----

----

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

| o | 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 o | Accelerated filer o         |
|--------|---------------------------|-----------------------------|
|   | Non-accelerated filer o   | Smaller reporting company T |

----

----

----

|   | · | Changes in banking regulation; |
|--------|--------|--------------------------------|

|   | · | Governmental economic and regulatory policy changes and restrictions; |
|--------|--------|-----------------------------------------------------------------------|

|   | · | Changes in the national and local economy; |
|--------|--------|--------------------------------------------|

|   | · | Trends in customer behavior, their ability to repay loans, and risk of losses due to loan defaults; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | Outcomes of contingencies, including loan loss reserves; |
|--------|--------|----------------------------------------------------------|

|   | · | Changes in local real estate and other collateral values; |
|--------|--------|-----------------------------------------------------------|

|   | · | Changes in interest rates and interest rate relationships; |
|--------|--------|------------------------------------------------------------|

|   | · | Demand for our products and services; |
|--------|--------|---------------------------------------|

|   | · | The degree of competition by traditional and non-traditional competitors; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | Changes in tax laws; |
|--------|--------|----------------------|

|   | · | Changes in prices; |
|--------|--------|--------------------|

|   | · | The impact of technological advances; and |
|--------|--------|-------------------------------------------|

|   | · | Changes in local real estate and other collateral values. |
|--------|--------|-----------------------------------------------------------|

----

INDE

| PART I.   FINANCIAL INFORMATION |                |
|------------------------------------------------|---------------------|
|                                           |                |   |   |
|                                           | Item 1.             | Financial Statements | page no. |
|                                           |                |   |   |
|                                           |                | Consolidated Condensed Balance Sheets at March 31, 2010 (unaudited) and December 31, 2009 | 4 |
|                                           |                |   |   |
|                                           |                | Consolidated Condensed Statements of Operations for the three months ended March 31, 2010 and March 31, 2009 (unaudited) | 5 |
|                                           |                |   |   |
|                                           |                | Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2010 and March 31, 2009 (unaudited) | 6 |
|                                           |                |   |   |
|                                           |                | Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2010 and March 31, 2009 (unaudited) | 7 |
|                                           |                |   |   |
|                                           |                | Notes to Consolidated Condensed Financial Statements (unaudited) | 8 |
|                                           |                |   |   |
|                                           | Item 2.             | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
|                                           |                |   |   |
|                                           | Item 4.             | Controls and Procedures | 28 |
|                                           |                |   |   |
| PART II.   OTHER INFORMATION    |                |
|                                           |                |   |   |
|                                           | Item 1.             | Legal Proceedings | 29 |
|                                           |                |   |   |
|                                           | Item 1a.  | Risk Factors | 29 |
|                                           |                |   |   |
|                                           | Item 4.             | Removed & Reserved | 29 |
|                                           |                |   |   |
|                                           | Item 6.             | Exhibits | 29 |
|                                           |                |   |   |
| SIGNATURES                                     | 29                  |

----

Index

Tow

|                                                                                                                                                                                         |   | March 31 |        |   | December 31 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|------------------|--------|
|                                                                                                                                                                                         |   | 2010          |        |   | 2009             |   |
| ASSETS                                                                                                                                                                                       |   |          |        |   |             |   |
| Cash and due from banks                                                                                                                                                                      |   | $             | 19,009,535  |   |             | $      | 19,861,434 |   |
| Short-term investments and interest-earning deposits                                                                                                                                         |   |          | 4,055,256   |   |             |   | 1,259,197 |   |
| Federal funds sold                                                                                                                                                                           |   |          | 2,141,339   |   |             |   | 3,543,678 |   |
| Total cash and cash equivalents                                                                                                                                                              |   |          | 25,206,130  |   |             |   | 24,664,309 |   |
| Securities held to maturity, at cost (fair value of $5,712,547 at March 31, 2010 and $4,635,616 at December 31, 2009)                                                                        |   |          | 5,397,048   |   |             |   | 4,495,977 |   |
| Securities available for sale, at fair value                                                                                                                                                 |   |          | 85,865,731  |   |             |   | 85,179,160 |   |
| FHLBI and FRB stock                                                                                                                                                                          |   |          | 4,325,800   |   |             |   | 4,250,800 |   |
| Loans Held for Sale                                                                                                                                                                          |   |          | 1,030,767   |   |             |   | 3,842,089 |   |
| Loans                                                                                                                                                                                        |   |          | 523,437,450 |   |             |   | 527,333,461 |   |
| Allowance for loan losses                                                                                                                                                                    |   |          | (12,149,885 | )      |             |   | (11,598,389 | ) |
| Net loans                                                                                                                                                                                    |   |          | 511,287,565 |   |             |   | 515,735,072 |   |
| Premises and equipment, net                                                                                                                                                                  |   |          | 8,257,867   |   |             |   | 8,011,574 |   |
| Accrued interest receivable                                                                                                                                                                  |   |          | 2,513,276   |   |             |   | 2,439,859 |   |
| Bank Owned Life Insurance                                                                                                                                                                    |   |          | 13,161,853  |   |             |   | 13,046,573 |   |
| Other Real Estate Owned                                                                                                                                                                      |   |          | 4,443,366   |   |             |   | 4,634,089 |   |
| Prepaid FDIC Insurance                                                                                                                                                                       |   |          | 4,329,905   |   |             |   | 4,777,797 |   |
| Other assets                                                                                                                                                                                 |   |          | 8,306,457   |   |             |   | 9,081,759 |   |
| Total assets                                                                                                                                                                                 |   | $             | 674,125,765 |   |             | $      | 680,159,058 |   |
|                                                                                                                                                                                         |   |          |        |   |             |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                         |   |          |        |   |             |   |   |   |
| LIABILITIES                                                                                                                                                                                  |   |          |        |   |             |   |   |   |
| Deposits:                                                                                                                                                                                    |   |          |        |   |             |   |   |   |
| Noninterest-bearing                                                                                                                                                                          |   | $             | 88,650,687  |   |             | $      | 95,027,233 |   |
| Interest-bearing                                                                                                                                                                             |   |          | 470,640,588 |   |             |   | 473,353,118 |   |
| Total deposits                                                                                                                                                                               |   |          | 559,291,275 |   |             |   | 568,380,351 |   |
| Federal Home Loan Bank advances                                                                                                                                                              |   |          | 45,200,000  |   |             |   | 43,200,000 |   |
| Junior subordinated debt                                                                                                                                                                     |   |          | 17,527,000  |   |             |   | 17,527,000 |   |
| Accrued interest payable                                                                                                                                                                     |   |          | 614,936     |   |             |   | 480,885 |   |
| Other liabilities                                                                                                                                                                            |   |          | 3,516,634   |   |             |   | 3,634,713 |   |
| Total liabilities                                                                                                                                                                            |   |          | 626,149,845 |   |             |   | 633,222,949 |   |
| STOCKHOLDERS' EQUITY                                                                                                                                                                         |   |          |        |   |             |   |   |   |
| Preferred stock, no par value, 4,000,000 shares authorized; 18,300 shares issued and outstanding                                                                                             |   |          | 1,788,000   |   |             |   | 1,788,000 |   |
| Common stock and paid-in-capital, no par value, 6,000,000 shares authorized; 4,159,432 and 4,155,432 shares issued; and 4,090,432 shares outstanding at March 31, 2010 and December 31, 2009 |   |          | 39,847,376  |   |             |   | 39,835,648 |   |
| Treasury stock, at cost, 65,000 shares at March 31, 2010 and December 31, 2009                                                                                                               |   |          | (884,376    | )      |             |   | (884,376 | ) |
| Retained earnings                                                                                                                                                                            |   |          | 6,007,844   |   |             |   | 5,286,808 |   |
| Accumulated other comprehensive income (loss), net of tax of  $626,979 at March 31, 2010 and  $468,803 at December 31, 2009                                              |   |          | 1,217,076   |   |             |   | 910,029 |   |
| Total stockholders' equity                                                                                                                                                                   |   |          | 47,975,920  |   |             |   | 46,936,109 |   |
| Total liabilities and stockholders' equity                                                                                                                                                   |   | $             | 674,125,765 |   |             | $      | 680,159,058 |   |

