----

----

| T | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| £ | TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|----------------------------------------------------------------------------------|

| TOWER FINANCIAL CORPORATION                            |
|--------------------------------------------------------|
| (Exact name of Registrant as specified in its charter) |

| INDIANA                                                        | 35-2051170                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

| (260) 427-7000                        |
|---------------------------------------|
| (Registrant’s telephone number) |

|   | Large accelerated filer £ | Accelerated filer £    |
|--------|--------------------------------|-----------------------------|
|   | Non-accelerated filer £   | Smaller reporting company T |

----

----

----

Index

|   | · | The impact of a prolonged recession on our asset quality, the adequacy of our allowance for loan losses and the sufficiency of our capital; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the continued weakness of the local economy in our primary service area; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | the effect of general economic and monetary conditions and the regulatory environment on the Bank’s ability to attract deposits, make loans and achieve satisfactory interest spreads; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the risk of further loan delinquencies and losses due to loan defaults by both commercial loan customers or a significant number of other borrowers; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | general changes in real estate, business and general property valuations underlying secured loans; |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | the level of our non-performing substandard or doubtful assets; |
|--------|--------|-----------------------------------------------------------------|

|   | · | restrictions or additional capital requirements imposed on us by our regulators; and |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | dependence on our key banking and management personnel. |
|--------|--------|---------------------------------------------------------|

----

Index

INDEX

| PART I.     FINANCIAL INFORMATION |     |
|-------------------------------------------------------|----------|
|                                                  |     |   |   |
|                                                  | Item 1.  | Financial Statements | page no. |
|                                                  |     |   |   |
|                                                  |     | Consolidated Condensed Balance Sheets at March 31, 2011 (unaudited) and December 31, 2010 | 4 |
|                                                  |     |   |   |
|                                                  |     | Consolidated Condensed Statements of Operations for the three months ended March 31, 2011 and March 31, 2010 (unaudited) | 5 |
|                                                  |     |   |   |
|                                                  |     | Consolidated Condensed Statements of Changes in Stockholders’ Equity for  the three months ended March 31, 2011 and March 31, 2010 (unaudited) | 7 |
|                                                  |     |   |   |
|                                                  |     | Consolidated Condensed Statements of Cash Flows for the three months March 31, 2011 and March 31, 2010 (unaudited) | 8 |
|                                                  |     |   |   |
|                                                  |     | Notes to Consolidated Condensed Financial Statements (unaudited) | 9 |
|                                                  |     |   |   |
|                                                  | Item 2.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 |
|                                                  |     |   |   |
|                                                  | Item 4.  | Controls and Procedures | 35 |
|                                                  |     |   |   |
| PART II.    OTHER INFORMATION          |     |
|                                                  |     |   |   |
|                                                  | Item 1.  | Legal Proceedings | 36 |
|                                                  |     |   |   |
|                                                  | Item 1a. | Risk Factors | 36 |
|                                                  |     |   |   |
|                                                  | Item 6.  | Exhibits | 37 |
|                                                  |     |   |   |
| SIGNATURES                                            | 37       |

----

Index

Consolidated Condensed Balance Sheets

|                                                                                                                                                                                                                       |   | March 31, |        |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|-------------|--------|--------------|--------|
|                                                                                                                                                                                                                       |   | 2011      |        |   | 2010         |   |
| ASSETS                                                                                                                                                                                                                     |   |      |        |   |         |   |
| Cash and due from banks                                                                                                                                                                                                    |   | $         | 12,983,538  |   |         | $      | 24,717,935 |   |
| Short-term investments and interest-earning deposits                                                                                                                                                                       |   |      | 662,736     |   |         |   | 3,313,006 |   |
| Federal funds sold                                                                                                                                                                                                         |   |      | 2,221,872   |   |         |   | 1,648,441 |   |
| Total cash and cash equivalents                                                                                                                                                                                  |   |      | 15,868,146  |   |         |   | 29,679,382 |   |
| Long-term interest earning deposits                                                                                                                                                                              |   |      | 996,000     |   |         |   | 996,000 |   |
| Securities available for sale, at fair value                                                                                                                                                                     |   |      | 123,635,639 |   |         |   | 110,108,656 |   |
| FHLB and FRB stock                                                                                                                                                                                               |   |      | 4,075,100   |   |         |   | 4,075,100 |   |
| Loans held for sale                                                                                                                                                                                              |   |      | 432,413     |   |         |   | 2,140,872 |   |
|                                                                                                                                                                                                                       |   |      |        |   |         |   |   |   |
| Loans                                                                                                                                                                                                                      |   |      | 489,249,575 |   |         |   | 486,914,115 |   |
| Allowance for loan losses                                                                                                                                                                                                  |   |      | (11,907,795 | )      |         |   | (12,489,400 | ) |
| Net loans                                                                                                                                                                                                                  |   |      | 477,341,780 |   |         |   | 474,424,715 |   |
| Premises and equipment, net                                                                                                                                                                                                |   |      | 8,237,010   |   |         |   | 8,329,718 |   |
| Accrued interest receivable                                                                                                                                                                                                |   |      | 2,486,910   |   |         |   | 2,391,953 |   |
| Bank owned life insurance                                                                                                                                                                                                  |   |      | 16,647,270  |   |         |   | 13,516,789 |   |
| Other real estate owned (OREO)                                                                                                                                                                                             |   |      | 4,740,592   |   |         |   | 4,284,263 |   |
| Prepaid FDIC Insurance                                                                                                                                                                                                     |   |      | 2,377,570   |   |         |   | 2,864,527 |   |
| Other assets                                                                                                                                                                                                               |   |      | 7,278,403   |   |         |   | 7,116,280 |   |
| Total assets                                                                                                                                                                                                               |   | $         | 664,116,833 |   |         | $      | 659,928,255 |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                             |   |      |        |   |         |   |   |   |
| LIABILITIES                                                                                                                                                                                                 |   |      |        |   |         |   |   |   |
| Deposits:                                                                                                                                                                                                   |   |      |        |   |         |   |   |   |
| Noninterest-bearing                                                                                                                                                                                                        |   | $         | 87,598,846  |   |         | $      | 92,872,957 |   |
| Interest-bearing                                                                                                                                                                                                           |   |      | 487,926,557 |   |         |   | 483,483,179 |   |
| Total deposits                                                                                                                                                                                                             |   |      | 575,525,403 |   |         |   | 576,356,136 |   |
| Federal funds purchased                                                                                                                                                                                                    |   |      | 100,000     |   |         |   | - |   |
| Federal Home Loan Bank (FHLB) advances                                                                                                                                                                                     |   |      | 11,500,000  |   |         |   | 7,500,000 |   |
| Junior subordinated debt                                                                                                                                                                                                   |   |      | 17,527,000  |   |         |   | 17,527,000 |   |
| Accrued interest payable                                                                                                                                                                                                   |   |      | 1,641,739   |   |         |   | 1,415,713 |   |
| Other liabilities                                                                                                                                                                                                          |   |      | 3,409,668   |   |         |   | 4,000,654 |   |
| Total liabilities                                                                                                                                                                                                          |   |      | 609,703,810 |   |         |   | 606,799,503 |   |
| STOCKHOLDERS' EQUITY                                                                                                                                                                                                       |   |      |        |   |         |   |   |   |
| Preferred stock, no par value, 4,000,000 shares authorized; 1,500 shares and 7,750 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively                                           |   |      | 146,558     |   |         |   | 757,213 |   |
| Common stock and paid-in-capital, no par value, 6,000,000 shares authorized; 4,892,843 and 4,789,023 issued; and  4,827,843 and 4,724,023 shares outstanding at March 31, 2011 and December 31, 2010   |   |      | 44,362,537  |   |         |   | 43,740,155 |   |
| Treasury stock, at cost, 65,000 shares at March 31, 2011 and December 31, 2010                                                                                                                              |   |      | (884,376    | )      |         |   | (884,376 | ) |
| Retained earnings                                                                                                                                                                                                |   |      | 9,233,222   |   |         |   | 8,450,579 |   |
| Accumulated other comprehensive income, net of tax of $801,103 at March 31, 2011 and $548,730 at December 31, 2010                                                                                                    |   |      | 1,555,082   |   |         |   | 1,065,181 |   |
| Total stockholders' equity                                                                                                                                                                                                 |   |      | 54,413,023  |   |         |   | 53,128,752 |   |
| Total liabilities and stockholders' equity                                                                                                                                                                                 |   | $         | 664,116,833 |   |         | $      | 659,928,255 |   |

----

Index

Consolidated Condensed Statements of Operations

|                                                |   | (unaudited)        |            |
|-----------------------------------------------------|--------|--------------------|-----------------|
|                                                |   | Three Months Ended |            |
|                                                |   | March 31,          |            |
|                                                |   | 2011               |            |   | 2010 |   |
| Interest income:                                    |   |               |            |   |   |   |
| Loans, including fees                               |   | $                  | 6,288,964       |   |   | $ | 6,883,002 |   |
| Securities - taxable                                |   |               | 579,369         |   |   |   | 639,091 |   |
| Securities - tax exempt                             |   |               | 393,162         |   |   |   | 244,551 |   |
| Other interest income                               |   |               | 14,262          |   |   |   | 6,248 |   |
| Total interest income                               |   |               | 7,275,757       |   |   |   | 7,772,892 |   |
| Interest expense:                                   |   |               |            |   |   |   |   |   |
| Deposits                                            |   |               | 1,361,146       |   |   |   | 1,759,498 |   |
| Federal funds purchased                             |   |               | 189             |   |   |   | - |   |
| FHLB advances                                       |   |               | 72,071          |   |   |   | 169,858 |   |
| Junior subordinated debt                            |   |               | 199,353         |   |   |   | 280,226 |   |
| Total interest expense                              |   |               | 1,632,759       |   |   |   | 2,209,582 |   |
| Net interest income                                 |   |               | 5,642,998       |   |   |   | 5,563,310 |   |
| Provision for loan losses                           |   |               | 1,220,000       |   |   |   | 1,340,000 |   |
| Net interest income after provision for loan losses |   |               |  4,422,998 |   |   |   |  4,223,310 |   |
| Noninterest income:                                 |   |               |            |   |   |   |   |   |
| Trust and brokerage fees                            |   |               | 884,000         |   |   |   | 882,966 |   |
| Service charges                                     |   |               | 290,850         |   |   |   | 290,386 |   |
| Loan broker fees                                    |   |               | 108,388         |   |   |   | 114,049 |   |
| Gain on sale/calls of securities                    |   |               | 58,669          |   |   |   | 840 |   |
| Other-than-temporary loss:                          |   |               |            |   |   |   |   |   |
| Total impairment loss                               |   |               | (124,999        | ) |   |   | (18,844 | ) |
| Loss recognized in other comprehensive income       |   |               | -               |   |   |   | 8,254 |   |
| Net impairment loss recognized in earnings          |   |               | (124,999        | ) |   |   | (10,590 | ) |
| Other income                                        |   |               | 430,305         |   |   |   | 320,043 |   |
| Total noninterest income                            |   |               | 1,647,213       |   |   |   | 1,597,694 |   |
| Noninterest expense:                                |   |               |            |   |   |   |   |   |
| Salaries and benefits                               |   |               | 2,559,082       |   |   |   | 2,387,076 |   |
| Occupancy and equipment                             |   |               | 619,606         |   |   |   | 629,278 |   |
| Marketing                                           |   |               | 89,784          |   |   |   | 96,692 |   |
| Data processing                                     |   |               | 309,305         |   |   |   | 308,912 |   |
| Loan and professional costs                         |   |               | 361,442         |   |   |   | 438,407 |   |
| Office supplies and postage                         |   |               | 48,947          |   |   |   | 63,189 |   |
| Courier services                                    |   |               | 53,724          |   |   |   | 55,334 |   |
| Business development                                |   |               | 90,619          |   |   |   | 79,008 |   |
| Communication                                       |   |               | 46,376          |   |   |   | 36,359 |   |
| FDIC insurance premiums                             |   |               | 506,848         |   |   |   | 502,205 |   |
| OREO Expenses                                       |   |               | 191,920         |   |   |   | 55,797 |   |
| Other expense                                       |   |               | 215,054         |   |   |   | 252,909 |   |
| Total noninterest expense                           |   |               | 5,092,707       |   |   |   | 4,905,166 |   |
| Income before income taxes                          |   |               | 977,504         |   |   |   | 915,838 |   |
| Income taxes expense                                |   |               | 194,861         |   |   |   | 194,802 |   |
|                                                |   |               |            |   |   |   |   |   |
| Net income                                          |   | $                  | 782,643         |   |   | $ | 721,036 |   |

