| South Carolina                    |   | 57-1079460          |
|-----------------------------------|--------|---------------------|
| (State or other jurisdiction      |   | (I.R.S. Employer    |
| of incorporation or organization) |   | Identification No.) |

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

----

|                                                                                                                 | Page No.                                                                              |
|----------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
| PART I - FINANCIAL INFORMATION                                                                                       |                                                                                  |
|                                                                                                                 |                                                                                  |   |
| Item 1.                                                                                                              | Financial Statements (Unaudited)                                                      |   |
|                                                                                                                 |                                                                                  |   |
| Condensed Consolidated Balance Sheets – June 30, 2012 and December 31, 2011                                    | 2                                                                                     |
|                                                                                                                 |                                                                                  |   |
| Condensed Consolidated Statements of Operations – Six months ended June 30, 2012 and 2011                      | 3                                                                                     |
|                                                                                                                 |                                                                                  |   |
| Condensed Consolidated Statements of Operations – Three months ended June 30, 2012 and 2011                    | 4                                                                                     |
|                                                                                                                 |                                                                                  |   |
| Condensed Consolidated Statements of Comprehensive Income (Loss) – Six months ended June 30, 2012 and 2011     | 5                                                                                     |
|                                                                                                                 |                                                                                  |   |
| Condensed Consolidated Statements of Comprehensive Income (Loss) – Three months ended June 30, 2012 and 2011   | 5                                                                                     |
|                                                                                                                 |                                                                                  |   |
| Condensed Consolidated Statements of Changes in Shareholders' Equity – Six months ended June 30, 2012 and 2011 | 6                                                                                     |
|                                                                                                                 |                                                                                  |   |
| Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2012 and 2011                            | 7                                                                                     |
|                                                                                                                 |                                                                                  |   |
| Notes to Condensed Consolidated Financial Statements                                                                 | 8-33                                                                                  |
|                                                                                                                 |                                                                                  |   |
| Item 2.                                                                                                              | Management's Discussion and Analysis of Financial Condition and Results of Operations | 34-44 |
|                                                                                                                 |                                                                                  |   |
| Item 3.                                                                                                              | Quantitative and Qualitative Disclosures About Market Risk                            | 45 |
|                                                                                                                 |                                                                                  |   |
| Item 4.                                                                                                              | Controls and Procedures                                                               | 45 |
|                                                                                                                 |                                                                                  |   |
| PART II - OTHER INFORMATION                                                                                          |                                                                                  |
|                                                                                                                 |                                                                                  |   |
| Item 5.                                                                                                              | Exhibits                                                                              | 46 |
|                                                                                                                 |                                                                                  |   |
| Signatures                                                                                                           |                                                                                  | 46 |
|                                                                                                                 |                                                                                  |   |
| Exhibit Index                                                                                                        | 47                                                                                    |