----

Index

Towe

|                                                                   |   | (unaudited)        |      |
|------------------------------------------------------------------------|--------|--------------------|-----------|
|                                                                   |   | Three Months Ended |      |
|                                                                   |   | March 31           |      |
|                                                                   |   | 2010               |      |   | 2009 |   |
| Interest income:                                                       |   |               |      |   |   |   |
| Loans, including fees                                                  |   | $                  | 6,883,002 |   |   | $ | 7,047,954 |   |
| Securities - taxable                                                   |   |               | 639,091   |   |   |   | 633,717 |   |
| Securities - tax exempt                                                |   |               | 244,551   |   |   |   | 226,283 |   |
| Other interest income                                                  |   |               | 6,248     |   |   |   | 6,845 |   |
| Total interest income                                                  |   |               | 7,772,892 |   |   |   | 7,914,799 |   |
| Interest expense:                                                      |   |               |      |   |   |   |   |   |
| Deposits                                                               |   |               | 1,759,498 |   |   |   | 2,842,890 |   |
| FHLB advances                                                          |   |               | 169,858   |   |   |   | 250,256 |   |
| Junior subordinated debt                                               |   |               | 280,226   |   |   |   | 280,226 |   |
| Total interest expense                                                 |   |               | 2,209,582 |   |   |   | 3,373,372 |   |
| Net interest income                                                    |   |               | 5,563,310 |   |   |   | 4,541,427 |   |
| Provision for loan losses                                              |   |               | 1,340,000 |   |   |   | 960,000 |   |
| Net interest income after provision for loan losses                    |   |               | 4,223,310 |   |   |   | 3,581,427 |   |
| Noninterest income:                                                    |   |               |      |   |   |   |   |   |
| Trust and brokerage fees                                               |   |               | 882,966   |   |   |   | 867,889 |   |
| Service charges                                                        |   |               | 290,386   |   |   |   | 257,833 |   |
| Loan broker fees                                                       |   |               | 117,500   |   |   |   | 138,278 |   |
| Gain on sale/calls of securities                                       |   |               | 840       |   |   |   | 191,151 |   |
| Other-than-temporary loss:                                             |   |               |      |   |   |   |   |   |
| Total impairment loss                                                  |   |               | (18,844   | ) |   |   | - |   |
| Loss recognized in other comprehensive income                          |   |               | 8,254     |   |   |   | - |   |
| Net impairment loss recognized in earnings                             |   |               | (10,590   | ) |   |   | - |   |
| Other income                                                           |   |               | 316,592   |   |   |   | 334,152 |   |
| Total noninterest income                                               |   |               | 1,597,694 |   |   |   | 1,789,303 |   |
| Noninterest expense:                                                   |   |               |      |   |   |   |   |   |
| Salaries and benefits                                                  |   |               | 2,387,076 |   |   |   | 2,722,449 |   |
| Occupancy and equipment                                                |   |               | 629,278   |   |   |   | 698,592 |   |
| Marketing                                                              |   |               | 96,692    |   |   |   | 144,657 |   |
| Data processing                                                        |   |               | 308,912   |   |   |   | 294,009 |   |
| Loan and professional costs                                            |   |               | 438,407   |   |   |   | 311,944 |   |
| Office supplies and postage                                            |   |               | 63,189    |   |   |   | 97,057 |   |
| Courier services                                                       |   |               | 55,334    |   |   |   | 61,435 |   |
| Business development                                                   |   |               | 79,008    |   |   |   | 100,997 |   |
| Communication                                                          |   |               | 36,359    |   |   |   | 43,918 |   |
| FDIC insurance premiums                                                |   |               | 502,205   |   |   |   | 279,490 |   |
| Other expense                                                          |   |               | 308,706   |   |   |   | 238,723 |   |
| Total noninterest expense                                              |   |               | 4,905,166 |   |   |   | 4,993,271 |   |
| Income before income taxes                                             |   |               | 915,838   |   |   |   | 377,459 |   |
| Income taxes expense (benefit)                                         |   |               | 194,802   |   |   |   | (32,766 | ) |
|                                                                   |   |               |      |   |   |   |   |   |
| Net income                                                             |   | $                  | 721,036   |   |   | $ | 410,225 |   |
|                                                                   |   |               |      |   |   |   |   |   |
| Basic earnings per common share                                        |   | $                  | 0.18      |   |   | $ | 0.10 |   |
| Diluted earnings per common share                                      |   | $                  | 0.16      |   |   | $ | 0.10 |   |
| Average common shares outstanding                                      |   |               | 4,090,432 |   |   |   | 4,090,365 |   |
| Average common shares and dilutive potential common shares outstanding |   |               | 4,394,419 |   |   |   | 4,090,365 |   |
| Dividends declared per share                                           |   | $                  | -         |   |   | $ | - |   |

----

Index

Tow

|                                    |   | Preferred Stock |      |   | Common Stock and Paid-in Capital |   |       | Retained Earnings |   |   | Accumulated Other Comprehensive Income (Loss) |   |   | Treasury Stock |      |   | Total  |   |
|-----------------------------------------|--------|-----------------|-----------|--------|----------------------------------|--------|------------|-------------------|--------|--------|-----------------------------------------------|--------|--------|----------------|-----------|--------|--------|--------|
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |
| Balance, January 1, 2009                |   | $               | -         |   |                             | $      | 39,766,742 |              |   | $      | 10,895,724                                    |   |   | $              | (159,950  | )      |   | $      | (884,376 | ) |   | $ | 49,618,140 |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
| Net income for 2009                     |   |            |      |   |                             |   |       |              |   |   | 410,225                                       |   |   |           |      |   |   |   |   |   |   |   | 410,225 |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income (See Note 5) |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           | 233,123   |   |   |   |   |   |   |   | 233,123 |   |
| Total Comprehensive Income              |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   | 643,348 |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
| Stock based compensation expense        |   |            |      |   |                             |   | 18,673     |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   | 18,673 |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2009                 |   | $               | -         |   |                             | $      | 39,785,415 |              |   | $      | 11,305,949                                    |   |   | $              | 73,173    |   |   | $      | (884,376 | ) |   | $ | 50,280,161 |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
|                                    |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           |      |   |   |   |   |   |   |   |   |   |
| 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 5) |   |            |      |   |                             |   |       |              |   |   |                                          |   |   |           | 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 |   |