----

Index

|                                                                              |   | (unaudited)        |            |
|-----------------------------------------------------------------------------------|--------|--------------------|-----------------|
|                                                                              |   | Three Months Ended |            |
|                                                                              |   | March 31,          |            |
|                                                                              |   | 2011               |            |   | 2010 |   |
|                                                                              |   |               |            |   |   |   |
| Net income:                                                                       |   | $                  | 782,643         |   |   | $ | 721,036 |   |
|                                                                              |   |               |            |   |   |   |   |   |
| Other comprehensive income net of tax:                                            |   |               |            |   |   |   |   |   |
| Unrealized appreciation on available for sale securities                          |   |               | 489,901         |   |   |   | 307,047 |   |
| Total comprehensive income                                                        |   | $                  | 1,272,544       |   |   | $ | 1,028,083 |   |
|                                                                              |   |               |            |   |   |   |   |   |
| Basic earnings per common share                                                   |   | $                  | 0.16            |   |   | $ | 0.18 |   |
| Diluted earnings per common share                                                 |   | $                  | 0.16            |   |   | $ | 0.16 |   |
| Average common shares outstanding                                                 |   |               | 4,754,892       |   |   |   | 4,090,432 |   |
| Average common shares and dilutive  potential common shares outstanding |   |               |  4,852,761 |   |   |   |  4,394,419 |   |
|                                                                              |   |               |            |   |   |   |   |   |
| Dividends declared per share                                                      |   | $                  | -               |   |   | $ | - |   |

----

Index

Consolidated Condensed Statements of Changes in Stockholders’ Equity

|                                                            |   |      |      |   | Common    |   |       |     |   |   | Accumulated   |   |   |     |      |   |   |   |
|-----------------------------------------------------------------|--------|-----------|-----------|--------|-----------|--------|------------|----------|--------|--------|---------------|--------|--------|----------|-----------|--------|--------|--------|
|                                                            |   |      |      |   | Stock and |   |       |     |   |   | Other         |   |   |     |      |   |   |   |
|                                                            |   | Preferred |      |   | Paid-in   |   |       | Retained |   |   | Comprehensive |   |   | Treasury |      |   |   |   |
|                                                            |   | Stock     |      |   | Capital   |   |       | Earnings |   |   | Income (Loss) |   |   | Stock    |      |   | Total  |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |
| Balance, January 1, 2010                                        |   | $         | 1,788,000 |   |      | $      | 39,835,648 |     |   | $      | 5,286,808     |   |   | $        | 910,029   |   |   | $      | (884,376 | ) |   | $ | 46,936,109 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Net income for 2010                                             |   |      |      |   |      |   |       |     |   |   | 721,036       |   |   |     |      |   |   |   |   |   |   |   | 721,036 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income (See Note 4)                         |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     | 307,047   |   |   |   |   |   |   |   | 307,047 |   |
| Total Comprehensive Income                                      |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   | 1,028,083 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Stock based compensation expense                                |   |      |      |   |      |   | 11,728     |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   | 11,728 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2010                                         |   | $         | 1,788,000 |   |      | $      | 39,847,376 |     |   | $      | 6,007,844     |   |   | $        | 1,217,076 |   |   | $      | (884,376 | ) |   | $ | 47,975,920 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2011                                        |   | $         | 757,213   |   |      | $      | 43,740,155 |     |   | $      | 8,450,579     |   |   | $        | 1,065,181 |   |   | $      | (884,376 | ) |   | $ | 53,128,752 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Net income for 2011                                             |   |      |      |   |      |   |       |     |   |   | 782,643       |   |   |     |      |   |   |   |   |   |   |   | 782,643 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income (See Note 4)                         |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     | 489,901   |   |   |   |   |   |   |   | 489,901 |   |
| Total Comprehensive Income                                      |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   | 1,272,544 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Stock based compensation expense                                |   |      |      |   |      |   | 11,727     |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   | 11,727 |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Conversion of 6,250 preferred shares into 103,820 common shares |   |      | (610,655  | )      |      |   | 610,655    |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   | - |   |
|                                                            |   |      |      |   |      |   |       |     |   |   |          |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2011                                         |   | $         | 146,558   |   |      | $      | 44,362,537 |     |   | $      | 9,233,222     |   |   | $        | 1,555,082 |   |   | $      | (884,376 | ) |   | $ | 54,413,023 |   |

----

Index

Consolidated Condensed Statements of Cash Flows

|                                                                       |   | (unaudited)        |        |   | (unaudited)        |   |
|----------------------------------------------------------------------------|--------|--------------------|-------------|--------|--------------------|--------|
|                                                                       |   | Three Months ended |        |   | Three Months ended |   |
|                                                                       |   | March 31, 2011     |        |   | March 31, 2010     |   |
| Cash flows from operating activities:                                      |   |               |        |   |               |   |
| Net income                                                                 |   | $                  | 782,643     |   |               | $      | 721,036 |   |
| Adjustments to reconcile net income to net cash from operating activities: |   |               |        |   |               |   |   |   |
| Depreciation and amortization                                              |   |               | 489,628     |   |               |   | 359,942 |   |
| Provision for loan losses                                                  |   |               | 1,220,000   |   |               |   | 1,340,000 |   |
| Stock based compensation expense                                           |   |               | 11,727      |   |               |   | 11,728 |   |
| Earnings on life insurance                                                 |   |               | (130,481    | )      |               |   | (115,280 | ) |
| Gain on sale of securities AFS                                             |   |               | (58,669     | )      |               |   | (840 | ) |
| Impairment on AFS securities                                               |   |               | 124,999     |   |               |   | 10,590 |   |
| Loans originated for sale                                                  |   |               | (3,704,941  | )      |               |   | (5,539,352 | ) |
| (Gain)Loss on sale of other real estate owned                              |   |               | 15,807      |   |               |   | 57 |   |
| Proceeds from sale of loans                                                |   |               | 5,413,400   |   |               |   | 8,350,674 |   |
| Write-down on OREO                                                         |   |               | 113,780     |   |               |   | - |   |
| Change in accrued interest receivable                                      |   |               | (94,957     | )      |               |   | (73,417 | ) |
| Change in other assets                                                     |   |               | 72,461      |   |               |   | 1,064,963 |   |
| Change in accrued interest payable                                         |   |               | 226,026     |   |               |   | 134,051 |   |
| Change in other liabilities                                                |   |               | (590,986    | )      |               |   | (118,079 | ) |
| Net cash from operating activities                                         |   |               | 3,890,437   |   |               |   | 6,146,073 |   |
| Cash flows from investing activities:                                      |   |               |        |   |               |   |   |   |
| Net change in loans                                                        |   |               | (5,414,160  | )      |               |   | 3,107,507 |   |
| Purchase of securities AFS                                                 |   |               | (21,237,075 | )      |               |   | (5,761,030 | ) |
| Proceeds from calls and maturities of securities AFS                       |   |               | 7,284,120   |   |               |   | 5,373,220 |   |
| Purchase of securities HTM                                                 |   |               | -           |   |               |   | (1,112,773 | ) |
| Proceeds from calls and maturities of securities HTM                       |   |               | -           |   |               |   | 211,702 |   |
| Proceeds from sale of securities AFS                                       |   |               | 783,300     |   |               |   | - |   |
| Proceeds from sale of OREO                                                 |   |               | 691,180     |   |               |   | 190,721 |   |
| Purchase of bank owned life insurance                                      |   |               | (3,000,000  | )      |               |   | - |   |
| Purchase of FHLB stock                                                     |   |               | -           |   |               |   | (75,000 | ) |
| Purchase of premises and equipment                                         |   |               | (78,305     | )      |               |   | (449,523 | ) |
| Net cash from (used in) investing activities                               |   |               | (20,970,940 | )      |               |   | 1,484,824 |   |
| Cash flows from financing activities:                                      |   |               |        |   |               |   |   |   |
| Net change in deposits                                                     |   |               | (830,733    | )      |               |   | (9,089,076 | ) |
| Repayment of long-term FHLB advances                                       |   |               | (2,000,000  | )      |               |   | (2,000,000 | ) |
| Net change in short-term borrowings                                        |   |               | 6,100,000   |   |               |   | 4,000,000 |   |
| Net cash from (used in) financing activities                               |   |               | 3,269,267   |   |               |   | (7,089,076 | ) |
| Net change in cash and cash equivalents                                    |   |               | (13,811,236 | )      |               |   | 541,821 |   |
| Cash and cash equivalents, beginning of period                             |   |               | 29,679,382  |   |               |   | 24,664,309 |   |
| Cash and cash equivalents, end of period                                   |   | $                  | 15,868,146  |   |               | $      | 25,206,130 |   |
|                                                                       |   |               |        |   |               |   |   |   |
| Supplemental disclosures of cash flow information                          |   |               |        |   |               |   |   |   |
| Cash paid during the year for:                                             |   |               |        |   |               |   |   |   |
| Interest                                                                   |   | $                  | 1,406,733   |   |               | $      | 2,075,531 |   |
| Income taxes                                                               |   |               | 570,000     |   |               |   | - |   |
| Noncash items:                                                             |   |               |        |   |               |   |   |   |
| Transfer of loans to other real estate owned                               |   |               | 1,277,095   |   |               |   | - |   |

----

Index

Notes to Consolidated Condensed Financial Statements

----

Index

|                                             |   | March 31, 2011 |        |   |             |   |
|--------------------------------------------------|--------|----------------|-------------|--------|------------------|--------|
|                                             |   | Amortized      |        |   | Gross Unrealized |   |   | Gross Unrealized |   |   | Fair |   |
|                                             |   | Cost           |        |   | Gains            |   |   | Losses |   |   | Value |   |
|                                             |   |           |        |   |             |   |   |   |   |   |   |   |
| Available for sale securities:                   |   |           |        |   |             |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $              | 3,392,750   |   |             | $      | 38,814 |   |   | $ | - |   |   | $ | 3,431,564 |   |
| Obligations of states and political subdivisions |   |           | 49,102,804  |   |             |   | 871,471 |   |   |   | (430,765 | ) |   |   | 49,543,510 |   |
| Mortgage-backed securities (residential)         |   |           | 64,353,606  |   |             |   | 2,005,925 |   |   |   | (316,416 | ) |   |   | 66,043,115 |   |
| Mortgage-backed securities (commercial)          |   |           | 4,430,296   |   |             |   | 187,154 |   |   |   | - |   |   |   | 4,617,450 |   |
| Collateralized debt obligations                  |   |           | -           |   |             |   | - |   |   |   | - |   |   |   | - |   |
|                                             |   |           |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total Securities                                 |   | $              | 121,279,456 |   |             | $      | 3,103,364 |   |   | $ | (747,181 | ) |   | $ | 123,635,639 |   |

|                                             |   | December 31, 2010 |        |   |             |   |
|--------------------------------------------------|--------|-------------------|-------------|--------|------------------|--------|
|                                             |   | Amortized         |        |   | Gross Unrealized |   |   | Gross Unrealized |   |   | Fair |   |
|                                             |   | Cost              |        |   | Gains            |   |   | Losses |   |   | Value |   |
|                                             |   |              |        |   |             |   |   |   |   |   |   |   |
| Available for sale securities:                   |   |              |        |   |             |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $                 | 4,112,957   |   |             | $      | 59,710 |   |   | $ | - |   |   | $ | 4,172,667 |   |
| Obligations of states and political subdivisions |   |              | 45,852,349  |   |             |   | 546,212 |   |   |   | (639,159 | ) |   |   | 45,759,402 |   |
| Mortgage-backed securities (residential)         |   |              | 53,960,788  |   |             |   | 1,854,148 |   |   |   | (325,966 | ) |   |   | 55,488,970 |   |
| Mortgage-backed securities (commercial)          |   |              | 4,458,652   |   |             |   | 224,365 |   |   |   | - |   |   |   | 4,683,017 |   |
| Collateralized debt obligations                  |   |              | 110,000     |   |             |   | - |   |   |   | (105,400 | ) |   |   | 4,600 |   |
| Total Securities                                 |   | $                 | 108,494,746 |   |             | $      | 2,684,435 |   |   | $ | (1,070,525 | ) |   | $ | 110,108,656 |   |

