |   | 5,155 |   |   |   | 5,155 |   |
|                                          |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                          |   | FaceAmount |    |   | Fair Value             |   |   | FaceAmount |   |   | Fair Value |   |
|                                          |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Other:                                        |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Commitments      to extend credit             |   | $          | 52,133  |   |                        | $      | 52,133 |   |   | $ | 58,419 |   |   | $ | 58,419 |   |
| Standby      letters of credit                |   |       | 3,575   |   |                        |   | 3,575 |   |   |   | 2,808 |   |   |   | 2,808 |   |
| Interest      rate swap                       |   |       | -       |   |                        |   | - |   |   |   | 186 |   |   |   | 186 |   |
|                                          |   |       |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |

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|                                           |   | December      31 |       |
|------------------------------------------------|--------|------------------|------------|
|                                           |   | 2008             |       |   | 2007 |   |
| ASSETS:                                        |   |             |       |   |   |   |
| Cash                                           |   | $                | 4,659,463  |   |   | $ | 3,681,391 |   |
| Investment      in subsidiaries                |   |             | 39,903,724 |   |   |   | 37,179,848 |   |
| Other      assets                              |   |             | 136,849    |   |   |   | 70,154 |   |
| TOTAL      ASSETS                              |   | $                | 44,700,036 |   |   | $ | 40,931,393 |   |
| LIABILITIES:                                   |   |             |       |   |   |   |   |   |
| Junior      subordinated debentures            |   | $                | 5,155,000  |   |   | $ | 5,155,000 |   |
| Other      liabilities                         |   |             | 3,967      |   |   |   | (24,472 | ) |
| TOTAL      LIABILITIES                         |   |             | 5,158,967  |   |   |   | 5,130,528 |   |
| STOCKHOLDERS’      EQUITY                |   |             | 39,541,069 |   |   |   | 35,800,865 |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS’ |   |             |       |   |   |   |   |   |
| EQUITY                                         |   | $                | 44,700,036 |   |   | $ | 40,931,393 |   |

|                                      |   | Years      Ended December 31, |      |
|-------------------------------------------|--------|-------------------------------|-----------|
|                                      |   | 2008                          |      |   | 2007 |   |   | 2006 |   |
| REVENUE:                                  |   |                          |      |   |   |   |   |   |   |
| Dividends      Received:                  |   |                          |      |   |   |   |   |   |   |
| Britton      & Koontz Bank, N.A.      |   | $                             | 2,800,000 |   |   | $ | 2,800,000 |   |   | $ | 2,500,000 |   |
| Other      income                         |   |                          | 3,633     |   |   |   | 3,058 |   |   |   | 3,308 |   |
|                                      |   |                          | 2,803,633 |   |   |   | 2,803,058 |   |   |   | 2,503,308 |   |
| EXPENSES                                  |   |                          | 439,234   |   |   |   | 558,952 |   |   |   | 675,339 |   |
|                                      |   |                          | 2,364,399 |   |   |   | 2,244,106 |   |   |   | 1,827,969 |   |
| INCOME      TAX EXPENSE (BENEFIT)         |   |                          | (163,551  | ) |   |   | (208,344 | ) |   |   | (273,332 | ) |
|                                      |   |                          | 2,527,950 |   |   |   | 2,452,450 |   |   |   | 2,101,301 |   |
| EQUITY      IN UNDISTRIBUTED              |   |                          |      |   |   |   |   |   |   |   |   |   |
| EARNINGS:                                 |   |                          |      |   |   |   |   |   |   |   |   |   |
| Britton      & Koontz Bank, N.A.      |   |                          | 975,255   |   |   |   | 542,479 |   |   |   | 1,464,176 |   |
| B&K      Title Insurance Agency, Inc. |   |                          | (442      | ) |   |   | 10,852 |   |   |   | 13,106 |   |
| NET      INCOME                           |   | $                             | 3,502,763 |   |   | $ | 3,005,781 |   |   | $ | 3,578,583 |   |