----

Index

Tower

|                                                                       |   | (unaudited)                  |          |   | (unaudited)                  |   |
|----------------------------------------------------------------------------|--------|------------------------------|---------------|--------|------------------------------|--------|
|                                                                       |   | Three Months ended |          |   | Three Months ended |   |
|                                                                       |   | March 31, 2010               |          |   | March 31, 2009               |   |
| Cash flows from operating activities:                                      |   |                         |          |   |                         |   |
| Net income                                                                 |   | $                            | 721,036       |   |                         | $      | 410,225 |   |
| Adjustments to reconcile net income to net cash from operating activities: |   |                         |          |   |                         |   |   |   |
| Depreciation and amortization                                              |   |                         | 359,942       |   |                         |   | 333,079 |   |
| Provision for loan losses                                                  |   |                         | 1,340,000     |   |                         |   | 960,000 |   |
| Stock based compensation expense                                           |   |                         | 11,728        |   |                         |   | 18,673 |   |
| Earnings on life insurance                                                 |   |                         | (115,280      | )      |                         |   | (114,746 | ) |
| Gain on sale of securities AFS                                             |   |                         | (840          | )      |                         |   | (191,151 | ) |
| Gain on settlement of interest rate floor                                  |   |                         | -             |   |                         |   | (136,242 | ) |
| Impairment on AFS securities                                               |   |                         | 10,590        |   |                         |   | - |   |
| Loans originated for sale                                                  |   |                         | (5,539,352    | )      |                         |   | (5,128,394 | ) |
| (Gain)Loss on sale of other real estate owned                              |   |                         | 57            |   |                         |   | 26,463 |   |
| Proceeds from sale of loans                                                |   |                         | 8,350,674     |   |                         |   | 3,935,359 |   |
| Change in accrued interest receivable                                      |   |                         | (73,417       | )      |                         |   | 169,179 |   |
| Change in other assets                                                     |   |                         | 1,064,963     |   |                         |   | (135,742 | ) |
| Change in accrued interest payable                                         |   |                         | 134,051       |   |                         |   | (76,546 | ) |
| Change in other liabilities                                                |   |                         | (118,079      | )      |                         |   | (3,092 | ) |
| Net cash from operating activities                                         |   |                         | 6,146,073     |   |                         |   | 67,065 |   |
| Cash flows from investing activities:                                      |   |                         |          |   |                         |   |   |   |
| Net change in loans                                                        |   |                         | 3,107,507     |   |                         |   | (168,995 | ) |
| Purchase of securities AFS                                                 |   |                         | (5,761,030    | )      |                         |   | (1,713,080 | ) |
| Proceeds from calls and maturities of securities AFS                       |   |                         | 5,373,220     |   |                         |   | 2,792,662 |   |
| Purchase of securities HTM                                                 |   |                         | (1,112,773    | )      |                         |   | - |   |
| Proceeds from calls and maturities of securities HTM                       |   |                         | 211,702       |   |                         |   | - |   |
| Proceeds from sale of securities AFS                                       |   |                         | -             |   |                         |   | 5,521,055 |   |
| Proceeds on sale of other real estate owned                                |   |                         |  190,721 |   |                         |   | 459,667 |   |
| Purchase of FHLB stock                                                     |   |                         | (75,000       | )      |                         |   | - |   |
| Purchase of premises and equipment                                         |   |                         | (449,523      | )      |                         |   | (67,578 | ) |
| Net cash from investing activities                                         |   |                         | 1,484,824     |   |                         |   | 6,823,731 |   |
| Cash flows from financing activities:                                      |   |                         |          |   |                         |   |   |   |
| Net change in deposits                                                     |   |                         | (9,089,076    | )      |                         |   | 32,467,438 |   |
| Net change in short term FHLB advances                                     |   |                         | 4,000,000     |   |                         |   | - |   |
| Repayment of FHLB fixed rate advances                                      |   |                         | (2,000,000    | )      |                         |   | (14,000,000 | ) |
| Net cash from (used in) financing activities                               |   |                         | (7,089,076    | )      |                         |   | 18,467,438 |   |
| Net change in cash and cash equivalents                                    |   |                         | 541,821       |   |                         |   | 25,358,234 |   |
| Cash and cash equivalents, beginning of period                             |   |                         | 24,664,309    |   |                         |   | 31,576,373 |   |
| Cash and cash equivalents, end of period                                   |   | $                            | 25,206,130    |   |                         | $      | 56,934,607 |   |
|                                                                       |   |                         |          |   |                         |   |   |   |
| Supplemental disclosures of cash flow information                          |   |                         |          |   |                         |   |   |   |
| Cash paid during the year for:                                             |   |                         |          |   |                         |   |   |   |
| Interest                                                                   |   | $                            | 2,075,531     |   |                         | $      | 3,449,918 |   |
| Income taxes                                                               |   |                         | -             |   |                         |   | 500,000 |   |
| Noncash items:                                                             |   |                         |          |   |                         |   |   |   |
| Transfer of loans to other real estate owned                               |   |                         | -             |   |                         |   | 2,914,900 |   |

----

Index

Tower 

----

Index

|                                             |   | March 31, 2010 |       |   |                  |   |
|--------------------------------------------------|--------|----------------|------------|--------|-----------------------|--------|
|                                             |   | Amortized      |       |   | Gross Unrealized |   |   | Gross Unrealized |   |   | Fair |   |
|                                             |   | Cost           |       |   | Gains                 |   |   | Losses |   |   | Value |   |
|                                             |   |           |       |   |                  |   |   |   |   |   |   |   |
| Available for sale securities:                   |   |           |       |   |                  |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $              | 7,715,526  |   |                  | $      | 93,687 |   |   | $ | (6,652 | ) |   | $ | 7,802,561 |   |
| Obligations of states and political subdivisions |   |           | 27,863,027 |   |                  |   | 767,691 |   |   |   | (139,084 | ) |   |   | 28,491,634 |   |
| Mortgage-backed securities (residential)         |   |           | 43,558,807 |   |                  |   | 1,470,678 |   |   |   | (243,497 | ) |   |   | 44,785,988 |   |
| Mortgage-backed securities (commercial)          |   |           | 4,652,975  |   |                  |   | 122,545 |   |   |   | - |   |   |   | 4,775,520 |   |
| Collateralized debt obligations                  |   |           | 231,342    |   |                  |   | - |   |   |   | (221,314 | ) |   |   | 10,028 |   |
| Total available for sale securities              |   | $              | 84,021,677 |   |                  | $      | 2,454,601 |   |   | $ | (610,547 | ) |   | $ | 85,865,731 |   |
|                                             |   |           |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity securities:                     |   |           |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)         |   |           | 5,397,048  |   |                  |   | 315,499 |   |   |   | - |   |   |   | 5,712,547 |   |
| Total held to maturity securities                |   |           | 5,397,048  |   |                  |   | 315,499 |   |   |   | - |   |   |   | 5,712,547 |   |
|                                             |   |           |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total Securities                                 |   | $              | 89,418,725 |   |                  | $      | 2,770,100 |   |   | $ | (610,547 | ) |   | $ | 91,578,278 |   |

|                                             |   | December 31, 2009 |       |   |                  |   |
|--------------------------------------------------|--------|-------------------|------------|--------|-----------------------|--------|
|                                             |   | Amortized         |       |   | Gross Unrealized |   |   | Gross Unrealized |   |   | Fair |   |
|                                             |   | Cost              |       |   | Gains                 |   |   | Losses |   |   | Value |   |
|                                             |   |              |       |   |                  |   |   |   |   |   |   |   |
| Available for sale securities:                   |   |              |       |   |                  |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $                 | 8,241,408  |   |                  | $      | 114,962 |   |   | $ | (68,987 | ) |   | $ | 8,287,383 |   |
| Obligations of states and political subdivisions |   |              | 26,707,619 |   |                  |   | 644,961 |   |   |   | (150,035 | ) |   |   | 27,202,545 |   |
| Mortgage-backed securities (residential)         |   |              | 43,664,429 |   |                  |   | 1,288,946 |   |   |   | (296,377 | ) |   |   | 44,656,998 |   |
| Mortgage-backed securities (commercial)          |   |              | 4,955,530  |   |                  |   | 71,629 |   |   |   | (4,925 | ) |   |   | 5,022,234 |   |
| Collateralized debt obligations                  |   |              | 231,342    |   |                  |   | - |   |   |   | (221,342 | ) |   |   | 10,000 |   |
| Total available for sale securities              |   | $                 | 83,800,328 |   |                  | $      | 2,120,498 |   |   | $ | (741,666 | ) |   | $ | 85,179,160 |   |
|                                             |   |              |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity securities:                     |   |              |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)         |   |              | 4,495,977  |   |                  |   | 139,639 |   |   |   | - |   |   |   | 4,635,616 |   |
| Total held to maturity securities                |   |              | 4,495,977  |   |                  |   | 139,639 |   |   |   | - |   |   |   | 4,635,616 |   |
|                                             |   |              |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total Securities                                 |   | $                 | 88,296,305 |   |                  | $      | 2,260,137 |   |   | $ | (741,666 | ) |   | $ | 89,814,776 |   |