----

Index

|                                                  |   | 3/31/2011        |   |
|-------------------------------------------------------|--------|------------------|--------|
|                                                  |   | Weighted Average |   |   | Amortized |   |   | Fair |   |
|                                                  |   | Yield            |   |   | Cost |   |   | Value |   |
| Available for sale securities:                        |   |             |   |   |   |   |   |   |   |
| Agencies:                                             |   |             |   |   |   |   |   |   |   |
| Due after one to five years                           |   |             | 2.16   | % |   | $ | 799,208 |   |   | $ | 816,104 |   |
| Due after five to ten years                           |   |             | 2.58   | % |   |   | 2,593,542 |   |   |   | 2,615,460 |   |
| Total Agencies                                        |   |             | 2.48   | % |   | $ | 3,392,750 |   |   | $ | 3,431,564 |   |
|                                                  |   |             |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities:                           |   |             |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)              |   |             | 2.96   | % |   | $ | 64,353,606 |   |   | $ | 66,043,115 |   |
| Mortgage-backed securities (commercial)               |   |             | 4.37   | % |   |   | 4,430,296 |   |   |   | 4,617,450 |   |
|                                                  |   |             | 3.05   | % |   | $ | 68,783,902 |   |   | $ | 70,660,565 |   |
| Obligations of state and political subdivisions:      |   |             |   |   |   |   |   |   |   |   |   |   |
| Due in one year or less                               |   |             | 4.99   | % |   | $ | 130,109 |   |   | $ | 130,709 |   |
| Due after one to five years                           |   |             | 5.41   | % |   |   | 3,835,225 |   |   |   | 3,967,328 |   |
| Due after five to ten years                           |   |             | 5.33   | % |   |   | 15,951,711 |   |   |   | 16,254,156 |   |
| Due after ten years                                   |   |             | 5.69   | % |   |   | 29,185,759 |   |   |   | 29,191,317 |   |
| Total Obligations of state and political subdivisions |   |             | 5.55   | % |   | $ | 49,102,804 |   |   | $ | 49,543,510 |   |
|                                                  |   |             |   |   |   |   |   |   |   |   |   |   |
| Collateralized debt obligations                       |   |             |   |   |   |   |   |   |   |   |   |   |
| Due after ten years                                   |   |             | 0.00   | % |   | $ | - |   |   | $ | - |   |

|                                                  |   | 12/31/2010 |   |
|-------------------------------------------------------|--------|------------|--------|
|                                                  |   | Weighted   |   |   |   |   |   |   |   |
|                                                  |   | Average    |   |   | Amortized |   |   | Fair |   |
|                                                  |   | Yield      |   |   | Cost |   |   | Value |   |
| Available for sale securities:                        |   |       |   |   |   |   |   |   |   |
| Agencies:                                             |   |       |   |   |   |   |   |   |   |
| Due in one year or less                               |   |       | 3.25   | % |   | $ | 700,000 |   |   | $ | 703,997 |   |
| Due after one to five years                           |   |       | 2.16   | % |   |   | 799,138 |   |   |   | 822,336 |   |
| Due after five to ten years                           |   |       | 2.58   | % |   |   | 2,613,819 |   |   |   | 2,646,334 |   |
| Total Agencies                                        |   |       | 2.61   | % |   | $ | 4,112,957 |   |   | $ | 4,172,667 |   |
|                                                  |   |       |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities:                           |   |       |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)              |   |       | 3.86   | % |   | $ | 53,960,788 |   |   | $ | 55,488,970 |   |
| Mortgage-backed securities (commercial)               |   |       | 4.22   | % |   |   | 4,458,652 |   |   |   | 4,683,017 |   |
|                                                  |   |       | 3.89   | % |   | $ | 58,419,440 |   |   | $ | 60,171,987 |   |
|                                                  |   |       |   |   |   |   |   |   |   |   |   |   |
| Obligations of state and political subdivisions:      |   |       |   |   |   |   |   |   |   |   |   |   |
| Due in one year or less                               |   |       | 4.99   | % |   | $ | 260,457 |   |   | $ | 262,621 |   |
| Due after one to five years                           |   |       | 5.24   | % |   |   | 3,168,388 |   |   |   | 3,270,587 |   |
| Due after five to ten years                           |   |       | 5.28   | % |   |   | 13,676,918 |   |   |   | 13,820,407 |   |
| Due after ten years                                   |   |       | 5.77   | % |   |   | 28,746,586 |   |   |   | 28,405,787 |   |
| Total Obligations of state and political subdivisions |   |       | 5.58   | % |   | $ | 45,852,349 |   |   | $ | 45,759,402 |   |
|                                                  |   |       |   |   |   |   |   |   |   |   |   |   |
| Collateralized debt obligations                       |   |       |   |   |   |   |   |   |   |   |   |   |
| Due after ten years                                   |   |       | 1.15   | % |   | $ | 110,000 |   |   | $ | 4,600 |   |

----

Index

|                                             |   | Continuing Unrealized |             |   | Continuing Unrealized   |   |           |       |   |
|--------------------------------------------------|--------|-----------------------|------------------|--------|-------------------------|--------|----------------|------------|--------|
|                                             |   | Losses for            |             |   | Losses for              |   |           |       |   |
|                                             |   | Less than 12 months   |             |   | More than 12 months     |   |           | Total      |   |
|                                             |   | Fair Value            |             |   | Gross Unrealized Losses |   |           | Fair Value |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |
|                                             |   |                  |             |   |                    |   |           |       |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities:                   |   |                  |             |   |                    |   |           |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $                     | -                |   |                    | $      | -              |       |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Obligations of states and political subdivisions |   |                  |  12,068,080 |   |                    |   |  (404,976 | )          |   |   |  1,449,442 |   |   |   |  (25,789 | ) |   |   |  13,517,522 |   |   |   |  (430,765 | ) |
| Mortgage-backed securities (residential)         |   |                  | 15,906,979       |   |                    |   | (159,133       | )          |   |   | 401,717 |   |   |   | (157,283 | ) |   |   | 16,308,696 |   |   |   | (316,416 | ) |
| Mortgage-backed securities (commercial)          |   |                  | -                |   |                    |   | -              |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Collateralized debt obligations                  |   |                  | -                |   |                    |   | -              |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total temporarily impaired securities            |   | $                     | 27,975,059       |   |                    | $      | (564,109       | )          |   | $ | 1,851,159 |   |   | $ | (183,072 | ) |   | $ | 29,826,218 |   |   | $ | (747,181 | ) |

|                                             |   | Continuing Unrealized |             |   | Continuing Unrealized   |   |           |       |   |
|--------------------------------------------------|--------|-----------------------|------------------|--------|-------------------------|--------|----------------|------------|--------|
|                                             |   | Losses for            |             |   | Losses for              |   |           |       |   |
|                                             |   | Less than 12 months   |             |   | More than 12 months     |   |           | Total      |   |
|                                             |   | Fair Value            |             |   | Gross Unrealized Losses |   |           | Fair Value |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |
|                                             |   |                  |             |   |                    |   |           |       |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities:                   |   |                  |             |   |                    |   |           |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $                     | -                |   |                    | $      | -              |       |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Obligations of states and political subdivisions |   |                  |  16,033,664 |   |                    |   |  (588,556 | )          |   |   |  1,427,946 |   |   |   |  (50,603 | ) |   |   |  17,461,610 |   |   |   |  (639,159 | ) |
| Mortgage-backed securities (residential)         |   |                  | 5,772,263        |   |                    |   | (156,769       | )          |   |   | 416,929 |   |   |   | (169,197 | ) |   |   | 6,189,192 |   |   |   | (325,966 | ) |
| Mortgage-backed securities (commercial)          |   |                  | -                |   |                    |   | -              |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Collateralized debt obligations                  |   |                  | -                |   |                    |   | -              |       |   |   | 4,600 |   |   |   | (105,400 | ) |   |   | 4,600 |   |   |   | (105,400 | ) |
| Total available for sale securities              |   | $                     | 21,805,927       |   |                    | $      | (745,325       | )          |   | $ | 1,849,475 |   |   | $ | (325,200 | ) |   | $ | 23,655,402 |   |   | $ | (1,070,525 | ) |

----

Index

|                    |   | March 31 |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |   | March 31 |   |
|-------------------------|--------|----------|--------|--------|-------------|--------|--------|--------------|--------|--------|---------|--------|--------|----------|--------|
|                    |   | 2011     |   |   | 2010        |   |   | 2010         |   |   | 2010    |   |   | 2010     |   |
| Delinquency 60+         |   |     | 25.16  | %      |        |   | 22.58  | %            |   |   | 20.76   | %      |   |     | 22.48  | % |   |   | 24.37 | % |
| Delinquency 90+         |   |     | 22.36  | %      |        |   | 19.79  | %            |   |   | 18.42   | %      |   |     | 20.73  | % |   |   | 22.07 | % |
| Other Real Estate Owned |   |     | 2.58   | %      |        |   | 1.73   | %            |   |   | 0.20    | %      |   |     | 0.17   | % |   |   | 1.27 | % |
| Foreclosure             |   |     | 10.70  | %      |        |   | 9.42   | %            |   |   | 9.11    | %      |   |     | 10.79  | % |   |   | 11.43 | % |
| Bankruptcy              |   |     | 3.08   | %      |        |   | 4.08   | %            |   |   | 4.09    | %      |   |     | 3.35   | % |   |   | 3.87 | % |

----

Index

|               |   | Deferral |       |   | Default |   |
|--------------------|--------|----------|------------|--------|---------|--------|
| March 31, 2008     |   | $        | -          |   |    | $      | 25,000,000 |   |
| September 30, 2008 |   |     | 20,000,000 |   |    |   | - |   |
| December 31, 2008  |   |     | 15,000,000 |   |    |   | 35,000,000 |   |
| March 31, 2009     |   |     | 22,500,000 |   |    |   | - |   |
| June 30, 2009      |   |     | 35,600,000 |   |    |   | 25,000,000 |   |
| September 30, 2009 |   |     | 86,000,000 |   |    |   | - |   |
| December 31, 2009* |   |     | 7,500,000  |   |    |   | 25,000,000 |   |
| March 31, 2010     |   |     | -          |   |    |   | - |   |
| June 30, 2010      |   |     | -          |   |    |   | - |   |
| September 30, 2010 |   |     | 14,000,000 |   |    |   | - |   |
| December 31, 2010  |   |     | 29,000,000 |   |    |   | - |   |
| March 31, 2011     |   |     | 12,000,000 |   |    |   | - |   |

| For the three months ended March 31                                                                         |   | 2011   |          |   | 2010   |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|--------|--------|
| Beginning Balance, January 1                                                                                |   | $      | 909,073       |   |   | $      | 750,770 |   |
| Additions for amounts related to credit loss for which an OTTI  was not previously recognized     |   |   |  -       |   |   |   |  - |   |
| Increases to the amount related to the credit loss for which other-than-temporary was previously recognized |   |   |  124,999 |   |   |   |  10,590 |   |
| Ending Balance, March 31                                                                                    |   | $      | 1,034,072     |   |   | $      | 761,360 |   |