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|                                            |   | Years      Ended December 31, |       |
|-------------------------------------------------|--------|-------------------------------|------------|
|                                            |   | 2008                          |       |   | 2007 |   |   | 2006 |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES:      |   |                          |       |   |   |   |   |   |   |
| Net      Income                                 |   | $                             | 3,502,763  |   |   | $ | 3,005,781 |   |   | $ | 3,578,583 |   |
| Adjustments      to reconcile net income to net |   |                          |       |   |   |   |   |   |   |   |   |   |
| cash      provided by operating activities:     |   |                          |       |   |   |   |   |   |   |   |   |   |
| Equity      on undistributed earnings           |   |                          |       |   |   |   |   |   |   |   |   |   |
| and      losses of affiliates                   |   |                          | (974,813   | ) |   |   | (553,331 | ) |   |   | (1,477,282 | ) |
| (Increase)      decrease in other assets        |   |                          | 2,781      |   |   |   | 25,403 |   |   |   | 184,413 |   |
| Increase      in other liabilities              |   |                          | (41,035    | ) |   |   | (61,123 | ) |   |   | 30,061 |   |
| Net      Cash Provided by Operating Activities  |   |                          | 2,489,696  |   |   |   | 2,416,730 |   |   |   | 2,315,775 |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES:      |   |                          |       |   |   |   |   |   |   |   |   |   |
| Cash      dividends paid                        |   |                          | (1,524,936 | ) |   |   | (1,524,936 | ) |   |   | (1,524,619 | ) |
| Fair      value of stock options                |   |                          | 13,312     |   |   |   | 10,735 |   |   |   | 10,003 |   |
| Cash      received from stock options exercised |   |                          | -          |   |   |   | - |   |   |   | 35,244 |   |
| Net      Cash (Used in) Financing Activities    |   |                          | (1,511,624 | ) |   |   | (1,514,201 | ) |   |   | (1,479,372 | ) |
| NET      INCREASE (DECREASE) IN CASH            |   |                          | 978,072    |   |   |   | 902,529 |   |   |   | 836,403 |   |
| CASH      AT BEGINNING OF YEAR                  |   |                          | 3,681,391  |   |   |   | 2,778,862 |   |   |   | 1,942,459 |   |
| CASH      AT END OF YEAR                        |   | $                             | 4,659,463  |   |   | $ | 3,681,391 |   |   | $ | 2,778,862 |   |

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Item 9. 

Item 9A(T).  

Item 9B.

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PART III

Item 10.

| DIRECTORS                                                                                                       |
|-----------------------------------------------------------------------------------------------------------------|
|                                                                                                            |
| Robert      R. Punches                                                                                          |
| Partner,      Gwin, Lewis & Punches, LLP                                                                    |
| Chairman,      Britton & Koontz Capital Corporation                                                         |
|                                                                                                            |
|                                                                                                            |
| W.      W. Allen, Jr.                                                                                           |
| President,      Allen Petroleum Services, IncVice      Chairman, Britton & Koontz Capital Corporation  |
|                                                                                                            |
| W.      Page Ogden                                                                                              |
| President      & Chief Executive Officer                                                                    |
| Britton      & Koontz Capital CorporationBritton      & Koontz Bank, National Association          |
|                                                                                                            |
| Craig      A. Bradford, D.M.D.                                                                                  |
| Pediatric      Dentist                                                                                          |
|                                                                                                            |
|                                                                                                            |
| George      R. Kurz                                                                                             |
| Principal,      Kurz & Hebert                                                                               |
|                                                                                                            |
|  Bethany      L. Overton                                                                                   |
| President,      Lambdin-Bisland Realty Co.                                                                      |
|                                                                                                            |
|                                                                                                            |
| Vinod      K. Thukral, Ph.D.                                                                                    |
| Retired      University Professor                                                                               |
|                                                                                                            |
|                                                                                                            |
|                                                                                                            |

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| EXECUTIVE      OFFICERS                                                                                       |
|---------------------------------------------------------------------------------------------------------------|
|                                                                                                          |
| W.      Page Ogden                                                                                            |
| President      & Chief Executive Officer                                                                  |
| Britton      & Koontz Capital CorporationBritton      & Koontz Bank, National Association             |
|                                                                                                     |
| William      M. Salters                                                                                       |
| Treasurer,      Chief Financial & Accounting Officer                                                      |
| Britton      & Koontz Capital CorporationBritton      & Koontz Bank, National Association   |
| Jarrett      E. Nicholson                                                                                     |
| Credit      Policy Officer and Chief Operations Officer                                                       |
| Britton      & Koontz Capital Corporation                                                                 |
| Britton      & Koontz Bank, NationalAssociation                                                           |