----

Index

|                                                  |   | 3/31/2010             |   |
|-------------------------------------------------------|--------|-----------------------|--------|
|                                                  |   | Weighted Average |   |   | Amortized |   |   | Fair |   |
|                                                  |   | Yield                 |   |   | Cost |   |   | Value |   |
| Available for sale securities:                        |   |                  |   |   |   |   |   |   |   |
| Agencies:                                             |   |                  |   |   |   |   |   |   |   |
| Due in one year or less                               |   |                  | 3.25   | % |   | $ | 700,000 |   |   | $ | 717,500 |   |
| Due after one to five years                           |   |                  | 3.58   | % |   | $ | 3,285,912 |   |   | $ | 3,314,707 |   |
| Due after five to ten years                           |   |                  | 2.58   | % |   |   | 2,674,138 |   |   |   | 2,714,104 |   |
| Due after ten years                                   |   |                  | 2.55   | % |   |   | 1,055,476 |   |   |   | 1,056,250 |   |
| Total Agencies                                        |   |                  | 3.07   | % |   | $ | 7,715,526 |   |   | $ | 7,802,561 |   |
|                                                  |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities:                           |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)              |   |                  | 4.26   | % |   | $ | 43,558,807 |   |   | $ | 44,785,988 |   |
| Mortgage-backed securities (commercial)               |   |                  | 3.86   | % |   |   | 4,652,975 |   |   |   | 4,775,520 |   |
|                                                  |   |                  | 4.22   | % |   | $ | 48,211,782 |   |   | $ | 49,561,508 |   |
| Obligations of state and political subdivisions:      |   |                  |   |   |   |   |   |   |   |   |   |   |
| Due in one year or less                               |   |                  | 5.03   | % |   | $ | 95,000 |   |   | $ | 95,443 |   |
| Due after one to five years                           |   |                  | 4.94   | % |   |   | 2,472,723 |   |   |   | 2,564,904 |   |
| Due after five to ten years                           |   |                  | 5.69   | % |   |   | 7,866,386 |   |   |   | 8,114,965 |   |
| Due after ten years                                   |   |                  | 6.20   | % |   |   | 17,428,918 |   |   |   | 17,716,322 |   |
| Total Obligations of state and political subdivisions |   |                  | 5.94   | % |   | $ | 27,863,027 |   |   | $ | 28,491,634 |   |
|                                                  |   |                  |   |   |   |   |   |   |   |   |   |   |
| Collateralized debt obligations                       |   |                  |   |   |   |   |   |   |   |   |   |   |
| Due after ten years                                   |   |                  | 1.11   | % |   | $ | 231,342 |   |   | $ | 10,028 |   |
|                                                  |   |                  |   |   |   |   |   |   |   |   |   |   |
| Held to maturity securities:                          |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities:                           |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)              |   |                  | 5.36   | % |   |   | 5,397,048 |   |   |   | 5,712,547 |   |

|                                                  |   | 12/31/2009            |   |
|-------------------------------------------------------|--------|-----------------------|--------|
|                                                  |   | Weighted Average |   |   | Amortized |   |   | Fair |   |
|                                                  |   | Yield                 |   |   | Cost |   |   | Value |   |
| Available for sale securities:                        |   |                  |   |   |   |   |   |   |   |
| Agencies:                                             |   |                  |   |   |   |   |   |   |   |
| Due after one to five years                           |   |                  | 3.53   | % |   | $ | 4,786,251 |   |   | $ | 4,840,794 |   |
| Due after five to ten years                           |   |                  | 3.44   | % |   |   | 2,393,069 |   |   |   | 2,416,589 |   |
| Due after ten years                                   |   |                  | 2.55   | % |   |   | 1,062,088 |   |   |   | 1,030,000 |   |
| Total Agencies                                        |   |                  | 3.38   | % |   | $ | 8,241,408 |   |   | $ | 8,287,383 |   |
|                                                  |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities:                           |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)              |   |                  | 4.14   | % |   | $ | 43,664,429 |   |   | $ | 44,656,998 |   |
| Mortgage-backed securities (commercial)               |   |                  | 3.65   | % |   |   | 4,955,530 |   |   |   | 5,022,234 |   |
|                                                  |   |                  | 4.09   | % |   | $ | 48,619,959 |   |   | $ | 49,679,232 |   |
| Obligations of state and political subdivisions:      |   |                  |   |   |   |   |   |   |   |   |   |   |
| Due in one year or less                               |   |                  | 3.40   | % |   | $ | 190,000 |   |   | $ | 191,449 |   |
| Due after one to five years                           |   |                  | 3.65   | % |   |   | 1,935,646 |   |   |   | 1,982,218 |   |
| Due after five to ten years                           |   |                  | 4.23   | % |   |   | 7,804,309 |   |   |   | 7,984,641 |   |
| Due after ten years                                   |   |                  | 4.27   | % |   |   | 16,777,664 |   |   |   | 17,044,237 |   |
| Total Obligations of state and political subdivisions |   |                  | 4.21   | % |   | $ | 26,707,619 |   |   | $ | 27,202,545 |   |
|                                                  |   |                  |   |   |   |   |   |   |   |   |   |   |
| Collateralized debt obligations                       |   |                  |   |   |   |   |   |   |   |   |   |   |
| Due after ten years                                   |   |                  | 1.10   | % |   | $ | 231,342 |   |   | $ | 10,000 |   |
|                                                  |   |                  |   |   |   |   |   |   |   |   |   |   |
| Held to maturity securities:                          |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities:                           |   |                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)              |   |                  | 4.89   | % |   |   | 4,495,977 |   |   |   | 4,635,616 |   |

----

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          |   | $                     | 2,442,098 |   |                    | $      | (6,652  | )          |   | $      | -                       |   |   | $ | - |   |   | $ | 2,442,098 |   |   | $ | (6,652 | ) |
| Obligations of states and political subdivisions |   |                  | 1,914,255 |   |                    |   | (23,380 | )          |   |   | 2,905,499               |   |   |   | (115,704 | ) |   |   | 4,819,754 |   |   |   | (139,084 | ) |
| Mortgage-backed securities (residential)         |   |                  | 1,991,317 |   |                    |   | (3,734  | )          |   |   | 1,423,055               |   |   |   | (239,763 | ) |   |   | 3,414,372 |   |   |   | (243,497 | ) |
|                                             |   |                  |      |   |                    |   |    |       |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (commercial)          |   |                  | -         |   |                    |   | -       |       |   |   | -                       |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Collateralized debt obligations                  |   |                  | -         |   |                    |   | -       |       |   |   | 10,028                  |   |   |   | (221,314 | ) |   |   | 10,028 |   |   |   | (221,314 | ) |
| Total available for sale securities              |   | $                     | 6,347,670 |   |                    | $      | (33,766 | )          |   | $      | 4,338,582               |   |   | $ | (576,781 | ) |   | $ | 10,686,252 |   |   | $ | (610,547 | ) |
|                                             |   |                  |      |   |                    |   |    |       |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity securities:                     |   |                  |      |   |                    |   |    |       |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)         |   |                  | -         |   |                    |   | -       |       |   |   | -                       |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total held to maturity securities                |   | $                     | -         |   |                    | $      | -       |       |   | $      | -                       |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                             |   |                  |      |   |                    |   |    |       |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired                       |   | $                     | 6,347,670 |   |                    | $      | (33,766 | )          |   | $      | 4,338,582               |   |   | $ | (576,781 | ) |   | $ | 10,686,252 |   |   | $ | (610,547 | ) |

----

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          |   | $                     | 2,656,626  |   |                    | $      | (68,987  | )          |   | $      | -                       |   |   | $ | - |   |   | $ | 2,656,626 |   |   | $ | (68,987 | ) |
| Obligations of states and political subdivisions |   |                  | 2,450,819  |   |                    |   | (25,413  | )          |   |   | 2,899,366               |   |   |   | (124,622 | ) |   |   | 5,350,185 |   |   |   | (150,035 | ) |
| Mortgage-backed securities (residential)         |   |                  | 7,225,027  |   |                    |   | (64,868  | )          |   |   | 468,665                 |   |   |   | (231,509 | ) |   |   | 7,693,692 |   |   |   | (296,377 | ) |
| Mortgage-backed securities (commercial)          |   |                  | 1,497,108  |   |                    |   | (4,925   | )          |   |   | -                       |   |   |   | - |   |   |   | 1,497,108 |   |   |   | (4,925 | ) |
| Collateralized debt obligations                  |   |                  | -          |   |                    |   | -        |       |   |   | 10,000                  |   |   |   | (221,342 | ) |   |   | 10,000 |   |   |   | (221,342 | ) |
| Total available for sale securities              |   | $                     | 13,829,580 |   |                    | $      | (164,193 | )          |   | $      | 3,378,031               |   |   | $ | (577,473 | ) |   | $ | 17,207,611 |   |   | $ | (741,666 | ) |
|                                             |   |                  |       |   |                    |   |     |       |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity securities:                     |   |                  |       |   |                    |   |     |       |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities (residential)         |   |                  | -          |   |                    |   | -        |       |   |   | -                       |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total held to maturity securities                |   | $                     | -          |   |                    | $      | -        |       |   | $      | -                       |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                             |   |                  |       |   |                    |   |     |       |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired                       |   | $                     | 13,829,580 |   |                    | $      | (164,193 | )          |   | $      | 3,378,031               |   |   | $ | (577,473 | ) |   | $ | 17,207,611 |   |   | $ | (741,666 | ) |