----

Index

|                                                                                                                         |   | Three months ended March 31, |      |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                                                                         |   | 2011                         |      |   | 2010 |   |
| Net Income                                                                                                                   |   | $                            | 782,643   |   |   | $ | 721,036 |   |
| Change in securities available for sale:                                                                                     |   |                         |      |   |   |   |   |   |
| Unrealized holding gains (losses) on securities for which other-than-temporary impairment has been recorded                  |   |                         | (7,685    | ) |   |   | (18,844 | ) |
| Other-than-temporary impairment on available for sale securities  associated with credit losses realized in income |   |                         | 124,999   |   |   |   | 10,590 |   |
| Unrealized holding gains (losses) recorded in other comprehensive income                                                     |   |                         | 117,314   |   |   |   | (8,254 | ) |
|                                                                                                                         |   |                         |      |   |   |   |   |   |
| Unrealized holding gains (losses) on available for sale securities  arising during the period                      |   |                         | 683,629   |   |   |   | 474,317 |   |
| Reclassification adjustment for (gains) losses realized in income on available for sale securities                           |   |                         | (58,669   | ) |   |   | (840 | ) |
| Net unrealized gains (losses)                                                                                                |   |                         | 624,960   |   |   |   | 473,477 |   |
| Income tax expense                                                                                                           |   |                         | 252,373   |   |   |   | 158,176 |   |
| Total other comprehensive income                                                                                             |   |                         | 489,901   |   |   |   | 307,047 |   |
| Comprehensive Income                                                                                                         |   | $                            | 1,272,544 |   |   | $ | 1,028,083 |   |

|                                                                                                                |   | Three Months Ended |                   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------|------------------------|
|                                                                                                                |   | March 31,          |                   |
|                                                                                                                |   | 2011               |                   |   | 2010 |   |
| Basic                                                                                                               |   |               |                   |   |   |   |
| Net income available to common stockholders                                                                         |   | $                  | 782,643                |   |   | $ | 721,036 |   |
| Weighted average common shares outstanding                                                                          |   |               | 4,754,892              |   |   |   | 4,090,432 |   |
| Basic earnings per common share                                                                                     |   | $                  | 0.16                   |   |   | $ | 0.18 |   |
|                                                                                                                |   |               |                   |   |   |   |   |   |
| Diluted                                                                                                             |   |               |                   |   |   |   |   |   |
| Net income available to common stockholders                                                                         |   | $                  | 782,643                |   |   | $ | 721,036 |   |
| Weighted average common shares outstanding                                                                          |   |               | 4,754,892              |   |   |   | 4,090,432 |   |
| Add:  dilutive effect of assumed preferred stock conversion and stock options                             |   |               |  97,869           |   |   |   |  303,987 |   |
| Weighted average common shares and dilutive potential common shares outstanding and preferred stock conversion |   |               |    4,852,761 |   |   |   |    4,394,419 |   |
| Diluted earnings per common share                                                                                   |   | $                  | 0.16                   |   |   | $ | 0.16 |   |

----

Index

|                                         |   |   |   |   | Weighted- |   |   | Weighted-   |   |   |       |   |
|----------------------------------------------|--------|--------|--------|--------|-----------|--------|--------|-------------|--------|--------|------------|--------|
|                                         |   |   |   |   | Average   |   |   | Average     |   |   |       |   |
|                                         |   |   |   |   | Aggregate |   |   | Remaining   |   |   |       |   |
|                                    |   |   |   |   | Exercise  |   |   | Contractual |   |   | Instrinsic |   |
| Options                                 |   | Shares |   |   | Price     |   |   | Term        |   |   | Value      |   |
| Outstanding at January 1, 2011               |   |   | 76,154 |   |      | $      | 13.37  |        |   |   | 2.72       |   |   | $ | - |   |
|                                    |   |   |   |   |      |   |   |        |   |   |       |   |   |   |   |   |
| Granted                                 |   |   | -      |   |      |   | -      |        |   |   | -          |   |   |   | - |   |
|                                    |   |   |   |   |      |   |   |        |   |   |       |   |   |   |   |   |
| Exercised                               |   |   | -      |   |      |   | -      |        |   |   | -          |   |   |   | - |   |
|                                    |   |   |   |   |      |   |   |        |   |   |       |   |   |   |   |   |
| Forfeited or expired                    |   |   | (1,500 | )      |      |   | 8.38   |        |   |   | -          |   |   |   | - |   |
|                                    |   |   |   |   |      |   |   |        |   |   |       |   |   |   |   |   |
| Outstanding at March 31, 2011                |   |   | 74,654 |   |      |   | 13.47  |        |   |   | 2.52       |   |   |   | - |   |
|                                    |   |   |   |   |      |   |   |        |   |   |       |   |   |   |   |   |
| Vested or expected to vest at March 31, 2011 |   |   | 74,654 |   |      |   | 13.47  |        |   |   | 2.52       |   |   |   | - |   |
|                                    |   |   |   |   |      |   |   |        |   |   |       |   |   |   |   |   |
| Exercisable at March 31, 2011                |   |   | 74,654 |   |      |   | 13.47  |        |   |   | 2.52       |   |   |   | - |   |

|                                  |   |   |   |   | Weighted-Average |   |
|---------------------------------------|--------|--------|--------|--------|------------------|--------|
|                             |   |   |   |   | Grant-Date       |   |
| Restricted Stock                 |   | Shares |   |   | Fair Value       |   |
|                             |   |   |   |   |             |   |
| Outstanding at January 1, 2011   |   |   | 9,750  |   |             | $      | 8.95 |   |
|                             |   |   |   |   |             |   |   |   |
| Granted                          |   |   | -      |   |             |   | - |   |
|                             |   |   |   |   |             |   |   |   |
| Vested                           |   |   | (1,000 | )      |             |   | 6.58 |   |
|                             |   |   |   |   |             |   |   |   |
| Forfeited                        |   |   | -      |   |             |   | - |   |
|                             |   |   |   |   |             |   |   |   |
| Outstanding at March 31, 2011    |   |   | 8,750  |   |             |   | 9.22 |   |

----

Index

|                         |   | As of and for the three months ending March 31, 2011 |        |
|------------------------------|--------|------------------------------------------------------|-------------|
|                         |   |                                                 |        |   | Wealth |   |   | Corporate & |   |   |   |   |   |   |   |
|                         |   | Bank                                                 |        |   | Management |   |   | Intercompany |   |   | Eliminations |   |   | Total |   |
| Income Statement Information |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income          |   | $                                                    | 5,820,305   |   |   | $ | 22,046 |   |   | $ | (199,353 | ) |   | $ | - |   |   | $ | 5,642,998 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest income          |   |                                                 | 754,927     |   |   |   | 886,039 |   |   |   | 1,043,801 |   |   |   | (1,037,554 | ) |   |   | 1,647,213 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest expense         |   |                                                 | 4,289,994   |   |   |   | 609,592 |   |   |   | 193,121 |   |   |   | - |   |   |   | 5,092,707 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncash items                |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses    |   |                                                 | 1,220,000   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,220,000 |   |
| Depreciation/Amortization    |   |                                                 | 476,435     |   |   |   | 13,193 |   |   |   | - |   |   |   | - |   |   |   | 489,628 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense(benefit)  |   |                                                 | 226,572     |   |   |   | 99,605 |   |   |   | (131,316 | ) |   |   | - |   |   |   | 194,861 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Profit               |   |                                                 | 838,666     |   |   |   | 198,888 |   |   |   | 782,643 |   |   |   | (1,037,554 | ) |   |   | 782,643 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Information    |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Assets               |   |                                                 | 658,382,461 |   |   |   | 6,648,921 |   |   |   | 78,009,855 |   |   |   | (78,924,404 | ) |   |   | 664,116,833 |   |

|                         |   | As of for the three months ending March 31, 2010 |        |
|------------------------------|--------|--------------------------------------------------|-------------|
|                         |   |                                             |        |   | Wealth |   |   | Corporate & |   |   |   |   |   |   |   |
|                         |   | Bank                                             |        |   | Management |   |   | Intercompany |   |   | Eliminations |   |   | Total |   |
| Income Statement Information |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income          |   | $                                                | 5,827,267   |   |   | $ | 16,269 |   |   | $ | (280,226 | ) |   | $ | - |   |   | $ | 5,563,310 |   |
|                         |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest income          |   |                                             | 900,819     |   |   |   | 886,732 |   |   |   | 1,011,249 |   |   |   | (1,201,106 | ) |   |   | 1,597,694 |   |
|                         |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest expense         |   |                                             | 4,150,734   |   |   |   | 599,282 |   |   |   | 155,150 |   |   |   | - |   |   |   | 4,905,166 |   |
|                         |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncash items                |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses    |   |                                             | 1,340,000   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,340,000 |   |
| Depreciation/Amortization    |   |                                             | 350,845     |   |   |   | 9,097 |   |   |   | - |   |   |   | - |   |   |   | 359,942 |   |
|                         |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense(benefit)  |   |                                             | 234,529     |   |   |   | 105,436 |   |   |   | (145,163 | ) |   |   | - |   |   |   | 194,802 |   |
|                         |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Profit               |   |                                             | 1,002,823   |   |   |   | 198,283 |   |   |   | 721,036 |   |   |   | (1,201,106 | ) |   |   | 721,036 |   |
|                         |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Information    |   |                                             |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Assets               |   |                                             | 676,696,637 |   |   |   | 5,935,873 |   |   |   | 70,543,441 |   |   |   | (79,050,186 | ) |   |   | 674,125,765 |   |

----

Index

|                      |   | March 31, 2011 |        |   | December 31, 2010 |   |
|--------------------------------|--------|----------------|-------------|--------|-------------------|--------|
|                      |   | Balance        |        |   | %                 |   |   | Balance |   |   | % |   |
|                      |   |           |        |   |              |   |   |   |   |   |   |   |
| Commercial                     |   | $              | 235,880,318 |   |              |   | 48.2 | % |   | $ | 233,882,777 |   |   |   | 48.0 | % |
| Commercial real estate         |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Construction                   |   |           | 25,890,839  |   |              |   | 5.3 | % |   |   | 24,588,088 |   |   |   | 5.1 | % |
| Other                          |   |           | 95,329,531  |   |              |   | 19.5 | % |   |   | 94,056,119 |   |   |   | 19.3 | % |
| Residential real estate        |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Traditional                    |   |           | 52,163,061  |   |              |   | 10.7 | % |   |   | 54,236,553 |   |   |   | 11.1 | % |
| Jumbo                          |   |           | 29,467,708  |   |              |   | 6.0 | % |   |   | 25,833,656 |   |   |   | 5.3 | % |
| Home equity                    |   |           | 35,688,855  |   |              |   | 7.3 | % |   |   | 38,395,005 |   |   |   | 7.9 | % |
| Consumer                       |   |           | 14,919,453  |   |              |   | 3.0 | % |   |   | 15,979,973 |   |   |   | 3.3 | % |
| Total loans                    |   |           | 489,339,765 |   |              |   | 100.0 | % |   |   | 486,972,171 |   |   |   | 100.0 | % |
| Net deferred loan costs (fees) |   |           | (90,190     | )      |              |   |   |   |   |   | (58,056 | ) |   |   |   |   |
| Allowance for loan losses      |   |           | (11,907,795 | )      |              |   |   |   |   |   | (12,489,400 | ) |   |   |   |   |
|                           |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net loans                      |   | $              | 477,341,780 |   |              |   |   |   |   | $ | 474,424,715 |   |   |   |   |   |

|                       |   |       |      |   |                   |   |       |                    |   |   |        |   |   |     |    |   |        |   |   |   |   |
|----------------------------|--------|------------|-----------|--------|------------------------|--------|------------|-------------------------|--------|--------|-------------|--------|--------|----------|---------|--------|-------------|--------|--------|--------|--------|
|                       |   | Commercial |      |   | Commercial Real Estate |   |       | Residential Real Estate |   |   | Home Equity |   |   | Consumer |    |   | Unallocated |   |   | Total  |   |
| Beginning balance 1/1/2011 |   |       | 5,790,945 |   |                   |   | 6,183,365  |                    |   |   | 386,992     |   |   |     | 77,051  |   |        |   | 28,711 |   |   |   | 22,336 |   |   |   | 12,489,400 |   |
| Provision expense          |   |       | 1,377,219 |   |                   |   | (91,840    | )                       |   |   | (70,458     | )      |   |     | 18,457  |   |        |   | (5,367 | )      |   |   | (8,011 | ) |   |   | 1,220,000 |   |
| Charge-offs                |   |       | (822,867  | )      |                   |   | (1,049,110 | )                       |   |   | -           |   |   |     | (17,408 | )      |        |   | -      |   |   |   | - |   |   |   | (1,889,385 | ) |
| Recoveries                 |   |       | 37,075    |   |                   |   | 47,363     |                    |   |   | -           |   |   |     | 1,767   |   |        |   | 1,575  |   |   |   | - |   |   |   | 87,780 |   |
| Ending Balance 3/31/2011   |   |       | 6,382,372 |   |                   |   | 5,089,778  |                    |   |   | 316,534     |   |   |     | 79,867  |   |        |   | 24,919 |   |   |   | 14,325 |   |   |   | 11,907,795 |   |

| Beginning balance 1/1/2010 |   |   | 11,598,389 |   |
|----------------------------|--------|--------|------------|--------|
| Provision expense          |   |   | 1,340,000  |   |
| Charge-offs                |   |   | (812,446   | )      |
| Recoveries                 |   |   | 23,942     |   |
| Ending Balance 3/31/2010   |   |   | 12,149,885 |   |