----

|                                                                                                                                                   |   | June 30,2012 |    |   | December 31,2011 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|------------------|--------|
|                                                                                                                                                   |   | (Unaudited)  |    |   |             |   |
|                                                                                                                                                   |   |         |    |   |             |   |
|                                                                                                                                                   |   |         |    |   |             |   |
| Assets                                                                                                                                                 |   |         |    |   |             |   |
| Cash and cash equivalents:                                                                                                                             |   |         |    |   |             |   |
| Cash and due from banks                                                                                                                                |   | $            | 18,537  |   |             | $      | 18,037 |   |
| Federal funds sold                                                                                                                                     |   |         | 2,180   |   |             |   | - |   |
| Total cash and cash equivalents                                                                                                                        |   |         | 20,717  |   |             |   | 18,037 |   |
| Investment securities                                                                                                                                  |   |         |    |   |             |   |   |   |
| Available for sale                                                                                                                                     |   |         | 51,584  |   |             |   | 48,958 |   |
| Federal Home Loan Bank Stock, at cost                                                                                                                  |   |         | 3,118   |   |             |   | 3,487 |   |
| Loans held for sale                                                                                                                                    |   |         | 378     |   |             |   | 995 |   |
| Loans, net of allowance of $8,631 and $10,691                                                                                                          |   |         | 315,858 |   |             |   | 309,048 |   |
| Premises and equipment, net                                                                                                                            |   |         | 21,943  |   |             |   | 21,977 |   |
| Other real estate owned, net                                                                                                                           |   |         | 9,904   |   |             |   | 9,323 |   |
| Company owned life insurance                                                                                                                           |   |         | 12,120  |   |             |   | 11,922 |   |
| Other assets                                                                                                                                           |   |         | 3,246   |   |             |   | 3,774 |   |
| Total assets                                                                                                                                           |   | $            | 438,868 |   |             | $      | 427,521 |   |
|                                                                                                                                                   |   |         |    |   |             |   |   |   |
| Liabilities                                                                                                                                            |   |         |    |   |             |   |   |   |
| Deposits                                                                                                                                               |   |         |    |   |             |   |   |   |
| Noninterest-bearing                                                                                                                                    |   | $            | 46,503  |   |             | $      | 34,120 |   |
| Interest-bearing                                                                                                                                       |   |         | 291,974 |   |             |   | 282,027 |   |
| Total deposits                                                                                                                                         |   |         | 338,477 |   |             |   | 316,147 |   |
| Federal funds purchased                                                                                                                                |   |         | -       |   |             |   | 3,588 |   |
| Securities sold under agreements to repurchase                                                                                                         |   |         | 2,138   |   |             |   | 3,262 |   |
| Federal Home Loan Bank Borrowings                                                                                                                      |   |         | 52,000  |   |             |   | 60,000 |   |
| Junior subordinated debentures                                                                                                                         |   |         | 10,310  |   |             |   | 10,310 |   |
| Other liabilities                                                                                                                                      |   |         | 3,443   |   |             |   | 3,402 |   |
| Total liabilities                                                                                                                                      |   |         | 406,368 |   |             |   | 396,709 |   |
| Shareholders’ Equity                                                                                                                             |   |         |    |   |             |   |   |   |
| Common stock (no par value; 20,000,000 shares authorized; 5,326,577 shares issued and outstanding at June 30, 2012 and 5,306,488 at December 31, 2011) |   |         | 54,413  |   |             |   | 54,382 |   |
| Accumulated deficit                                                                                                                                    |   |         | (20,774 | )      |             |   | (22,520 | ) |
| Accumulated other comprehensive loss                                                                                                                   |   |         | (1,139  | )      |             |   | (1,050 | ) |
| Total shareholders’ equity                                                                                                                       |   |         | 32,500  |   |             |   | 30,812 |   |
| Total liabilities and shareholders’ equity                                                                                                       |   | $            | 438,868 |   |             | $      | 427,521 |   |