----

Index

|                    |   | March 31 |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |   | March 31 |   |
|-------------------------|--------|---------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|--------------|--------|--------|---------------|--------|
|                    |   | 2010          |   |   | 2009             |   |   | 2009              |   |   | 2009         |   |   | 2009          |   |
| Delinquency 60+         |   |          | 20.50  | %      |             |   | 20.30  | %                 |   |   | 18.03        | %      |   |          | 16.76  | % |   |   | 14.38 | % |
| Delinquency 90+         |   |          | 18.20  | %      |             |   | 17.65  | %                 |   |   | 14.82        | %      |   |          | 13.68  | % |   |   | 11.39 | % |
| Other Real Estate Owned |   |          | 1.27   | %      |             |   | 1.32   | %                 |   |   | 0.84         | %      |   |          | 1.51   | % |   |   | 0.32 | % |
| Foreclosure             |   |          | 11.43  | %      |             |   | 11.38  | %                 |   |   | 10.64        | %      |   |          | 7.77   | % |   |   | 6.85 | % |
| Bankruptcy              |   |          | 3.87   | %      |             |   | 3.36   | %                 |   |   | 2.60         | %      |   |          | 0.31   | % |   |   | 0.31 | % |

|               |   | 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     |   |     | -          |   |    |   | - |   |

----

Index

|                                                                                                              |   | Three months ended March 31 |      |
|-------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|
|                                                                                                              |   | 2010                             |      |   | 2009 |   |
| Net Income (Loss)                                                                                                 |   | $                                | 721,036   |   |   | $ | 410,225 |   |
| Change in securities available-for-sale:                                                                          |   |                             |      |   |   |   |   |   |
| Other-than-temporary impairment on available-for-sale securities                                                  |   |                             | (18,844   | ) |   |   | (200,589 | ) |
| Other-than-temporary impairment on available-for-sale securities associated with credit losses realized in income |   |                             | 10,590    |   |   |   | - |   |
| Other-than-temporary impairment on available-for-sale securities, recorded in OCI                                 |   |                             | (8,254    | ) |   |   | (200,589 | ) |
|                                                                                                              |   |                             |      |   |   |   |   |   |
| Unrealized gains (losses) on interest rate floor                                                                  |   |                             | -         |   |   |   | - |   |
| Unrealized holding gains (losses) on available-for-sale securities arising during the period                      |   |                             | 474,317   |   |   |   | 1,153,684 |   |
| Reclassification adjustment for (gains) losses realized in income on interest rate floor                          |   |                             | -         |   |   |   | (136,242 | ) |
| Reclassification adjustment for (gains) losses realized in income on available-for-sale securities                |   |                             | (840      | ) |   |   | (191,151 | ) |
| Net unrealized gains (losses)                                                                                     |   |                             | 473,477   |   |   |   | 826,291 |   |
| Income tax expense (benefit)                                                                                      |   |                             | 158,176   |   |   |   | (120,094 | ) |
| Total other comprehensive income (loss)                                                                           |   |                             | 307,047   |   |   |   | 233,123 |   |
| Comprehensive Income (Loss)                                                                                       |   | $                                | 1,028,083 |   |   | $ | 643,348 |   |

----

Index

|                                                                                                           |   | Three Months Ended |      |
|----------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|
|                                                                                                           |   | March 31           |      |
|                                                                                                           |   | 2010               |      |   | 2009 |   |
| Basic                                                                                                          |   |               |      |   |   |   |
| Net income (loss)                                                                                              |   | $                  | 721,036   |   |   | $ | 410,225 |   |
| Less: Preferred stock dividends                                                                                |   |               | -         |   |   |   | - |   |
| Net income (loss) available to common stockholders                                                             |   | $                  | 721,036   |   |   | $ | 410,225 |   |
| Weighted average common shares outstanding                                                                     |   |               | 4,090,432 |   |   |   | 4,090,365 |   |
| Basic earnings (loss) per common share                                                                         |   | $                  | 0.18      |   |   | $ | 0.10 |   |
|                                                                                                           |   |               |      |   |   |   |   |   |
| Diluted                                                                                                        |   |               |      |   |   |   |   |   |
| Net income (loss)                                                                                              |   | $                  | 721,036   |   |   | $ | 410,225 |   |
| Less: Preferred stock dividends                                                                                |   |               | -         |   |   |   | - |   |
| Net income (loss) available to common stockholders                                                             |   | $                  | 721,036   |   |   | $ | 410,225 |   |
| Weighted average common shares outstanding                                                                     |   |               | 4,090,432 |   |   |   | 4,090,365 |   |
| Add:  dilutive effect of assumed preferred stock conversion                                          |   |               | 303,987   |   |   |   | - |   |
| Weighted average common shares and dilutive potential common shares outstanding and preferred stock conversion |   |               | 4,394,419 |   |   |   | 4,090,365 |   |
| Diluted earnings (loss) per common share                                                                       |   | $                  | 0.16      |   |   | $ | 0.10 |   |

----

Index

| Options                                      |   | Shares |    |   | Weighted- Average Aggregate Exercise Price |   |   | Weighted- Average Remaining Contractual Term |   |   | Instrinsic Value |   |
|----------------------------------------------|--------|--------|---------|--------|--------------------------------------------|--------|--------|----------------------------------------------|--------|--------|------------------|--------|
|                                         |   |   |    |   |                                       |   |   |                                         |   |   |             |   |
| Outstanding at January 1, 2010               |   |   | 91,404  |   |                                       | $      | 13.31  |                                         |   |   | 3.49             |   |   |   |   |
|                                         |   |   |    |   |                                       |   |   |                                         |   |   |             |   |   |   |   |
| Granted                                      |   |   | -       |   |                                       |   |   |                                         |   |   |             |   |   |   |   |
|                                         |   |   |    |   |                                       |   |   |                                         |   |   |             |   |   |   |   |
| Exercised                                    |   |   | -       |   |                                       |   |   |                                         |   |   |             |   |   |   |   |
|                                         |   |   |    |   |                                       |   |   |                                         |   |   |             |   |   |   |   |
| Forfeited or expired                         |   |   | (12,000 | )      |                                       |   | 13.47  |                                         |   |   |             |   |   |   |   |
|                                         |   |   |    |   |                                       |   |   |                                         |   |   |             |   |   |   |   |
| Outstanding at March 31, 2010                |   |   | 79,404  |   |                                       |   | 13.29  |                                         |   |   | 3.40             |   |   |   | - |   |
|                                         |   |   |    |   |                                       |   |   |                                         |   |   |             |   |   |   |   |   |
| Vested or expected to vest at March 31, 2010 |   |   | 79,404  |   |                                       |   |   |                                         |   |   |             |   |   |   | - |   |
|                                         |   |   |    |   |                                       |   |   |                                         |   |   |             |   |   |   |   |   |
| Exercisable at March 31, 2010                |   |   | 79,404  |   |                                       |   |   |                                         |   |   |             |   |   |   | - |   |

----

Index

|                         |   | As of and 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 |   |

|                         |   | As of and for the three months ending March 31, 2009 |        |
|------------------------------|--------|------------------------------------------------------|-------------|
|                         |   |                                                 |        |   | Wealth |   |   | Corporate & |   |   |   |   |   |   |   |
|                         |   | Bank                                                 |        |   | Management |   |   | Intercompany |   |   | Eliminations |   |   | Total |   |
| Income Statement Information |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income          |   | $                                                    | 4,797,370   |   |   | $ | 24,283 |   |   | $ | (280,226 | ) |   | $ | - |   |   | $ | 4,541,427 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest income          |   |                                                 | 961,415     |   |   |   | 873,056 |   |   |   | 756,252 |   |   |   | (801,420 | ) |   |   | 1,789,303 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest expense         |   |                                                 | 4,125,957   |   |   |   | 603,065 |   |   |   | 264,249 |   |   |   | - |   |   |   | 4,993,271 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncash items                |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses    |   |                                                 | 960,000     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 960,000 |   |
| Depreciation/Amortization    |   |                                                 | 323,127     |   |   |   | 9,952 |   |   |   | - |   |   |   | - |   |   |   | 333,079 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense(benefit)  |   |                                                 | 46,431      |   |   |   | 119,251 |   |   |   | (198,448 | ) |   |   | - |   |   |   | (32,766 | ) |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Profit               |   |                                                 | 626,397     |   |   |   | 175,023 |   |   |   | 410,225 |   |   |   | (801,420 | ) |   |   | 410,225 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Information    |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Assets               |   |                                                 | 711,548,273 |   |   |   | 6,121,156 |   |   |   | 72,087,734 |   |   |   | (74,123,219 | ) |   |   | 715,633,944 |   |