----

Index

| March 31, 2011                                  |   | Individually evaluated for impairment |       |   | Collectively evaluated for impairment |   |        | Total  |   |
|-------------------------------------------------|--------|---------------------------------------|------------|--------|---------------------------------------|--------|-------------|--------|--------|
| Allowance for loan losses:                      |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Ending allowance balance attributable to loans: |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Commercial                                      |   | $                                     | 1,361,920  |   |                                  | $      | 5,020,452   |   |   | $ | 6,382,372 |   |
| Commercial Real Estate                          |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Construction                                    |   |                                  | 1,467,000  |   |                                  |   | 651,318     |   |   |   | 2,118,318 |   |
| Other                                           |   |                                  | 585,000    |   |                                  |   | 2,386,460   |   |   |   | 2,971,460 |   |
| Residential Real Estate                         |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Traditional                                     |   |                                  | -          |   |                                  |   | 202,269     |   |   |   | 202,269 |   |
| Jumbo                                           |   |                                  | -          |   |                                  |   | 114,265     |   |   |   | 114,265 |   |
| Home Equity                                     |   |                                  | -          |   |                                  |   | 79,867      |   |   |   | 79,867 |   |
| Consumer                                        |   |                                  | -          |   |                                  |   | 24,919      |   |   |   | 24,919 |   |
| Unallocated                                     |   |                                  | -          |   |                                  |   | 14,325      |   |   |   | 14,325 |   |
| Total                                           |   | $                                     | 3,413,920  |   |                                  | $      | 8,493,875   |   |   | $ | 11,907,795 |   |
|                                            |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Loans:                                          |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Commercial                                      |   | $                                     | 16,971,628 |   |                                  | $      | 219,617,138 |   |   | $ | 236,588,766 |   |
| Commercial Real Estate                          |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Construction                                    |   |                                  | 6,367,965  |   |                                  |   | 19,574,159  |   |   |   | 25,942,124 |   |
| Other                                           |   |                                  | 6,085,261  |   |                                  |   | 89,420,950  |   |   |   | 95,506,211 |   |
| Residential Real Estate                         |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Traditional                                     |   |                                  | -          |   |                                  |   | 52,266,252  |   |   |   | 52,266,252 |   |
| Jumbo                                           |   |                                  | -          |   |                                  |   | 29,526,003  |   |   |   | 29,526,003 |   |
| Home Equity                                     |   |                                  | -          |   |                                  |   | 35,909,221  |   |   |   | 35,909,221 |   |
| Consumer                                        |   |                                  | -          |   |                                  |   | 15,123,879  |   |   |   | 15,123,879 |   |
| Unallocated                                     |   |                                  | -          |   |                                  |   | -           |   |   |   | - |   |
| Total                                           |   | $                                     | 29,424,854 |   |                                  | $      | 461,437,602 |   |   | $ | 490,862,456 |   |

| December 31, 2010                               |   | Individually evaluated for impairment |       |   | Collectively evaluated for impairment |   |        | Total  |   |
|-------------------------------------------------|--------|---------------------------------------|------------|--------|---------------------------------------|--------|-------------|--------|--------|
| Allowance for loan losses:                      |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Ending allowance balance attributable to loans: |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Commercial                                      |   | $                                     | 794,796    |   |                                  | $      | 4,996,149   |   |   | $ | 5,790,945 |   |
| Commercial Real Estate                          |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Construction                                    |   |                                  | 2,547,000  |   |                                  |   | 664,665     |   |   |   | 3,211,665 |   |
| Other                                           |   |                                  | 445,000    |   |                                  |   | 2,526,700   |   |   |   | 2,971,700 |   |
| Residential Real Estate                         |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Traditional                                     |   |                                  | -          |   |                                  |   | 262,134     |   |   |   | 262,134 |   |
| Jumbo                                           |   |                                  | -          |   |                                  |   | 124,858     |   |   |   | 124,858 |   |
| Home Equity                                     |   |                                  | -          |   |                                  |   | 77,051      |   |   |   | 77,051 |   |
| Consumer                                        |   |                                  | -          |   |                                  |   | 28,711      |   |   |   | 28,711 |   |
| Unallocated                                     |   |                                  | -          |   |                                  |   | 22,336      |   |   |   | 22,336 |   |
| Total                                           |   | $                                     | 3,786,796  |   |                                  | $      | 8,702,604   |   |   | $ | 12,489,400 |   |
|                                            |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Loans:                                          |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Commercial                                      |   | $                                     | 17,755,408 |   |                                  | $      | 216,751,782 |   |   | $ | 234,507,190 |   |
| Commercial Real Estate                          |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Construction                                    |   |                                  | 8,020,168  |   |                                  |   | 16,632,723  |   |   |   | 24,652,891 |   |
| Other                                           |   |                                  | 5,853,845  |   |                                  |   | 88,362,580  |   |   |   | 94,216,425 |   |
| Residential Real Estate                         |   |                                  |       |   |                                  |   |        |   |   |   |   |   |
| Traditional                                     |   |                                  | -          |   |                                  |   | 54,373,838  |   |   |   | 54,373,838 |   |
| Jumbo                                           |   |                                  | -          |   |                                  |   | 25,899,046  |   |   |   | 25,899,046 |   |
| Home Equity                                     |   |                                  | -          |   |                                  |   | 38,620,639  |   |   |   | 38,620,639 |   |
| Consumer                                        |   |                                  | -          |   |                                  |   | 16,186,219  |   |   |   | 16,186,219 |   |
| Unallocated                                     |   |                                  | -          |   |                                  |   | -           |   |   |   | - |   |
| Total                                           |   | $                                     | 31,629,421 |   |                                  | $      | 456,826,827 |   |   | $ | 488,456,248 |   |

----

Index

| March 31, 2011                      |   | Unpaid Principal Balance |       |   | Recorded Investment |   |       | Allowance for Loan Losses Allocated |   |
|-------------------------------------|--------|--------------------------|------------|--------|---------------------|--------|------------|-------------------------------------|--------|
| With no related allowance recorded: |   |                     |       |   |                |   |       |                                |   |
| Commercial                          |   | $                        | 11,815,368 |   |                | $      | 11,842,016 |                                |   | $ | - |   |
| Commercial Real Estate              |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Construction                        |   |                     | 1,314,369  |   |                |   | 1,314,913  |                                |   |   | - |   |
| Other                               |   |                     | 1,475,872  |   |                |   | 1,482,866  |                                |   |   | - |   |
| Residential Real Estate             |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Traditional                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Jumbo                               |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Home Equity                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Consumer                            |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
|                                |   |                     | 14,605,609 |   |                |   | 14,639,795 |                                |   |   | - |   |
| With related allowance recorded:    |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Commercial                          |   |                     | 5,120,215  |   |                |   | 5,129,612  |                                |   |   | 1,361,920 |   |
| Commercial Real Estate              |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Construction                        |   |                     | 5,051,275  |   |                |   | 5,053,052  |                                |   |   | 1,467,000 |   |
| Other                               |   |                     | 4,598,566  |   |                |   | 4,602,395  |                                |   |   | 585,000 |   |
| Residential Real Estate             |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Traditional                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Jumbo                               |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Home Equity                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Consumer                            |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
|                                |   |                     | 14,770,056 |   |                |   | 14,785,059 |                                |   |   | 3,413,920 |   |
|                                |   |                     |       |   |                |   |       |                                |   |   |   |   |
|                                |   | $                        | 29,375,665 |   |                | $      | 29,424,854 |                                |   | $ | 3,413,920 |   |

| December 31, 2010                   |   | Unpaid Principal Balance |       |   | Recorded Investment |   |       | Allowance for Loan Losses Allocated |   |
|-------------------------------------|--------|--------------------------|------------|--------|---------------------|--------|------------|-------------------------------------|--------|
| With no related allowance recorded: |   |                     |       |   |                |   |       |                                |   |
| Commercial                          |   | $                        | 12,803,552 |   |                | $      | 12,826,772 |                                |   | $ | - |   |
| Commercial Real Estate              |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Construction                        |   |                     | 1,850,416  |   |                |   | 1,862,150  |                                |   |   | - |   |
| Other                               |   |                     | 2,208,130  |   |                |   | 2,208,205  |                                |   |   | - |   |
| Residential Real Estate             |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Traditional                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Jumbo                               |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Home Equity                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Consumer                            |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
|                                |   |                     | 16,862,098 |   |                |   | 16,897,127 |                                |   |   | - |   |
| With related allowance recorded:    |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Commercial                          |   |                     | 4,910,918  |   |                |   | 4,928,636  |                                |   |   | 794,796 |   |
| Commercial Real Estate              |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Construction                        |   |                     | 6,156,859  |   |                |   | 6,158,018  |                                |   |   | 2,547,000 |   |
| Other                               |   |                     | 3,640,193  |   |                |   | 3,645,640  |                                |   |   | 445,000 |   |
| Residential Real Estate             |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Traditional                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Jumbo                               |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Home Equity                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Consumer                            |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
|                                |   |                     | 14,707,970 |   |                |   | 14,732,294 |                                |   |   | 3,786,796 |   |
|                                |   |                     |       |   |                |   |       |                                |   |   |   |   |
|                                |   | $                        | 31,570,068 |   |                | $      | 31,629,421 |                                |   | $ | 3,786,796 |   |

----

Index

|                                      | For the three months ended |   | March 31, 2011 |       |
|-------------------------------------------|----------------------------|--------|----------------|------------|
|                                      |                       |   |           |       |
| Average impaired loans during the period: |                       |   |           |       |
| Commercial                                |                       |   | $              | 15,987,011 |   |
| Commercial Real Estate                    |                       |   |           |       |   |
| Construction                              |                       |   |           | 3,560,177  |   |
| Other                                     |                       |   |           | 11,015,678 |   |
|                                      |                       |   |           |       |   |
| Interest recognized on impaired loans:    |                       |   |           |       |   |
| Commercial                                |                       |   |           | 159,397    |   |
| Commercial Real Estate                    |                       |   |           |       |   |
| Construction                              |                       |   |           | 47,245     |   |
| Other                                     |                       |   |           | 70,047     |   |
|                                      |                       |   |           |       |   |
| Cash-basis interest income recognized:    |                       |   |           |       |   |
| Commercial                                |                       |   |           | 134,391    |   |
| Commercial Real Estate                    |                       |   |           |       |   |
| Construction                              |                       |   |           | 43,318     |   |
| Other                                     |                       |   |           | 64,577     |   |

|                                     | For the three months ended |   | March 31, 2010 |       |
|------------------------------------------|----------------------------|--------|----------------|------------|
|                                     |                       |   |           |       |
| Average impaired loans during the period |                       |   | $              | 25,396,342 |   |
|                                     |                       |   |           |       |   |
| Interest recognized on impaired loans    |                       |   |           | 178,971    |   |
|                                     |                       |   |           |       |   |
| Cash-basis interest income recognized    |                       |   |           | 178,971    |   |

| March 31, 2011          |   | Nonaccrual |       |   | Loans Past Due Over 90 Days Still Accruing |   |
|-------------------------|--------|------------|------------|--------|--------------------------------------------|--------|
| Commercial              |   | $          | 7,581,886  |   |                                       | $      | 1,897,231 |   |
| Commercial Real Estate  |   |       |       |   |                                       |   |   |   |
| Construction            |   |       | 3,306,335  |   |                                       |   | - |   |
| Other                   |   |       | 1,197,890  |   |                                       |   | 678,007 |   |
| Residential Real Estate |   |       |       |   |                                       |   |   |   |
| Traditional             |   |       | 651,925    |   |                                       |   | 183,512 |   |
| Jumbo                   |   |       | -          |   |                                       |   | - |   |
| Home Equity             |   |       | -          |   |                                       |   | 118,341 |   |
| Consumer                |   |       | -          |   |                                       |   | 7,352 |   |
| Total                   |   | $          | 12,738,036 |   |                                       | $      | 2,884,443 |   |