----

|                                                                            |   | For the Six Months Ended |      |
|---------------------------------------------------------------------------------|--------|--------------------------|-----------|
|                                                                            |   | June 30,                 |      |
|                                                                            |   | 2012                     |      |   | 2011 |   |
| Interest income                                                                 |   |                     |      |   |   |   |
| Loans, including fees                                                           |   | $                        | 8,377     |   |   | $ | 8,965 |   |
| Taxable securities                                                              |   |                     | 529       |   |   |   | 852 |   |
| Tax exempt securities                                                           |   |                     | 122       |   |   |   | 246 |   |
| Cash and federal funds sold                                                     |   |                     | 16        |   |   |   | 17 |   |
| Total interest income                                                           |   |                     | 9,044     |   |   |   | 10,080 |   |
| Interest expense                                                                |   |                     |      |   |   |   |   |   |
| Deposits and borrowings                                                         |   |                     | 2,563     |   |   |   | 3,512 |   |
| Net interest income                                                             |   |                     | 6,481     |   |   |   | 6,568 |   |
| Provision for loan losses                                                       |   |                     | 430       |   |   |   | 3,643 |   |
| Net interest income after provision for loan losses                             |   |                     | 6,051     |   |   |   | 2,925 |   |
| Noninterest income                                                              |   |                     |      |   |   |   |   |   |
| Service fees on deposit accounts                                                |   |                     | 779       |   |   |   | 683 |   |
| Gain on sales of available for sale securities                                  |   |                     | 215       |   |   |   | 675 |   |
| Gain on sales of premises and equipment                                         |   |                     | 124       |   |   |   | - |   |
| Company owned life insurance earnings                                           |   |                     | 197       |   |   |   | 202 |   |
| Other-than-temporary impairment on available for sale securities                |   |                     | -         |   |   |   | (176 | ) |
| Other                                                                           |   |                     | 216       |   |   |   | 271 |   |
| Total noninterest income                                                        |   |                     | 1,531     |   |   |   | 1,655 |   |
| Noninterest expenses                                                            |   |                     |      |   |   |   |   |   |
| Salaries and employment benefits                                                |   |                     | 3,231     |   |   |   | 3,379 |   |
| Occupancy                                                                       |   |                     | 727       |   |   |   | 604 |   |
| Furniture and equipment                                                         |   |                     | 749       |   |   |   | 794 |   |
| Software                                                                        |   |                     | 130       |   |   |   | 177 |   |
| Insurance                                                                       |   |                     | 398       |   |   |   | 457 |   |
| Professional fees                                                               |   |                     | 458       |   |   |   | 475 |   |
| Telephone, postage, and supplies                                                |   |                     | 163       |   |   |   | 175 |   |
| Gain on sale of other real estate owned                                         |   |                     | (964      | ) |   |   | (399 | ) |
| Other real estate owned rental income, impairment provision, and other expenses |   |                     | 370       |   |   |   | 2,251 |   |
| Other operating expenses                                                        |   |                     | 535       |   |   |   | 562 |   |
| Total noninterest expenses                                                      |   |                     | 5,797     |   |   |   | 8,475 |   |
| Income (loss) before income taxes                                               |   |                     | 1,785     |   |   |   | (3,895 | ) |
|                                                                            |   |                     |      |   |   |   |   |   |
| Income tax expense                                                              |   |                     | 39        |   |   |   | 4,812 |   |
|                                                                            |   |                     |      |   |   |   |   |   |
| Net income (loss)                                                               |   | $                        | 1,746     |   |   | $ | (8,707 | ) |
|                                                                            |   |                     |      |   |   |   |   |   |
| Basic net income (loss) per common share                                        |   | $                        | 0.33      |   |   | $ | (1.65 | ) |
| Diluted net income (loss) per common share                                      |   | $                        | 0.33      |   |   | $ | (1.65 | ) |
| Weighted average shares outstanding                                             |   |                     |      |   |   |   |   |   |
| Basic                                                                           |   |                     | 5,321,578 |   |   |   | 5,275,558 |   |
| Diluted                                                                         |   |                     | 5,321,578 |   |   |   | 5,275,558 |   |