----

Index

|                           |   | March 31, 2010 |        |   | December 31, 2009 |   |
|--------------------------------|--------|----------------|-------------|--------|-------------------|--------|
|                           |   | Balance        |        |   | %                 |   |   | Balance |   |   | % |   |
|                           |   |           |        |   |              |   |   |   |   |   |   |   |
| Commercial                     |   | $              | 246,021,203 |   |              |   | 47.0 | % |   | $ | 251,773,047 |   |   |   | 47.7 | % |
| Commercial real estate         |   |           | 135,524,293 |   |              |   | 25.9 | % |   |   | 132,355,208 |   |   |   | 25.1 | % |
| Residential real estate        |   |           | 87,540,628  |   |              |   | 16.7 | % |   |   | 86,679,947 |   |   |   | 16.4 | % |
| Home equity                    |   |           | 39,014,897  |   |              |   | 7.4 | % |   |   | 40,042,804 |   |   |   | 7.6 | % |
| Consumer                       |   |           | 15,462,209  |   |              |   | 3.0 | % |   |   | 16,648,679 |   |   |   | 3.2 | % |
| Total loans                    |   |           | 523,563,230 |   |              |   | 100.0 | % |   |   | 527,499,685 |   |   |   | 100.0 | % |
| Net deferred loan costs/(fees) |   |           | (125,780    | )      |              |   |   |   |   |   | (166,224 | ) |   |   |   |   |
| Allowance for loan losses      |   |           | (12,149,885 | )      |              |   |   |   |   |   | (11,598,389 | ) |   |   |   |   |
|                           |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net loans                      |   | $              | 511,287,565 |   |              |   |   |   |   | $ | 515,735,072 |   |   |   |   |   |

|                                          |   | 2010   |       |   | 2009   |   |
|-----------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                          |   |   |       |   |   |   |
| Beginning balance, January 1                  |   | $      | 11,598,389 |   |   | $      | 10,654,879 |   |
| Provision expense                             |   |   | 1,340,000  |   |   |   | 960,000 |   |
| Charge-offs                                   |   |   | (812,446   | )      |   |   | (315,867 | ) |
| Recoveries                                    |   |   | 23,942     |   |   |   | 198,512 |   |
|                                          |   |   |       |   |   |   |   |   |
| Ending balance, March 31                      |   | $      | 12,149,885 |   |   | $      | 11,497,524 |   |
|                                          |   |   |       |   |   |   |   |   |
| Net charge-offs to average loans (annualized) |   |   | 0.61       | %      |   |   | 0.09 | % |

|                             |   | March 31, 2010 |       |   | December 31, 2009 |   |
|----------------------------------|--------|---------------------|------------|--------|------------------------|--------|
|                             |   |                |       |   |                   |   |
| Specific allocations             |   | $                   | 5,381,000  |   |                   | $      | 5,470,000 |   |
| Loan pool percentage allocations |   |                | 6,716,000  |   |                   |   | 6,076,000 |   |
| Unallocated                      |   |                | 52,885     |   |                   |   | 52,389 |   |
|                             |   |                |       |   |                   |   |   |   |
| Total allowance for loan losses  |   | $                   | 12,149,885 |   |                   | $      | 11,598,389 |   |

|                                           |   | March 31, 2010 |       |   | December 31, 2009 |   |
|------------------------------------------------|--------|---------------------|------------|--------|------------------------|--------|
|                                           |   |                |       |   |                   |   |
| Loans past due over 90 days and still accruing |   | $                   | 3,222,399  |   |                   | $      | 561,136 |   |
| Restructured loans                             |   |                | 1,997,270  |   |                   |   | 1,915,127 |   |
| Nonaccrual loans                               |   |                | 13,973,999 |   |                   |   | 13,466,165 |   |
| Total nonperforming loans                      |   | $                   | 19,193,668 |   |                   | $      | 15,942,428 |   |
| Other real estate owned                        |   |                | 4,443,366  |   |                   |   | 4,634,089 |   |
| Impaired Securities                            |   |                | 440,232    |   |                   |   | 478,665 |   |
| Total nonperforming assets                     |   | $                   | 24,077,266 |   |                   | $      | 21,055,182 |   |
|                                           |   |                |       |   |                   |   |   |   |
| Nonperforming assets to total assets           |   |                | 3.57       | %      |                   |   | 3.10 | % |

----

Index

|                                              |   | March 31, 2010 |       |   | December 31, 2009 |   |
|---------------------------------------------------|--------|---------------------|------------|--------|------------------------|--------|
|                                              |   |                |       |   |                   |   |
| Loans with no allocated allowance for loan losses |   | $                   | 12,774,792 |   |                   | $      | 9,776,211 |   |
| Loans with allocated allowance for loan losses    |   |                | 14,566,926 |   |                   |   | 13,674,754 |   |
| Total Impaired Loans                              |   | $                   | 27,341,718 |   |                   | $      | 23,450,965 |   |
|                                              |   |                |       |   |                   |   |   |   |
| Amount of allowance for loan losses allocated     |   | $                   | 3,562,000  |   |                   | $      | 3,825,000 |   |
|                                              |   |                |       |   |                   |   |   |   |
| Average impaired loans during the period          |   | $                   | 25,396,342 |   |                   | $      | 25,424,530 |   |
|                                              |   |                |       |   |                   |   |   |   |
| Interest recognized on impaired loans             |   | $                   | 178,971    |   |                   | $      | 938,621 |   |
|                                              |   |                |       |   |                   |   |   |   |
| Cash-basis interest income recognized             |   | $                   | 178,971    |   |                   | $      | 938,621 |   |

|                                                                     |   | March 31, 2010 |       |   | December 31, 2009 |   |
|--------------------------------------------------------------------------|--------|---------------------|------------|--------|------------------------|--------|
|                                                                     |   |                |       |   |                   |   |
| 2.29% bullet advance, principal due at maturity March 22, 2010           |   |                | -          |   |                   |   | 2,000,000 |   |
| 3.26% bullet advance, principal due at maturity April 28, 2010           |   |                | 1,500,000  |   |                   |   | 1,500,000 |   |
| 0.47% variable rate advance, principal due at maturity May 24, 2010      |   |                | -          |   |                   |   | 15,000,000 |   |
| 0.47% variable rate advance, principal due at maturity June 16, 2010     |   |                | -          |   |                   |   | 12,000,000 |   |
| 3.63% bullet advance, principal due at maturity June 28, 2010            |   |                | 4,000,000  |   |                   |   | 4,000,000 |   |
| 4.32% bullet advance, principal due at maturity June 29, 2010            |   |                | 1,200,000  |   |                   |   | 1,200,000 |   |
| 0.49% variable rate advance, principal due at maturity July 19, 2010     |   |                | 6,000,000  |   |                   |   | - |   |
| 0.49% variable rate advance, principal due at maturity July 28, 2010     |   |                | 8,000,000  |   |                   |   | - |   |
| 0.49% variable rate advance, principal due at maturity August 9, 2010    |   |                | 10,000,000 |   |                   |   | - |   |
| 0.49% variable rate advance, principal due at maturity September 8, 2010 |   |                | 7,000,000  |   |                   |   | - |   |
| 3.19% bullet advance, principal due at maturity March 28, 2011           |   |                | 2,000,000  |   |                   |   | 2,000,000 |   |
| 3.60% bullet advance, principal due at maturity April 28, 2011           |   |                | 1,500,000  |   |                   |   | 1,500,000 |   |
| 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 |   |
|                                                                     |   |                |       |   |                   |   |   |   |
|                                                                     |   | $                   | 45,200,000 |   |                   | $      | 43,200,000 |   |

| Year   |   | Advances |       |
|--------|--------|----------|------------|
| 2010   |   |     | 37,700,000 |   |
| 2011   |   |     | 3,500,000  |   |
| 2012   |   |     | 2,000,000  |   |
| 2013   |   |     | 2,000,000  |   |
| 2014   |   |     | -          |   |
|   |   | $        | 45,200,000 |   |