----

Index

| December 31, 2010       |   | Nonaccrual |       |   | Loans Past Due Over 90 Days Still Accruing |   |
|-------------------------|--------|------------|------------|--------|--------------------------------------------|--------|
| Commercial              |   | $          | 6,413,675  |   |                                       | $      | 1,961,597 |   |
| Commercial Real Estate  |   |       |       |   |                                       |   |   |   |
| Construction            |   |       | 3,476,643  |   |                                       |   | 482,512 |   |
| Other                   |   |       | 2,208,205  |   |                                       |   | - |   |
| Residential Real Estate |   |       |       |   |                                       |   |   |   |
| Traditional             |   |       | 825,432    |   |                                       |   | 229,213 |   |
| Jumbo                   |   |       | -          |   |                                       |   | - |   |
| Home Equity             |   |       | 17,292     |   |                                       |   | 179 |   |
| Consumer                |   |       | -          |   |                                       |   | 27,843 |   |
| Total                   |   | $          | 12,941,247 |   |                                       | $      | 2,701,344 |   |

| March 31, 2011          |   | 30 - 59 Days Past Due |      |   | 60 - 89 Days Past Due |   |      | Greater than 90 Days Past Due |   |   | Total Past Due |   |   | Total Loans Not Past Due |       |
|-------------------------|--------|-----------------------|-----------|--------|-----------------------|--------|-----------|-------------------------------|--------|--------|----------------|--------|--------|--------------------------|------------|
| Commercial              |   | $                     | 1,824,016 |   |                  | $      | 4,304,047 |                          |   | $      | 4,639,386      |   |   |                     | 10,767,449 |   |   | $ | 225,821,317 |   |
| Commercial Real Estate  |   |                  |      |   |                  |   |      |                          |   |   |           |   |   |                     |       |   |   |   |   |   |
| Construction            |   |                  | 2,596,702 |   |                  |   | -         |                          |   |   | 3,167,098      |   |   |                     | 5,763,800  |   |   |   | 20,178,324 |   |
| Other                   |   |                  | 749,663   |   |                  |   | 132,249   |                          |   |   | 1,875,897      |   |   |                     | 2,757,809  |   |   |   | 92,748,402 |   |
| Residential Real Estate |   |                  |      |   |                  |   |      |                          |   |   |           |   |   |                     |       |   |   |   |   |   |
| Traditional             |   |                  | 60,156    |   |                  |   | -         |                          |   |   | 835,437        |   |   |                     | 895,593    |   |   |   | 51,370,659 |   |
| Jumbo                   |   |                  | -         |   |                  |   | -         |                          |   |   | -              |   |   |                     | -          |   |   |   | 29,526,003 |   |
| Home Equity             |   |                  | 41,487    |   |                  |   | -         |                          |   |   | 118,341        |   |   |                     | 159,828    |   |   |   | 35,749,393 |   |
| Consumer                |   |                  | 335,817   |   |                  |   | 49,303    |                          |   |   | 7,352          |   |   |                     | 392,472    |   |   |   | 14,731,407 |   |
| Total                   |   | $                     | 5,607,841 |   |                  | $      | 4,485,599 |                          |   | $      | 10,643,511     |   |   | $                        | 20,736,951 |   |   | $ | 470,125,505 |   |

| December 31, 2010       |   | 30 - 59 Days Past Due |      |   | 60 - 89 Days Past Due |   |    | Greater than 90 Days Past Due |   |   | Total Past Due |   |   | Total Loans Not Past Due |       |
|-------------------------|--------|-----------------------|-----------|--------|-----------------------|--------|---------|-------------------------------|--------|--------|----------------|--------|--------|--------------------------|------------|
| Commercial              |   | $                     | 3,377,433 |   |                  | $      | 444,713 |                          |   | $      | 5,571,355      |   |   |                     | 9,393,501  |   |   | $ | 225,113,689 |   |
| Commercial Real Estate  |   |                  |      |   |                  |   |    |                          |   |   |           |   |   |                     |       |   |   |   |   |   |
| Construction            |   |                  | 3,487,072 |   |                  |   | -       |                          |   |   | 1,862,150      |   |   |                     | 5,349,222  |   |   |   | 19,303,669 |   |
| Other                   |   |                  | -         |   |                  |   | 239,392 |                          |   |   | 2,208,205      |   |   |                     | 2,447,597  |   |   |   | 91,768,828 |   |
| Residential Real Estate |   |                  |      |   |                  |   |    |                          |   |   |           |   |   |                     |       |   |   |   |   |   |
| Traditional             |   |                  | 738,767   |   |                  |   | 121,252 |                          |   |   | 1,054,645      |   |   |                     | 1,914,664  |   |   |   | 52,459,174 |   |
| Jumbo                   |   |                  | 1,183,388 |   |                  |   | -       |                          |   |   | -              |   |   |                     | 1,183,388  |   |   |   | 24,715,658 |   |
| Home Equity             |   |                  | 48,433    |   |                  |   | -       |                          |   |   | 17,471         |   |   |                     | 65,904     |   |   |   | 38,554,735 |   |
| Consumer                |   |                  | 250,040   |   |                  |   | 95,625  |                          |   |   | 27,843         |   |   |                     | 373,508    |   |   |   | 15,812,711 |   |
| Total                   |   | $                     | 9,085,133 |   |                  | $      | 900,982 |                          |   | $      | 10,741,669     |   |   | $                        | 20,727,784 |   |   | $ | 467,728,464 |   |

----

Index

| March 31, 2011          |   | Not Rated |        |   | Pass   |   |        | Special Mention |   |   | Substandard |   |   | Doubtful |       |
|-------------------------|--------|-----------|-------------|--------|--------|--------|-------------|-----------------|--------|--------|-------------|--------|--------|----------|------------|
| Commercial              |   | $         | -           |   |   | $      | 197,988,301 |            |   | $      | 19,342,991  |   |   |     | 11,830,588 |   |   | $ | 7,426,886 |   |
| Commercial Real Estate  |   |      |        |   |   |   |        |            |   |   |        |   |   |     |       |   |   |   |   |   |
| Construction            |   |      | -           |   |   |   | 8,060,591   |            |   |   | 3,282,154   |   |   |     | 11,293,045 |   |   |   | 3,306,334 |   |
| Other                   |   |      | -           |   |   |   | 82,031,287  |            |   |   | 7,537,356   |   |   |     | 4,739,678  |   |   |   | 1,197,890 |   |
| Residential Real Estate |   |      |        |   |   |   |        |            |   |   |        |   |   |     |       |   |   |   |   |   |
| Traditional             |   |      | 52,266,252  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Jumbo                   |   |      | 29,526,003  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Home Equity             |   |      | 35,909,221  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Consumer                |   |      | 15,123,879  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Total                   |   | $         | 132,825,355 |   |   | $      | 288,080,179 |            |   | $      | 30,162,501  |   |   | $        | 27,863,311 |   |   | $ | 11,931,110 |   |

| December 31, 2010       |   | Not Rated |        |   | Pass   |   |        | Special Mention |   |   | Substandard |   |   | Doubtful |       |
|-------------------------|--------|-----------|-------------|--------|--------|--------|-------------|-----------------|--------|--------|-------------|--------|--------|----------|------------|
| Commercial              |   | $         | -           |   |   | $      | 197,230,795 |            |   | $      | 15,507,296  |   |   |     | 15,459,634 |   |   | $ | 6,309,465 |   |
| Commercial Real Estate  |   |      |        |   |   |   |        |            |   |   |        |   |   |     |       |   |   |   |   |   |
| Construction            |   |      | -           |   |   |   | 5,725,698   |            |   |   | 3,104,775   |   |   |     | 12,345,774 |   |   |   | 3,476,644 |   |
| Other                   |   |      | -           |   |   |   | 79,158,412  |            |   |   | 8,485,742   |   |   |     | 4,364,067  |   |   |   | 2,208,204 |   |
| Residential Real Estate |   |      |        |   |   |   |        |            |   |   |        |   |   |     |       |   |   |   |   |   |
| Traditional             |   |      | 54,373,838  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Jumbo                   |   |      | 25,899,046  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Home Equity             |   |      | 38,620,639  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Consumer                |   |      | 16,186,219  |   |   |   | -           |            |   |   | -           |   |   |     | -          |   |   |   | - |   |
| Total                   |   | $         | 135,079,742 |   |   | $      | 282,114,905 |            |   | $      | 27,097,813  |   |   | $        | 32,169,475 |   |   | $ | 11,994,313 |   |

| March 31, 2011          |   | Not Past Due |        |   | 30 - 89 Days Past Due |   |    | Greater than 90 Days Past Due Still Accruing |   |   | Nonaccrual |   |
|-------------------------|--------|--------------|-------------|--------|-----------------------|--------|---------|----------------------------------------------|--------|--------|------------|--------|
| Residential Real Estate |   |         |        |   |                  |   |    |                                         |   |   |       |   |
| Traditional             |   | $            | 51,370,659  |   |                  | $      | 60,156  |                                         |   | $      | 183,512    |   |   | $ | 651,925 |   |
| Jumbo                   |   |         | 29,526,003  |   |                  |   | -       |                                         |   |   | -          |   |   |   | - |   |
| Home Equity             |   |         | 35,749,393  |   |                  |   | 41,487  |                                         |   |   | 118,341    |   |   |   | - |   |
| Consumer                |   |         | 14,731,407  |   |                  |   | 385,120 |                                         |   |   | 7,352      |   |   |   | - |   |
| Total                   |   | $            | 131,377,462 |   |                  | $      | 486,763 |                                         |   | $      | 309,205    |   |   | $ | 651,925 |   |