Item 

Item 12

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| Plan category                                                   |   |  Number      of securities to be issued upon exercise of outstanding options, warrants and rights |    |   | Weighted-average      exercise price of outstanding options, warrants and rights |   |    | Number      of securities remaining available for future      issuance |   |
|-----------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------------|--------|---------|------------------------------------------------------------------------|--------|
| Equity      compensation plans approved by security holders(1)  |   |                                                                                                   | 27,120  |   |                                                                             | $      | 17.48   |                                                                   |   |   | 87,880 |   |
| Equity      compensation plans not approved by security holders |   |                                                                                                   | — |   |                                                                             |   | — |                                                                   |   |   | — |   |
| Total                                                           |   |                                                                                                   | 27,120  |   |                                                                             | $      | 17.48   |                                                                   |   |   | 87,880 |   |

| (1) | An      aggregate of 115,000 shares of common stock are authorized for issuance      under the 2007 LTIP.  This amount includes 28,370 newly-reserved      shares and 86,630 shares that remained available for grant or award under      the 1996 LTIP at the time of itsexpiration. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 13

Item 14

PART IV

Item 15

| 1.   | Consolidated      Financial Statements and Supplementary Information for Years Ended      December 31, 2008, 2007 and 2006, which include the    following: |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)   | Management’s      Annual Report on Internal Control over Financial  Reporting |
|-----------------|-------------------------------------------------------------------------------------|

| (b)   | Report      of Independent Registered Public AccountingFirm |
|-----------------|-------------------------------------------------------------|

| (c)   | Consolidated      Balance Sheets |
|-----------------|----------------------------------|

| (d)   | Consolidated      Statements of Income |
|-----------------|----------------------------------------|

| (e)   | Consolidated      Statements of Changes in Stockholders’Equity |
|-----------------|----------------------------------------------------------------------|

| (f)   | Consolidated      Statement of Cash Flows |
|-----------------|-------------------------------------------|

| (g)   | Notes      to the Consolidated FinancialStatements |
|-----------------|----------------------------------------------------|

| 2.   | Financial      Statement Schedules |
|----------------|------------------------------------|

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| Exhibit |     | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.1     | *        | Amended      and Restated Articles of Incorporation of Britton & Koontz Capital      Corporation, incorporated by reference to Exhibit 3.01 to the Registrant’s      Current Report on Form 8-K filed with the Securities and Exchange      Commission (“Commission”) on February 20, 2009.                                                                                                                                                                                                                                                                                            |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.2     | *        | By-Laws      of Britton & Koontz Capital Corporation, as amended, incorporated by      reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed      with the Securities and Exchange Commission on October 22,      2008.                                                                                                                                                                                                                                                                                                                                                        |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.1     | *        | Shareholder      Rights Agreement dated June 1, 1996 between Britton & Koontz Capital      Corporation and Britton & Koontz First National Bank, as Rights Agent,      incorporated by reference to Exhibit 4.3 to Registrant’s Registration      Statement on Form S-8, Registration No. 333-20631, filed with the      Commission on January 29, 1997, as amended by Amendment No. 1 to Rights      Agreement dated as of August 15, 2006, incorporated by reference to      Exhibit 4.2 to Registrant’s Current Report on Form 8-K filed with the      Commission on August 17, 2006. |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.01   | *† | Employment      Agreement dated February 17, 2009, between Britton & Koontz      Capital Corporation and W. Page Ogden, incorporated by reference to      Exhibit 10.01 to Registrant’s Current Report on Form 8-K filed with the      Commission on February 20, 2009.                                                                                                                                                                                                                                                                                                                       |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.02   | *† | Britton      & Koontz Capital Corporation Long-Term Incentive Compensation Plan and      Amendment, incorporated by reference to Exhibit 4.4 to Registrant’s      Registration Statement on Form S-8, Registration No. 333-20631, filed with      the Commission on January 29, 1997.                                                                                                                                                                                                                                                                                                              |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.03   | *† | Britton      & Koontz Capital Corporation 2007 Long-Term Incentive Compensation      Plan, incorporated by reference to Appendix B to Registrant’s Definitive      Proxy Statement filed with the Commission on March 21,    2007.                                                                                                                                                                                                                                                                                                                                                                 |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.04   | *† | Salary      Continuation Agreement dated December 18, 2007, between Britton &      Koontz Bank, N.A. and W. Page Ogden, incorporated by reference to Exhibit      10.04 to Registrant’s Current Report on Form 8-K filed with the Commission      on February 27, 2008.                                                                                                                                                                                                                                                                                                                            |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21      |     | Subsidiaries of Britton & Koontz Capital      Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 23      |     | Consent of Independent Registered Public      Accountants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.1    |     | Certification of Chief Executive Officer as required      pursuant to Section 302 of the Sarbanes-Oxley Act of    2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.2    |     | Certification of Chief Financial Officer as required      pursuant to Section 302 of the Sarbanes-Oxley Act of    2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 32.1    |     | Certification of Chief Executive Officer as required      pursuant to Section 906 of the Sarbanes-Oxley Act of    2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 32.2    |     | Certification of Chief Financial Officer as required      pursuant to Section 906 of the Sarbanes-Oxley Act of    2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