----

Index

----

Index

|                                             |   |    |       |   | March 31, 2010 |   |       |    |   |
|--------------------------------------------------|--------|---------|------------|--------|----------------|--------|------------|---------|--------|
|                                             |   | Level 1 |       |   | Level 2        |   |       | Level 3 |   |   | Total |   |
| Available for sale securities:                   |   |    |       |   |           |   |       |    |   |   |   |   |
| U.S. Government agency debt obligations          |   | $       | 7,802,561  |   |           |   | -          |    |   |   | - |   |   | $ | 7,802,561 |   |
| Obligations of states and political subdivisions |   |    | -          |   |           |   | 28,491,634 |    |   |   | - |   |   |   | 28,491,634 |   |
| Mortgage-backed securities (residential)         |   |    | 44,355,784 |   |           |   | -          |    |   |   | 430,204 |   |   |   | 44,785,988 |   |
| Mortgage-backed securities (commercial)          |   |    | 2,682,149  |   |           |   | 2,093,371  |    |   |   | - |   |   |   | 4,775,520 |   |
| Collateralized debt obligations                  |   |    | -          |   |           |   | -          |    |   |   | 10,028 |   |   |   | 10,028 |   |
| Total                                            |   | $       | 54,840,494 |   |           | $      | 30,585,005 |    |   | $ | 440,232 |   |   | $ | 85,865,731 |   |

|                                             |   |    |       |   | December 31, 2009 |   |       |    |   |
|--------------------------------------------------|--------|---------|------------|--------|-------------------|--------|------------|---------|--------|
|                                             |   | Level 1 |       |   | Level 2           |   |       | Level 3 |   |   | Total |   |
| Available for sale securities:                   |   |    |       |   |              |   |       |    |   |   |   |   |
| U.S. Government agency debt obligations          |   | $       | 8,287,383  |   |              | $      | -          |    |   | $ | - |   |   | $ | 8,287,383 |   |
| Obligations of states and political subdivisions |   |    | -          |   |              |   | 27,202,545 |    |   |   | - |   |   |   | 27,202,545 |   |
| Mortgage-backed securities (residential)         |   |    | 44,188,333 |   |              |   | -          |    |   |   | 468,665 |   |   |   | 44,656,998 |   |
| Mortgage-backed securities (commercial)          |   |    | 2,932,234  |   |              |   | 2,090,000  |    |   |   | - |   |   |   | 5,022,234 |   |
| Collateralized debt obligations                  |   |    | -          |   |              |   | -          |    |   |   | 10,000 |   |   |   | 10,000 |   |
| Total                                            |   | $       | 55,407,950 |   |              | $      | 29,292,545 |    |   | $ | 478,665 |   |   | $ | 85,179,160 |   |

|                                   |   | Available-for-salesecurities |    |   | Available-for-salesecurities |   |
|----------------------------------------|--------|------------------------------|---------|--------|------------------------------|--------|
|                                   |   | March 31, 2010          |    |   | March 31, 2009          |   |
|                                   |   |                         |    |   |                         |   |
| Beginning Balance, January 1           |   | $                            | 478,665 |   |                         | $      | 230,900 |   |
| Principal paydowns                     |   | $                            | (19,589 | )      |                         | $      | - |   |
| Net realized/unrealized gains (losses) |   |                         |    |   |                         |   |   |   |
| Included in earnings:                  |   |                         |    |   |                         |   |   |   |
| Interest income in Securities          |   |                         |    |   |                         |   | 7,344 |   |
| Credit loss recognized in earnings     |   |                         | (10,590 | )      |                         |   | - |   |
| Included in other comprehensive income |   |                         | (8,254  | )      |                         |   | (200,589 | ) |
| Ending Balance, March 31               |   | $                            | 440,232 |   |                         | $      | 37,655 |   |

----

Index

|                    |   | March 31, 2010 |   |
|-------------------------|--------|----------------|--------|
|                    |   | Level 1        |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Impaired loans          |   |           | -      |   |   |   | - |   |   |   | 11,004,926 |   |   |   | 11,004,926 |   |
| Other real estate owned |   |           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |

|                    |   | December 31, 2009 |   |
|-------------------------|--------|-------------------|--------|
|                    |   | Level 1           |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Impaired loans          |   |              | -      |   |   |   | - |   |   |   | 9,849,754 |   |   |   | 9,849,754 |   |
| Other real estate owned |   |              | -      |   |   |   | - |   |   |   | 1,932,200 |   |   |   | 1,932,200 |   |

|                          |   | March 31, 2010 |         |   | December 31, 2009 |   |
|-------------------------------|--------|----------------|--------------|--------|-------------------|--------|
|                          |   | Carrying       |         |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                          |   | Value          |         |   | Value             |   |   | Value |   |   | Value |   |
| Financial assets:             |   |           |         |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents     |   | $              | 25,206,130   |   |              | $      | 25,206,130 |   |   | $ | 24,664,309 |   |   | $ | 24,664,309 |   |
| Securities held to maturity   |   |           | 5,397,048    |   |              |   | 5,712,547 |   |   |   | 4,495,977 |   |   |   | 4,635,616 |   |
| Securities available for sale |   |           | 85,865,731   |   |              |   | 85,865,731 |   |   |   | 85,179,160 |   |   |   | 85,179,160 |   |
| FHLBI and FRB stock           |   |           | 4,325,800    |   |              |   | N/A |   |   |   | 4,250,800 |   |   |   | N/A |   |
| Loans held for sale           |   |           | 1,030,767    |   |              |   | 1,030,767 |   |   |   | 3,842,089 |   |   |   | 3,842,089 |   |
| Loans, net                    |   |           | 511,287,565  |   |              |   | 513,378,901 |   |   |   | 515,735,072 |   |   |   | 518,357,191 |   |
| Accrued interest receivable   |   |           | 2,513,276    |   |              |   | 2,513,276 |   |   |   | 2,439,859 |   |   |   | 2,439,859 |   |
| Financial liabilities:        |   |           |         |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                      |   | $              | (559,291,275 | )      |              | $      | (561,497,361 | ) |   | $ | (568,380,351 | ) |   | $ | (571,401,464 | ) |
| FHLB advances                 |   |           | (45,200,000  | )      |              |   | (45,523,030 | ) |   |   | (43,200,000 | ) |   |   | (43,578,410 | ) |
| Junior subordinated debt      |   |           | (17,527,000  | )      |              |   | (16,807,788 | ) |   |   | (17,527,000 | ) |   |   | (17,147,380 | ) |
| Accrued interest payable      |   |           | (614,936     | )      |              |   | (614,936 | ) |   |   | (480,885 | ) |   |   | (480,885 | ) |

----

Index

2.   MANAGEMENT’S 

----

Index

|                             |   | March 31, 2010 |        |   | December 31, 2009 |   |
|----------------------------------|--------|----------------|-------------|--------|-------------------|--------|
|                             |   | Balance        |        |   | %                 |   |   | Balance |   |   | % |   |
| Core deposits:                   |   |           |        |   |              |   |   |   |   |   |   |   |
| Noninterest-bearing demand       |   | $              | 88,650,687  |   |              |   | 15.9 | % |   | $ | 95,027,233 |   |   |   | 16.7 | % |
| Interest-bearing checking        |   |           | 108,448,952 |   |              |   | 19.4 | % |   |   | 89,734,976 |   |   |   | 15.8 | % |
| Money market                     |   |           | 148,135,218 |   |              |   | 26.5 | % |   |   | 152,091,793 |   |   |   | 26.8 | % |
| Savings                          |   |           | 20,219,817  |   |              |   | 3.6 | % |   |   | 18,264,036 |   |   |   | 3.2 | % |
| Time, under $100,000             |   |           | 69,026,126  |   |              |   | 12.3 | % |   |   | 77,202,688 |   |   |   | 13.6 | % |
| Total core deposits              |   |           | 434,480,800 |   |              |   | 77.7 | % |   |   | 432,320,726 |   |   |   | 76.1 | % |
| Non-core deposits:               |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| In-market non-core deposits:     |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Time, $100,000 and over          |   |           | 57,148,926  |   |              |   | 10.2 | % |   |   | 67,389,262 |   |   |   | 11.9 | % |
| Out-of-market non-core deposits: |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Brokered certificate of deposits |   |           | 67,661,549  |   |              |   | 12.1 | % |   |   | 68,670,363 |   |   |   | 12.1 | % |
| Total non-core deposits          |   |           | 124,810,475 |   |              |   | 22.3 | % |   |   | 136,059,625 |   |   |   | 23.9 | % |
|                             |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits                   |   | $              | 559,291,275 |   |              |   | 100.0 | % |   | $ | 568,380,351 |   |   |   | 100.0 | % |