----

|                                                                            |   | For the Three Months Ended |      |
|---------------------------------------------------------------------------------|--------|----------------------------|-----------|
|                                                                            |   | June 30,                   |      |
|                                                                            |   | 2012                       |      |   | 2011 |   |
| Interest income                                                                 |   |                       |      |   |   |   |
| Loans, including fees                                                           |   | $                          | 4,222     |   |   | $ | 4,474 |   |
| Taxable securities                                                              |   |                       | 292       |   |   |   | 462 |   |
| Tax exempt securities                                                           |   |                       | 55        |   |   |   | 123 |   |
| Cash and federal funds sold                                                     |   |                       | 10        |   |   |   | 11 |   |
| Total interest income                                                           |   |                       | 4,579     |   |   |   | 5,070 |   |
| Interest expense                                                                |   |                       |      |   |   |   |   |   |
| Deposits and borrowings                                                         |   |                       | 1,275     |   |   |   | 1,735 |   |
| Net interest income                                                             |   |                       | 3,304     |   |   |   | 3,335 |   |
| Provision for loan losses                                                       |   |                       | 330       |   |   |   | 2,493 |   |
| Net interest income after provision for loan losses                             |   |                       | 2,974     |   |   |   | 842 |   |
| Noninterest income                                                              |   |                       |      |   |   |   |   |   |
| Service fees on deposit accounts                                                |   |                       | 401       |   |   |   | 349 |   |
| Gain on sales of available for sale securities                                  |   |                       | - -       |   |   |   | 797 |   |
| Company owned life insurance earnings                                           |   |                       | 98        |   |   |   | 104 |   |
| Other                                                                           |   |                       | 126       |   |   |   | 63 |   |
| Total noninterest income                                                        |   |                       | 625       |   |   |   | 1,313 |   |
| Noninterest expenses                                                            |   |                       |      |   |   |   |   |   |
| Salaries and employment benefits                                                |   |                       | 1,635     |   |   |   | 1,679 |   |
| Occupancy                                                                       |   |                       | 370       |   |   |   | 313 |   |
| Furniture and equipment                                                         |   |                       | 371       |   |   |   | 429 |   |
| Software                                                                        |   |                       | 66        |   |   |   | 90 |   |
| Insurance                                                                       |   |                       | 196       |   |   |   | 187 |   |
| Professional fees                                                               |   |                       | 227       |   |   |   | 218 |   |
| Telephone, postage, and supplies                                                |   |                       | 81        |   |   |   | 88 |   |
| Gain on sale of other real estate owned                                         |   |                       | (228      | ) |   |   | (397 | ) |
| Other real estate owned rental income, impairment provision, and other expenses |   |                       | 145       |   |   |   | 2,131 |   |
| Other operating expenses                                                        |   |                       | 282       |   |   |   | 309 |   |
| Total noninterest expenses                                                      |   |                       | 3,145     |   |   |   | 5,047 |   |
| Income (loss) before income taxes                                               |   |                       | 454       |   |   |   | (2,892 | ) |
| Income tax expense (benefit)                                                    |   |                       | (49       | ) |   |   | 5,236 |   |
| Net income (loss)                                                               |   | $                          | 503       |   |   | $ | (8,128 | ) |
| Basic net income (loss) per common share                                        |   | $                          | 0.09      |   |   | $ | (1.54 | ) |
| Diluted net income (loss) per common share                                      |   | $                          | 0.09      |   |   | $ | (1.54 | ) |
| Weighted average shares outstanding                                             |   |                       |      |   |   |   |   |   |
| Basic                                                                           |   |                       | 5,326,577 |   |   |   | 5,280,925 |   |
| Diluted                                                                         |   |                       | 5,326,577 |   |   |   | 5,280,925 |   |

----

|                                                         |   | For the Six Months EndedJune 30, |   |
|--------------------------------------------------------------|--------|----------------------------------|--------|
|                                                         |   | 2012                             |   |   | 2011 |   |
| Net income (loss)                                            |   | $                                | 1,746  |   |   | $ | (8,707 | ) |
|                                                         |   |                             |   |   |   |   |   |   |
| Other comprehensive income (loss):                           |   |                             |   |   |   |   |   |   |
| Unrealized gains/losses on securities:                       |   |                             |   |   |   |   |   |   |
| Unrealized holding gains arising during the period           |   |                             | 76     |   |   |   | 2,334 |   |
| Reclassification adjustment for gains included in net income |   |                             | (215   | ) |   |   | (819 | ) |
| Tax effect                                                   |   |                             | 50     |   |   |   | (545 | ) |
|                                                         |   |                             |   |   |   |   |   |   |
| Total other comprehensive income (loss)                      |   |                             | (89    | ) |   |   | 970 |   |
|                                                         |   |                             |   |   |   |   |   |   |
| Comprehensive income (loss)                                  |   | $                                | 1,657  |   |   | $ | (7,737 | ) |