----

Index

| December 31, 2010       |   | Not Past Due |        |   | 30 - 89 Days Past Due |   |      | Greater than 90 Days Past Due Still Accruing |   |   | Nonaccrual |   |
|-------------------------|--------|--------------|-------------|--------|-----------------------|--------|-----------|----------------------------------------------|--------|--------|------------|--------|
| Residential Real Estate |   |         |        |   |                  |   |      |                                         |   |   |       |   |
| Traditional             |   | $            | 52,459,174  |   |                  | $      | 860,019   |                                         |   | $      | 229,213    |   |   | $ | 825,432 |   |
| Jumbo                   |   |         | 24,715,658  |   |                  |   | 1,183,388 |                                         |   |   | -          |   |   |   | - |   |
| Home Equity             |   |         | 38,554,735  |   |                  |   | 48,433    |                                         |   |   | 179        |   |   |   | 17,292 |   |
| Consumer                |   |         | 15,812,711  |   |                  |   | 345,665   |                                         |   |   | 27,843     |   |   |   | - |   |
| Total                   |   | $            | 131,542,278 |   |                  | $      | 2,437,505 |                                         |   | $      | 257,235    |   |   | $ | 842,724 |   |

|                                           |   | March 31, 2011 |       |   | December 31, 2010 |   |
|------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|
|                                           |   |           |       |   |              |   |
| Loans past due over 90 days and still accruing |   | $              | 2,872,769  |   |              | $      | 2,688,135 |   |
| Nonperforming restructured loans               |   |           | 2,119,335  |   |              |   | 7,501,958 |   |
| Nonaccrual loans                               |   |           | 12,738,444 |   |              |   | 12,939,331 |   |
| Total nonperforming loans                      |   | $              | 17,730,548 |   |              | $      | 23,129,424 |   |
| Other real estate owned                        |   |           | 4,740,592  |   |              |   | 4,284,263 |   |
| Impaired Securities                            |   |           | 401,717    |   |              |   | 421,529 |   |
| Total nonperforming assets                     |   | $              | 22,872,857 |   |              | $      | 27,835,216 |   |
|                                           |   |           |       |   |              |   |   |   |
| Nonperforming assets to total assets           |   |           | 3.44       | %      |              |   | 4.22 | % |
|                                           |   |           |       |   |              |   |   |   |
| Nonperforming loans to total loans             |   |           | 3.62       | %      |              |   | 4.75 | % |

|                                                                      |   | March 31, 2011 |       |   | December 31, 2010 |   |
|---------------------------------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|
|                                                                      |   |           |       |   |              |   |
| 3.19% bullet advance, principal due at maturity March 28, 2011            |   | $              | -          |   |              | $      | 2,000,000 |   |
| 3.60% bullet advance, principal due at maturity April 28, 2011            |   |           | 1,500,000  |   |              |   | 1,500,000 |   |
| 0.48% variable rate advance, principal due at maturity September 13, 2011 |   |           | 1,500,000  |   |              |   | - |   |
| 0.48% variable rate advance, principal due at maturity September 26, 2011 |   |           | 4,500,000  |   |              |   | - |   |
| 3.55% bullet advance, principal due at maturity March 26, 2012            |   |           | 2,000,000  |   |              |   | 2,000,000 |   |
| 3.81% bullet advance, principal due at maturity March 26, 2013            |   |           | 2,000,000  |   |              |   | 2,000,000 |   |
|                                                                      |   |           |       |   |              |   |   |   |
|                                                                      |   | $              | 11,500,000 |   |              | $      | 7,500,000 |   |

| Year   |   | Advances |       |
|--------|--------|----------|------------|
| 2011   |   | $        | 7,500,000  |   |
| 2012   |   |     | 2,000,000  |   |
| 2013   |   |     | 2,000,000  |   |
|   |   | $        | 11,500,000 |   |

----

Index

----

Index

|                                             |   |    |    |   | March 31, 2011 |   |             |    |   |
|--------------------------------------------------|--------|---------|---------|--------|----------------|--------|------------------|---------|--------|
|                                             |   | Level 1 |    |   | Level 2        |   |             | Level 3 |   |   | Total |   |
| Available for sale securities:                   |   |    |    |   |           |   |             |    |   |   |   |   |
| U.S. Government agency debt obligations          |   | $       | -       |   |           | $      | 3,431,564        |    |   | $ | - |   |   | $ | 3,431,564 |   |
| Obligations of states and political subdivisions |   |    |  - |   |           |   |  49,543,510 |    |   |   |  - |   |   |   |  49,543,510 |   |
| Mortgage-backed securities (residential)         |   |    | -       |   |           |   | 58,392,943       |    |   |   | 7,650,172 |   |   |   | 66,043,115 |   |
| Mortgage-backed securities (commercial)          |   |    | -       |   |           |   | 4,617,450        |    |   |   | - |   |   |   | 4,617,450 |   |
| Collateralized debt obligations                  |   |    | -       |   |           |   | -                |    |   |   | - |   |   |   | - |   |
| Total                                            |   | $       | -       |   |           | $      | 115,985,467      |    |   | $ | 7,650,172 |   |   | $ | 123,635,639 |   |

|                                             |   |    |    |   | December 31, 2010 |   |             |    |   |
|--------------------------------------------------|--------|---------|---------|--------|-------------------|--------|------------------|---------|--------|
|                                             |   | Level 1 |    |   | Level 2           |   |             | Level 3 |   |   | Total |   |
| Available for sale securities:                   |   |    |    |   |              |   |             |    |   |   |   |   |
| U.S. Government agency debt obligations          |   | $       | -       |   |              | $      | 4,172,667        |    |   | $ | - |   |   | $ | 4,172,667 |   |
| Obligations of states and political subdivisions |   |    |  - |   |              |   |  45,759,402 |    |   |   |  - |   |   |   |  45,759,402 |   |
| Mortgage-backed securities (residential)         |   |    | -       |   |              |   | 47,097,328       |    |   |   | 8,391,642 |   |   |   | 55,488,970 |   |
| Mortgage-backed securities (commercial)          |   |    | -       |   |              |   | 4,683,017        |    |   |   | - |   |   |   | 4,683,017 |   |
| Collateralized debt obligations                  |   |    | -       |   |              |   | -                |    |   |   | 4,600 |   |   |   | 4,600 |   |
| Total                                            |   | $       | -       |   |              | $      | 101,712,414      |    |   | $ | 8,396,242 |   |   | $ | 110,108,656 |   |

|                                   |   | Available-for-sale securities  |     |   | Available-for-sale securities            |   |
|----------------------------------------|--------|--------------------------------|----------|--------|------------------------------------------|--------|
|                                   |   | March 31, 2011                 |     |   | March 31, 2010                           |   |
| For the three months ended             |   | Collateralized Debt Obligation |     |   | Mortgage Backed Securities (residential) |   |   | Collateralized Debt Obligation |   |   | Mortgage Backed Securities (residential) |   |
|                                   |   |                           |     |   |                                     |   |   |   |   |   |   |   |
| Beginning Balance, January 1           |   | $                              | 4,600    |   |                                     | $      | 8,391,642 |   |   | $ | 10,000 |   |   | $ | 5,091,556 |   |
| Principal paydowns                     |   |                           | -        |   |                                     |   | (747,556 | ) |   |   | - |   |   |   | (255,943 | ) |
| Net realized/unrealized gains (losses) |   |                           |     |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Included in earnings:                  |   |                           |     |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest income on securities          |   |                           | -        |   |                                     |   | (1,980 | ) |   |   | - |   |   |   | 24,624 |   |
| Credit loss recognized in earnings     |   |                           | (110,000 | )      |                                     |   | (14,999 | ) |   |   | - |   |   |   | (10,590 | ) |
| Included in other comprehensive income |   |                           | 105,400  |   |                                     |   | 23,065 |   |   |   | 28 |   |   |   | 167,607 |   |
| Purchases of Level 3 securities        |   |                           |     |   |                                     |   | - |   |   |   |   |   |   |   | 1,112,773 |   |
| Transfers in (out) of Level 3          |   |                           | -        |   |                                     |   | - |   |   |   | - |   |   |   | - |   |
| Ending Balance, March 31               |   | $                              | -        |   |                                     | $      | 7,650,172 |   |   | $ | 10,028 |   |   | $ | 6,130,027 |   |

----

Index

|                    |   | Changes in Unrealized Gains (Losses) Relating to Assets Held at Reporting Date for the Quarter Ended March 31 |    |
|-----------------------------------|--------|---------------------------------------------------------------------------------------------------------------|---------|
| Collateralized Debt Obligation    |   | 2011                                                                                                          |    |   | 2010 |   |
| Impairment recognized in earnings |   | $                                                                                                             | 110,000 |   |   | $ | - |   |
| Total                             |   | $                                                                                                             | 110,000 |   |   | $ | - 0 - |   |

|                                     |   | Changes in Unrealized Gains (Losses) Relating to Assets Held at Reporting Date for the Year Ended March 31 |   |
|------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|--------|
| Mortgage backed securities (residential) |   | 2011                                                                                                       |   |   | 2010 |   |
| Impairment recognized in earnings        |   | $                                                                                                          | 14,999 |   |   | $ | 10,590 |   |
| Total                                    |   | $                                                                                                          | 14,999 |   |   | $ | 10,590 |   |

|                     |   |    |   |   | March 31, 2011 |   |   |    |   |
|--------------------------|--------|---------|--------|--------|----------------|--------|--------|---------|--------|
|                     |   | Level 1 |   |   | Level 2        |   |   | Level 3 |   |   | Total |   |
| Impaired loans:          |   |    |   |   |           |   |   |    |   |   |   |   |
| Commercial               |   | $       | -      |   |           | $      | -      |    |   | $ | 4,431,757 |   |   | $ | 4,431,757 |   |
| Commercial Real Estate   |   |    |   |   |           |   |   |    |   |   |   |   |   |   |   |   |
| Construction             |   |    | -      |   |           |   | -      |    |   |   | 431,986 |   |   |   | 431,986 |   |
| Other                    |   |    | -      |   |           |   | -      |    |   |   | 3,641,323 |   |   |   | 3,641,323 |   |
| Other real estate owned: |   |    |   |   |           |   |   |    |   |   |   |   |   |   |   |   |
| Commercial Real Estate   |   |    |   |   |           |   |   |    |   |   |   |   |   |   |   |   |
| Construction             |   | $       | -      |   |           | $      | -      |    |   | $ | 51,700 |   |   | $ | 51,700 |   |
| Other                    |   |    | -      |   |           |   | -      |    |   |   | 1,230,315 |   |   |   | 1,230,315 |   |
| Residential Real Estate  |   |    |   |   |           |   |   |    |   |   |   |   |   |   |   |   |
| Traditional              |   |    | -      |   |           |   | -      |    |   |   | 228,420 |   |   |   | 228,420 |   |
| Jumbo                    |   |    | -      |   |           |   | -      |    |   |   | - |   |   |   | - |   |

----

Index

|                     |   |    |   |   | December 31, 2010 |   |   |    |   |
|--------------------------|--------|---------|--------|--------|-------------------|--------|--------|---------|--------|
|                     |   | Level 1 |   |   | Level 2           |   |   | Level 3 |   |   | Total |   |
| Impaired loans:          |   |    |   |   |              |   |   |    |   |   |   |   |
| Commercial               |   | $       | -      |   |              | $      | -      |    |   | $ | 5,491,859 |   |   | $ | 5,491,859 |   |
| Commercial Real Estate   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |
| Construction             |   |    | -      |   |              |   | -      |    |   |   | 763,986 |   |   |   | 763,986 |   |
| Other                    |   |    | -      |   |              |   | -      |    |   |   | 4,617,865 |   |   |   | 4,617,865 |   |
| Other real estate owned: |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |
| Commercial Real Estate   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |
| Construction             |   | $       | -      |   |              | $      | -      |    |   | $ | 1,878,255 |   |   | $ | 1,878,255 |   |
| Other                    |   |    | -      |   |              |   | -      |    |   |   | 917,000 |   |   |   | 917,000 |   |
| Residential Real Estate  |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |
| Traditional              |   |    | -      |   |              |   | -      |    |   |   | 279,000 |   |   |   | 279,000 |   |
| Jumbo                    |   |    | -      |   |              |   | -      |    |   |   | - |   |   |   | - |   |

|                                |   | March 31, 2011 |         |   | December 31, 2010 |   |
|-------------------------------------|--------|----------------|--------------|--------|-------------------|--------|
|                                |   | Carrying       |         |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                                |   | Value          |         |   | Value             |   |   | Value |   |   | Value |   |
| Financial assets:                   |   |           |         |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents           |   | $              | 15,868,146   |   |              | $      | 15,868,146 |   |   | $ | 29,679,382 |   |   | $ | 29,679,382 |   |
| Long-term interest earning deposits |   |           | 996,000      |   |              |   | 996,000 |   |   |   | 996,000 |   |   |   | 996,000 |   |
| Securities available for sale       |   |           | 123,635,639  |   |              |   | 123,635,639 |   |   |   | 110,108,656 |   |   |   | 110,108,656 |   |
| FHLBI and FRB stock                 |   |           | 4,075,100    |   |              |   | N/A |   |   |   | 4,075,100 |   |   |   | N/A |   |
| Loans held for sale                 |   |           | 432,413      |   |              |   | 432,413 |   |   |   | 2,140,872 |   |   |   | 2,140,872 |   |
| Loans, net                          |   |           | 477,341,780  |   |              |   | 481,043,587 |   |   |   | 474,424,715 |   |   |   | 477,931,195 |   |
| Accrued interest receivable         |   |           | 2,486,910    |   |              |   | 2,486,910 |   |   |   | 2,391,953 |   |   |   | 2,391,953 |   |
| Financial liabilities:              |   |           |         |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                            |   | $              | (575,525,403 | )      |              | $      | (577,661,891 | ) |   | $ | (576,356,136 | ) |   | $ | (579,132,112 | ) |
| Federal funds purchased             |   |           | (100,000     | )      |              |   | (100,000 | ) |   |   | - |   |   |   | - |   |
| FHLB advances                       |   |           | (11,500,000  | )      |              |   | (11,667,250 | ) |   |   | (7,500,000 | ) |   |   | (7,716,450 | ) |
| Junior subordinated debt            |   |           | (17,527,000  | )      |              |   | (16,818,812 | ) |   |   | (17,527,000 | ) |   |   | (16,537,065 | ) |
| Accrued interest payable            |   |           | (1,641,739   | )      |              |   | (1,641,739 | ) |   |   | (1,415,713 | ) |   |   | (1,415,713 | ) |