----

Index

| Performance Ratios          |   | March 31 |   |
|-----------------------------|--------|----------|--------|
|                        |   | 2010     |   |   | 2009 |   |
|                        |   |     |   |   |   |   |
| Return on average assets *  |   |     | 0.43   | % |   |   | 0.24 | % |
| Return on average equity *  |   |     | 6.17   | % |   |   | 3.33 | % |
| Net interest margin (TEY) * |   |     | 3.66   | % |   |   | 2.85 | % |
| Efficiency ratio            |   |     | 68.50  | % |   |   | 78.87 | % |

----

Index

|                                                       |   | (Dollars in Thousands)                     |    |
|------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                       |   | As of and For The Three Month Period Ended |    |
|                                                       |   | March 31, 2010                             |    |   | March 31, 2009 |   |
|                                                       |   |                                       |    |   | Interest |   |   | Annualized |   |   |   |   |   | Interest |   |   | Annualized |   |
|                                                       |   | Average                                    |    |   | Earned |   |   | Yield |   |   | Average |   |   | Earned |   |   | Yield |   |
|                                                       |   | Balance                                    |    |   | or Paid |   |   | or Cost |   |   | Balance |   |   | or Paid |   |   | or Cost |   |
| Assets                                                     |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments and interest-earning deposits       |   | $                                          | 2,432   |   |   | $ | 4 |   |   |   | 0.67 | % |   | $ | 1,554 |   |   | $ | - |   |   |   | 0.00 | % |
| Federal funds sold                                         |   |                                       | 3,720   |   |   |   | 2 |   |   |   | 0.22 | % |   |   | 19,363 |   |   |   | 7 |   |   |   | 0.15 | % |
| Securities - taxable                                       |   |                                       | 71,040  |   |   |   | 639 |   |   |   | 3.65 | % |   |   | 59,585 |   |   |   | 634 |   |   |   | 4.32 | % |
| Securities - tax exempt (1)                                |   |                                       | 24,419  |   |   |   | 371 |   |   |   | 6.16 | % |   |   | 21,739 |   |   |   | 343 |   |   |   | 6.40 | % |
| Loans held for sale                                        |   |                                       | 1,157   |   |   |   | - |   |   |   | 0.00 | % |   |   | 864 |   |   |   | - |   |   |   | 0.00 | % |
| Loans                                                      |   |                                       | 526,814 |   |   |   | 6,883 |   |   |   | 5.30 | % |   |   | 559,607 |   |   |   | 7,048 |   |   |   | 5.11 | % |
| Total interest-earning assets                              |   |                                       | 629,582 |   |   |   | 7,899 |   |   |   | 5.09 | % |   |   | 662,712 |   |   |   | 8,032 |   |   |   | 4.91 | % |
| Allowance for loan losses                                  |   |                                       | (12,040 | ) |   |   |   |   |   |   |   |   |   |   | (10,948 | ) |   |   |   |   |   |   |   |   |
| Cash and due from banks                                    |   |                                       | 19,284  |   |   |   |   |   |   |   |   |   |   |   | 11,236 |   |   |   |   |   |   |   |   |   |
| Other assets                                               |   |                                       | 41,141  |   |   |   |   |   |   |   |   |   |   |   | 33,431 |   |   |   |   |   |   |   |   |   |
| Total assets                                               |   | $                                          | 677,967 |   |   |   |   |   |   |   |   |   |   | $ | 696,431 |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                       |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing checking                                  |   | $                                          | 106,890 |   |   | $ | 106 |   |   |   | 0.40 | % |   | $ | 84,621 |   |   | $ | 177 |   |   |   | 0.85 | % |
| Savings                                                    |   |                                       | 19,152  |   |   |   | 19 |   |   |   | 0.40 | % |   |   | 17,400 |   |   |   | 21 |   |   |   | 0.49 | % |
| Money market                                               |   |                                       | 149,750 |   |   |   | 323 |   |   |   | 0.87 | % |   |   | 152,462 |   |   |   | 481 |   |   |   | 1.28 | % |
| Certificates of deposit                                    |   |                                       | 200,216 |   |   |   | 1,312 |   |   |   | 2.66 | % |   |   | 271,298 |   |   |   | 2,164 |   |   |   | 3.23 | % |
| FHLB advances                                              |   |                                       | 44,765  |   |   |   | 170 |   |   |   | 1.54 | % |   |   | 26,157 |   |   |   | 250 |   |   |   | 3.88 | % |
| Junior subordinated debt                                   |   |                                       | 17,527  |   |   |   | 280 |   |   |   | 6.48 | % |   |   | 17,527 |   |   |   | 280 |   |   |   | 6.48 | % |
| Total interest-bearing liabilities                         |   |                                       | 538,300 |   |   |   | 2,210 |   |   |   | 1.67 | % |   |   | 569,465 |   |   |   | 3,373 |   |   |   | 2.39 | % |
| Noninterest-bearing checking                               |   |                                       | 88,231  |   |   |   |   |   |   |   |   |   |   |   | 73,026 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                          |   |                                       | 4,016   |   |   |   |   |   |   |   |   |   |   |   | 3,998 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                       |   |                                       | 47,420  |   |   |   |   |   |   |   |   |   |   |   | 49,942 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                 |   | $                                          | 677,967 |   |   |   |   |   |   |   |   |   |   | $ | 696,431 |   |   |   |   |   |   |   |   |   |
| Net interest income                                        |   |                                       |    |   |   | $ | 5,689 |   |   |   |   |   |   |   |   |   |   | $ | 4,659 |   |   |   |   |   |
| Rate spread                                                |   |                                       |    |   |   |   |   |   |   |   | 3.42 | % |   |   |   |   |   |   |   |   |   |   | 2.52 | % |
| Net interest income as a percent of average earning assets |   |                                       |    |   |   |   |   |   |   |   | 3.66 | % |   |   |   |   |   |   |   |   |   |   | 2.85 | % |

----

Index

|              |   | March 31, 2010 |   |   | December 31, 2009 |   |
|-------------------|--------|----------------|--------|--------|-------------------|--------|
|              |   |           |   |   | Well-             |   |   | Minimum |   |   |   |   |   | Well- |   |   | Minimum |   |
|              |   | Actual         |   |   | Capitalized       |   |   | Required |   |   | Actual |   |   | Capitalized |   |   | Required |   |
|              |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Company       |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage capital  |   |           | 9.20   | %      |              |   | 5.00 | % |   |   | 4.00 | % |   |   | 9.05 | % |   |   | 5.00 | % |   |   | 4.00 | % |
| Tier 1 risk-based |   |           | 11.14  | %      |              |   | 6.00 | % |   |   | 4.00 | % |   |   | 10.90 | % |   |   | 6.00 | % |   |   | 4.00 | % |
| Total risk-based  |   |           | 12.66  | %      |              |   | 10.00 | % |   |   | 8.00 | % |   |   | 12.45 | % |   |   | 10.00 | % |   |   | 8.00 | % |
|              |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Bank          |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage capital  |   |           | 9.39   | %      |              |   | 5.00 | % |   |   | 4.00 | % |   |   | 9.30 | % |   |   | 5.00 | % |   |   | 4.00 | % |
| Tier 1 risk-based |   |           | 11.30  | %      |              |   | 6.00 | % |   |   | 4.00 | % |   |   | 11.06 | % |   |   | 6.00 | % |   |   | 4.00 | % |
| Total risk-based  |   |           | 12.56  | %      |              |   | 10.00 | % |   |   | 8.00 | % |   |   | 12.32 | % |   |   | 10.00 | % |   |   | 8.00 | % |

----

Index

 4.   CONTROLS 

----

Index

1.   

1a. 

4. 

6.  

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

31.1

31.2

32.1

32.2

SIG

|                           | TOWER FINANCIAL CORPORATION        |
|--------------------------------|------------------------------------|
|                           |                               |
|                           |                               |
| Dated:  May 14, 2010 | / s /  Michael D. Cahill |
|                           | Michael D. Cahill, President       |
|                           | and Chief Executive Officer        |
|                           |                               |
|                           |                               |
| Dated:  May 14, 2010 | / s /  Richard R. Sawyer |
|                           | Richard R. Sawyer                  |
|                           | Chief Financial Officer            |

----