|                                                         |   | For the Three Months EndedJune 30, |   |
|--------------------------------------------------------------|--------|------------------------------------|--------|
|                                                         |   | 2012                               |   |   | 2011 |   |
| Net income (loss)                                            |   | $                                  | 503    |   |   | $ | (8,128 | ) |
|                                                         |   |                               |   |   |   |   |   |   |
| Other comprehensive income:                                  |   |                               |   |   |   |   |   |   |
| Unrealized gains/losses on securities:                       |   |                               |   |   |   |   |   |   |
| Unrealized holding gains arising during the period           |   |                               | 272    |   |   |   | 1,128 |   |
| Reclassification adjustment for gains included in net income |   |                               | -      |   |   |   | (797 | ) |
| Tax effect                                                   |   |                               | (98    | ) |   |   | (112 | ) |
|                                                         |   |                               |   |   |   |   |   |   |
| Total other comprehensive income                             |   |                               | 174    |   |   |   | 219 |   |
|                                                         |   |                               |   |   |   |   |   |   |
| Comprehensive income (loss)                                  |   | $                                  | 677    |   |   | $ | (7,909 | ) |

----

|                                                                                              |   | Common Stock |      |   | Accumulated |   |   | AccumulatedOtherComprehensive |   |   |    |   |
|---------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|-------------|--------|--------|-------------------------------|--------|--------|---------|--------|
|                                                                                              |   | Shares       |      |   | Amount      |   |   | Deficit                       |   |   | Loss    |   |   | Total |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |
| Balance, January 1, 2011                                                                          |   |         | 4,780,822 |   |        | $      | 54,258 |                          |   | $      | (6,040  | )      |   | $ | (2,440 | ) |   | $ | 45,778 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Net loss for the period                                                                           |   |         |      |   |        |   |   |                          |   |   | (8,707  | )      |   |   |   |   |   |   | (8,707 | ) |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                                                                        |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains on securities available for sale net of taxes of $840                    |   |         |      |   |        |   |   |                          |   |   |    |   |   |   | 1,494 |   |   |   | 1,494 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Less reclassification adjustment for gains included in net income, net of taxes of $295           |   |         |      |   |        |   |   |                          |   |   |    |   |   |   | (524 | ) |   |   | (524 | ) |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Comprehensive loss                                                                                |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   | (7,737 | ) |
| Stock dividend (10%)                                                                              |   |         | 480,156   |   |        |   |   |                          |   |   | -       |   |   |   |   |   |   |   | - |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Employee stock purchase plan                                                                      |   |         | 19,947    |   |        |   | 65     |                          |   |   | .-      |   |   |   | - |   |   |   | 65 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2011                                                                            |   |         | 5,280,925 |   |        | $      | 54,323 |                          |   | $      | (14,747 | )      |   | $ | (1,470 | ) |   | $ | 38,106 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2012                                                                          |   |         | 5,306,488 |   |        | $      | 54,382 |                          |   | $      | (22,520 | )      |   | $ | (1,050 | ) |   | $ | 30,812 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Net income for the period                                                                         |   |         |      |   |        |   |   |                          |   |   | 1,746   |   |   |   |   |   |   |   | 1,746 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss                                                                          |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains on securities available for sale net of taxes of $27                     |   |         |      |   |        |   |   |                          |   |   |    |   |   |   | 49 |   |   |   | 49 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Less reclassification adjustment for gains and losses included in net income, net of taxes of $77 |   |         |      |   |        |   |   |                          |   |   |    |   |   |   | (138 | ) |   |   | (138 | ) |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   | 1,657 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Employee stock purchase plan                                                                      |   |         | 20,089    |   |        |   | 31     |                          |   |   | .-      |   |   |   | - |   |   |   | 31 |   |
|                                                                                              |   |         |      |   |        |   |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2012                                                                            |   |         | 5,326,577 |   |        | $      | 54,413 |                          |   | $      | (20,774 | )      |   | $ | (1,139 | ) |   | $ | 32,500 |   |