| * | As      indicated in the column entitled “Description of Exhibit,” this exhibit is      incorporated by reference to another filing or  document. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| † | Management      contract or compensatory plan or arrangement required to be filed as an      exhibit to this Annual Report on Form 10-K pursuant to Item 15 of Form      10-K. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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SIGNATURES

| Signature                        |               | Title                                                                                       |   | Date                |
|----------------------------------|--------------------|---------------------------------------------------------------------------------------------|--------|---------------------|
| /s/      Robert R. Punches       |     |                                                                                        |   |                |
| Robert      R. Punches           |               | Chairman      and Director                                                                  |   | March      17, 2009 |
| /s/      W. W. Allen, Jr.        |     |                                                                                        |   |                |
| W.      W. Allen, Jr.            |               | Vice      Chairman and Director                                                             |   | March      17, 2009 |
|  /s/      W. Page Ogden     |     |                                                                                        |   |                |
| W.      Page Ogden               |               | Principal      Executive Officer and                                                        |   | March      17, 2009 |
|                             |               | Director                                                                                    |   |                |
| /s/      Craig A. Bradford, DMD  |          |                                                                                        |   |                |
| Craig      A. Bradford, DMD      |               | Director                                                                                    |   | March      17, 2009 |
| /s/      Bethany L. Overton      |     |                                                                                        |   |                |
| Bethany      L. Overton          |               | Director                                                                                    |   | March      17, 2009 |
| /s/      George R. Kurz          |     |                                                                                        |   |                |
| George      R. Kurz              |               | Director                                                                                    |   | March      17, 2009 |
| /s/      Vinod K. Thukral, Ph.D. |     |                                                                                        |   |                |
| Vinod      K. Thukral, Ph.D.     |               | Director                                                                                    |   | March      17, 2009 |
| /s/      William M. Salters      |     |                                                                                        |   |                |
| William      M. Salters          |               | Treasurer,      Principal FinancialOfficer      and Principal Accounting Officer  |   | March      17, 2009 |

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| EXHIBITINDEX |
|--------------|

| Exhibit |   | Description      of Exhibit                                                                                             |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                    |
| 21      |   | Subsidiaries of Britton & Koontz Capital      Corporation                                                           |
|    |   |                                                                                                                    |
| 23      |   | Consent of Independent Registered Public      Accountants                                                               |
|    |   |                                                                                                                    |
| 31.1    |   | Certification of Chief Executive Officer as required      pursuant to Section 302 of the Sarbanes-Oxley Act of    2002. |
|    |   |                                                                                                                    |
| 31.2    |   | Certification of Chief Financial Officer as required      pursuant to Section 302 of the Sarbanes-Oxley Act of    2002. |
|    |   |                                                                                                                    |
| 32.1    |   | Certification of Chief Executive Officer as required      pursuant to Section 906 of the Sarbanes-Oxley Act of    2002  |
|    |   |                                                                                                                    |
| 32.2    |   | Certification of Chief Financial Officer as required      pursuant to Section 906 of the Sarbanes-Oxley Act of    2002  |

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