----

Index

----

Index

Item 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

----

Index

----

Index

|                                                 |   | March 31, 2011 |        |   | December 31, 2010 |   |
|------------------------------------------------------|--------|----------------|-------------|--------|-------------------|--------|
|                                                 |   | Balance        |        |   | %                 |   |   | Balance |   |   | % |   |
| Core deposits:                                       |   |           |        |   |              |   |   |   |   |   |   |   |
| Noninterest-bearing demand                           |   | $              | 87,598,846  |   |              |   | 15.2 | % |   | $ | 92,872,957 |   |   |   | 16.1 | % |
| Interest-bearing checking                            |   |           | 114,920,403 |   |              |   | 20.0 | % |   |   | 101,158,162 |   |   |   | 17.6 | % |
| Money market                                         |   |           | 153,225,501 |   |              |   | 26.6 | % |   |   | 159,336,066 |   |   |   | 27.7 | % |
| Savings                                              |   |           | 21,247,225  |   |              |   | 3.7 | % |   |   | 22,672,555 |   |   |   | 3.9 | % |
| Time, under $100,000                                 |   |           | 51,881,437  |   |              |   | 9.0 | % |   |   | 55,450,402 |   |   |   | 9.6 | % |
| Total core deposits                                  |   |           | 428,873,412 |   |              |   | 74.5 | % |   |   | 431,490,142 |   |   |   | 74.9 | % |
| Non-core deposits:                                   |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| In-market non-core deposits: Time, $100,000 and over |   |           | 36,220,770  |   |              |   | 6.3 | % |   |   |  39,356,777 |   |   |   | 6.8 | % |
| Out-of-market non-core deposits:                     |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Money market                                         |   |           | 12,020,676  |   |              |   | 2.1 | % |   |   | 12,015,936 |   |   |   | 2.1 | % |
| Brokered certificate of deposits                     |   |           | 98,410,545  |   |              |   | 17.1 | % |   |   | 93,493,281 |   |   |   | 16.2 | % |
| Total out-of-market deposits                         |   |           | 110,431,221 |   |              |   | 19.2 | % |   |   | 105,509,217 |   |   |   | 18.3 | % |
| Total non-core deposits                              |   |           | 146,651,991 |   |              |   | 25.5 | % |   |   | 144,865,994 |   |   |   | 25.1 | % |
|                                                 |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits                                       |   | $              | 575,525,403 |   |              |   | 100.0 | % |   | $ | 576,356,136 |   |   |   | 100.0 | % |

| Performance Ratios          |   | March 31 |   |
|-----------------------------|--------|----------|--------|
|                        |   | 2011     |   |   | 2010 |   |
|                        |   |     |   |   |   |   |
| Return on average assets *  |   |     | 0.48   | % |   |   | 0.43 | % |
| Return on average equity *  |   |     | 5.91   | % |   |   | 6.17 | % |
| Net interest margin (TEY) * |   |     | 3.83   | % |   |   | 3.66 | % |
| Efficiency ratio            |   |     | 69.86  | % |   |   | 68.50 | % |

----

Index

|                                                       |   | As of and For The Three Month Period Ended |    |
|------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                       |   | March 31, 2011                             |    |   | March 31, 2010 |   |
|                                                       |   |                                       |    |   | Interest |   |   | Annualized |   |   |   |   |   | Interest |   |   | Annualized |   |
|                                                       |   | Average                                    |    |   | Earned |   |   | Yield |   |   | Average |   |   | Earned |   |   | Yield |   |
| ($ in thousands)                                           |   | Balance                                    |    |   | or Paid |   |   | or Cost |   |   | Balance |   |   | or Paid |   |   | or Cost |   |
| Assets                                                     |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments and interest-earning deposits       |   | $                                          | 2,785   |   |   | $ | 13 |   |   |   | 1.89 | % |   | $ | 2,432 |   |   | $ | 4 |   |   |   | 0.67 | % |
| Federal funds sold                                         |   |                                       | 2,013   |   |   |   | 1 |   |   |   | 0.20 | % |   |   | 3,720 |   |   |   | 2 |   |   |   | 0.22 | % |
| Securities - taxable                                       |   |                                       | 80,112  |   |   |   | 579 |   |   |   | 3.00 | % |   |   | 71,040 |   |   |   | 639 |   |   |   | 3.65 | % |
| Securities - tax exempt (1)                                |   |                                       | 41,668  |   |   |   | 596 |   |   |   | 5.81 | % |   |   | 24,419 |   |   |   | 371 |   |   |   | 6.16 | % |
| Loans held for sale                                        |   |                                       | 1,689   |   |   |   | - |   |   |   | 0.00 | % |   |   | 1,157 |   |   |   | - |   |   |   | 0.00 | % |
| Loans                                                      |   |                                       | 489,999 |   |   |   | 6,289 |   |   |   | 5.21 | % |   |   | 526,814 |   |   |   | 6,883 |   |   |   | 5.30 | % |
| Total interest-earning assets                              |   |                                       | 618,266 |   |   |   | 7,478 |   |   |   | 4.91 | % |   |   | 629,582 |   |   |   | 7,899 |   |   |   | 5.09 | % |
| Allowance for loan losses                                  |   |                                       | (12,964 | ) |   |   |   |   |   |   |   |   |   |   | (12,040 | ) |   |   |   |   |   |   |   |   |
| Cash and due from banks                                    |   |                                       | 19,509  |   |   |   |   |   |   |   |   |   |   |   | 19,284 |   |   |   |   |   |   |   |   |   |
| Other assets                                               |   |                                       | 39,753  |   |   |   |   |   |   |   |   |   |   |   | 41,141 |   |   |   |   |   |   |   |   |   |
| Total assets                                               |   | $                                          | 664,564 |   |   |   |   |   |   |   |   |   |   | $ | 677,967 |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                       |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing checking                                  |   | $                                          | 115,584 |   |   | $ | 46 |   |   |   | 0.16 | % |   | $ | 106,890 |   |   | $ | 106 |   |   |   | 0.40 | % |
| Savings                                                    |   |                                       | 23,156  |   |   |   | 15 |   |   |   | 0.26 | % |   |   | 19,152 |   |   |   | 19 |   |   |   | 0.40 | % |
| Money market                                               |   |                                       | 167,363 |   |   |   | 194 |   |   |   | 0.47 | % |   |   | 149,750 |   |   |   | 323 |   |   |   | 0.87 | % |
| Certificates of deposit                                    |   |                                       | 185,183 |   |   |   | 1,106 |   |   |   | 2.42 | % |   |   | 200,216 |   |   |   | 1,312 |   |   |   | 2.66 | % |
| Short-term borrowings                                      |   |                                       | 67      |   |   |   | - |   |   |   | 0.00 | % |   |   | - |   |   |   | - |   |   |   | 0.00 | % |
| FHLB advances                                              |   |                                       | 10,489  |   |   |   | 72 |   |   |   | 2.78 | % |   |   | 44,765 |   |   |   | 170 |   |   |   | 1.54 | % |
| Junior subordinated debt                                   |   |                                       | 17,527  |   |   |   | 200 |   |   |   | 4.63 | % |   |   | 17,527 |   |   |   | 280 |   |   |   | 6.48 | % |
| Total interest-bearing liabilities                         |   |                                       | 519,369 |   |   |   | 1,633 |   |   |   | 1.28 | % |   |   | 538,300 |   |   |   | 2,210 |   |   |   | 1.67 | % |
| Noninterest-bearing checking                               |   |                                       | 86,368  |   |   |   |   |   |   |   |   |   |   |   | 88,231 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                          |   |                                       | 5,165   |   |   |   |   |   |   |   |   |   |   |   | 4,016 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                       |   |                                       | 53,662  |   |   |   |   |   |   |   |   |   |   |   | 47,420 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                 |   | $                                          | 664,564 |   |   |   |   |   |   |   |   |   |   | $ | 677,967 |   |   |   |   |   |   |   |   |   |
| Net interest income                                        |   |                                       |    |   |   | $ | 5,845 |   |   |   |   |   |   |   |   |   |   | $ | 5,689 |   |   |   |   |   |
| Rate spread                                                |   |                                       |    |   |   |   |   |   |   |   | 3.63 | % |   |   |   |   |   |   |   |   |   |   | 3.42 | % |
| Net interest income as a percent of average earning assets |   |                                       |    |   |   |   |   |   |   |   | 3.83 | % |   |   |   |   |   |   |   |   |   |   | 3.66 | % |

----

Index

|              |   | March 31, 2011 |   |   | December 31, 2010 |   |
|-------------------|--------|----------------|--------|--------|-------------------|--------|
|              |   |           |   |   | Well-             |   |   | Minimum |   |   |   |   |   | Well- |   |   | Minimum |   |
|              |   | Actual         |   |   | Capitalized       |   |   | Required |   |   | Actual |   |   | Capitalized |   |   | Required |   |
|              |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Company       |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage capital  |   |           | 10.59  | %      |              |   | 5.00 | % |   |   | 4.00 | % |   |   | 10.55 | % |   |   | 5.00 | % |   |   | 4.00 | % |
| Tier 1 risk-based |   |           | 13.27  | %      |              |   | 6.00 | % |   |   | 4.00 | % |   |   | 13.10 | % |   |   | 6.00 | % |   |   | 4.00 | % |
| Total risk-based  |   |           | 14.53  | %      |              |   | 10.00 | % |   |   | 8.00 | % |   |   | 14.30 | % |   |   | 10.00 | % |   |   | 8.00 | % |
|              |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Bank          |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage capital  |   |           | 10.15  | %      |              |   | 5.00 | % |   |   | 4.00 | % |   |   | 10.08 | % |   |   | 5.00 | % |   |   | 4.00 | % |
| Tier 1 risk-based |   |           | 12.64  | %      |              |   | 6.00 | % |   |   | 4.00 | % |   |   | 12.46 | % |   |   | 6.00 | % |   |   | 4.00 | % |
| Total risk-based  |   |           | 13.90  | %      |              |   | 10.00 | % |   |   | 8.00 | % |   |   | 13.72 | % |   |   | 10.00 | % |   |   | 8.00 | % |

----

Index

Item 4.   CONTROLS AND PROCEDURES

----

Index

Item 1.    LEGAL PROCEEDINGS

Item 1a.   RISK FACTORS

----

Index

 6. 

|   | (a) | Exhibits. |
|--------|-----|-----------|

| 31.1 | Certification of Chief Executive Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Certification of Chief Financial Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 |  Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2. | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

SIGNATURES

|                             | TOWER FINANCIAL CORPORATION        |
|----------------------------------|------------------------------------|
|                             |                               |   |
|                             |                               |   |
| Dated:  April 29, 2011 | / s /  Michael D. Cahill |
|                             | Michael D. Cahill, President       |
|                             | and Chief Executive Officer        |
|                             |                               |   |
|                             |                               |   |
| Dated:  April 29, 2011 | / s /  Richard R. Sawyer |
|                             | Richard R. Sawyer                  |
|                             | Chief Financial Officer            |

----