----

|                                                                                    |   | For the Six Months EndedJune 30, |    |
|-----------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                    |   | 2012                             |    |   | 2011 |   |
| Operating activities                                                                    |   |                             |    |   |   |   |
| Net income (loss)                                                                       |   | $                                | 1,746   |   |   | $ | (8,707 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities |   |                             |    |   |   |   |   |   |
| Decrease in deferred income taxes                                                       |   |                             | -       |   |   |   | 4,806 |   |
| Provision for loan losses                                                               |   |                             | 430     |   |   |   | 3,643 |   |
| Depreciation and amortization                                                           |   |                             | 449     |   |   |   | 507 |   |
| Discount accretion and premium amortization                                             |   |                             | 199     |   |   |   | 164 |   |
| Gain on sale of securities                                                              |   |                             | (215    | ) |   |   | (819 | ) |
| Gain on sale of premises and equipment                                                  |   |                             | (124    | ) |   |   | - |   |
| Other-than-temporary impairment on available for sale securities                        |   |                             | -       |   |   |   | 176 |   |
| Gain on sale of other real estate owned                                                 |   |                             | (964    | ) |   |   | (399 | ) |
| Deferred gain on sale of other real estate owned                                        |   |                             | -       |   |   |   | (93 | ) |
| Impairment charges on other real estate owned                                           |   |                             | 303     |   |   |   | 1,997 |   |
| Originations of loans held for sale                                                     |   |                             | (6,121  | ) |   |   | (1,947 | ) |
| Proceeds from sales of loans held for sale                                              |   |                             | 6,738   |   |   |   | 2,259 |   |
| Increase in value of Company owned life insurance                                       |   |                             | (197    | ) |   |   | (203 | ) |
| Decrease in other assets                                                                |   |                             | 577     |   |   |   | 2,048 |   |
| (Decrease) increase in other liabilities                                                |   |                             | 41      |   |   |   | (1,329 | ) |
| Net cash provided by operating activities                                               |   |                             | 2,862   |   |   |   | 2,103 |   |
|                                                                                    |   |                             |    |   |   |   |   |   |
| Investing activities                                                                    |   |                             |    |   |   |   |   |   |
| Sales of Federal Home Loan Bank stock                                                   |   |                             | 369     |   |   |   | 261 |   |
| Purchases of investment securities available-for-sale                                   |   |                             | (18,675 | ) |   |   | (25,895 | ) |
| Sales of investment securities available-for-sale                                       |   |                             | 10,226  |   |   |   | 32,232 |   |
| Calls, maturities, and paydowns of investment securities available-for-sale             |   |                             | 5,701   |   |   |   | 4,222 |   |
| Proceeds from sales of premises and equipment                                           |   |                             | 1,159   |   |   |   | - |   |
| Purchases of premises and equipment                                                     |   |                             | (1,451  | ) |   |   | (62 | ) |
| Proceeds from sales of other real estate owned                                          |   |                             | 5,283   |   |   |   | 843 |   |
| Capital expenditures related to other real estate owned                                 |   |                             | (18     | ) |   |   | (257 | ) |
| Net (increase) decrease in loans                                                        |   |                             | (12,426 | ) |   |   | 826 |   |
| Net cash provided by (used for) investing activities                                    |   |                             | (9,832  | ) |   |   | 12,170 |   |
|                                                                                    |   |                             |    |   |   |   |   |   |
| Financing activities                                                                    |   |                             |    |   |   |   |   |   |
| Decrease in borrowings                                                                  |   |                             | (12,712 | ) |   |   | (4,740 | ) |
| Net proceeds from issuances of stock                                                    |   |                             | 31      |   |   |   | 65 |   |
| Net increase (decrease) in deposits                                                     |   |                             | 22,331  |   |   |   | (2,544 | ) |
| Net cash provided by (used for) financing activities                                    |   |                             | 9,650   |   |   |   | (7,219 | ) |
|                                                                                    |   |                             |    |   |   |   |   |   |
| Increase in cash and cash equivalents                                                   |   |                             | 2,680   |   |   |   | 7,054 |   |
| Cash and cash equivalents, beginning of period                                          |   |                             | 18,037  |   |   |   | 20,062 |   |
| Cash and cash equivalents, end of period                                                |   | $                                | 20,717  |   |   | $ | 27,116 |   |
|                                                                                    |   |                             |    |   |   |   |   |   |
| Cash paid for:                                                                          |   |                             |    |   |   |   |   |   |
| Income taxes                                                                            |   | $                                | 46      |   |   | $ | - |   |
| Interest                                                                                |   | $                                | 2,252   |   |   | $ | 3,276 |   |
| Supplemental noncash investing and financing activities:                                |   |                             |    |   |   |   |   |   |
| Real estate acquired in settlement of loans                                             |   | $                                | 6,294   |   |   | $ | 3,504 |   |
| Change in unrealized (gains) losses on available-for-sale securities                    |   | $                                | 139     |   |   | $ | ( 1,515 | ) |
| Loans to finance sales of other real estate owned                                       |   | $                                | 1,109   |   |   | $ | 1,478 |   |

----

----

|                             |   | June 30, 2012 |   |
|----------------------------------|--------|---------------|--------|
|                             |   | Amortized     |   |   | Gross Unrealized |   |   | Estimated Fair |   |
|                             |   | Cost          |   |   | Gains |   |   | Losses |   |   |  Value |   |
| Available for sale               |   |          |   |   |   |   |   |   |   |   |   |   |
| Mortgage backed                  |   |          |   |   |   |   |   |   |   |   |   |   |
| Government sponsored enterprises |   | $             | 42,183 |   |   | $ | 776 |   |   | $ | - |   |   | $ | 42,959 |   |
| Other                            |   |          | 1,402  |   |   |   | - |   |   |   | 22 |   |   |   | 1,380 |   |
| Municipal securities             |   |          | 5,593  |   |   |   | 319 |   |   |   | - |   |   |   | 5,912 |   |
| Other                            |   |          | 4,186  |   |   |   | - |   |   |   | 2,853 |   |   |   | 1,333 |   |
| Total                            |   | $             | 53,364 |   |   | $ | 1,095 |   |   | $ | 2,875 |   |   | $ | 51,584 |   |

|                             |   | December 31, 2011 |   |
|----------------------------------|--------|-------------------|--------|
|                             |   | Amortized         |   |   | Gross Unrealized |   |   | Estimated Fair |   |
|                             |   | Cost              |   |   | Gains |   |   | Losses |   |   | Value |   |
| Available for sale               |   |              |   |   |   |   |   |   |   |   |   |   |
| Mortgage backed                  |   |              |   |   |   |   |   |   |   |   |   |   |
| Government sponsored enterprises |   | $                 | 37,688 |   |   | $ | 544 |   |   | $ | - |   |   | $ | 38,232 |   |
| Other                            |   |              | 1,539  |   |   |   | 6 |   |   |   | - |   |   |   | 1,545 |   |
| Municipal securities             |   |              | 7,190  |   |   |   | 415 |   |   |   | - |   |   |   | 7,605 |   |
| Other                            |   |              | 4,182  |   |   |   | - |   |   |   | 2,606 |   |   |   | 1,576 |   |
| Total                            |   | $                 | 50,599 |   |   | $ | 965 |   |   | $ | 2,606 |   |   | $ | 48,958 |   |

|            |   | June 30, 2012           |   |
|-----------------|--------|-------------------------|--------|
|            |   | Less than Twelve Months |   |   | Twelve Months or More |   |   | Total |   |
|            |   | Fair Value              |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|            |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage backed |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other           |   | $                       | 1,380  |   |   | $ | 22 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,380 |   |   | $ | 22 |   |
| Other           |   |                    | -      |   |   |   | - |   |   |   | 1,333 |   |   |   | 2,853 |   |   |   | 1,333 |   |   |   | 2,853 |   |
|            |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total           |   | $                       | 1,380  |   |   | $ | 22 |   |   | $ | 1,333 |   |   | $ | 2,853 |   |   | $ | 2,713 |   |   | $ | 2,875 |   |

|   |   | December 31, 2011       |   |
|--------|--------|-------------------------|--------|
|   |   | Less than Twelve Months |   |   | Twelve Months or More |   |   | Total |   |
|   |   | Fair Value              |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other  |   | $                       | 86     |   |   | $ |    64 |   |   |   | 990 |   |   |   | 2,542 |   |   |   | 1,076 |   |   |   | 2,606 |   |
|   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total  |   | $                       | 86     |   |   | $ | 64 |   |   | $ | 990 |   |   | $ | 2,542 |   |   | $ | 1,076 |   |   | $ | 2,606 |   |

----

|  Tranche |   | Current Balance |    |   | Required Overcollateralization % |   |   | Current Overcollateralization % |   |
|---------------|--------|-----------------|---------|--------|----------------------------------|--------|--------|---------------------------------|--------|
| A             |   | $               | 200,620 |   |                             |   | 128.00 | %                               |   |   | 117.30 | % |
| B             |   |            | 41,135  |   |                             |   | 115.00 | %                               |   |   | 97.34 | % |
| C             |   |            | 46,045  |   |                             |   | 106.20 | %                               |   |   | 81.77 | % |
| D             |   |            | 26,676  |   |                             |   | 100.25 | %                               |   |   | 74.83 | % |
| Income Notes  |   |            | 18,000  |   |                             |   | N/A    |                            |   |   | N/A |   |

----

| June 30, 2012                                                  |   |
|----------------------------------------------------------------|--------|
| (Amounts in thousands)                                         |   |   |   |   |   |   |
|                                                           |   | Security A |   |   | Security B |   |
|                                                           |   |   |   |   |   |   |
| Book Value                                                     |   | $ | 1,804 |   |   | $ | 1,732 |   |
| Fair Value                                                     |   | $ | 727 |   |   | $ | 19 |   |
| Unrealized Loss                                                |   | $ | 1,077 |   |   | $ | 1,713 |   |
| Number of underlying financial institution issuers             |   |   | 48 |   |   |   | 42 |   |
| Number of deferrals and defaults                               |   |   | 13 |   |   |   | 16 |   |
| Additional expected deferrals/ defaults*                       |   |   | N/A |   |   |   | 0/2 |   |
| Excess Subordination as a percentage of performing collateral^ |   |   | 16.24 | % |   |   | N/A |   |

| * | No assessment of these numbers was made for Security A as it was not modeled for cash flows due to its current payment status and its excess subordination. For Security B, this includes issuers for which there is an estimated probability of deferral or default of 50% or greater.  None of the remaining performing collateral was projected as a future deferral or default, due to low Texas ratios; two deferring issuers were projected to default. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ^ | Security B is in a support tranche and has no excess subordination. |
|---|---------------------------------------------------------------------|

----

|                                           |   | June 30, 2012 |   |
|------------------------------------------------|--------|---------------|--------|
|                                           |   | AmortizedCost |   |   | FairValue |   |
| Due after five but within ten years            |   | $             | 1,651  |   |   | $ | 1,729 |   |
| Due after ten years                            |   |          | 7,978  |   |   |   | 5,430 |   |
| Mortgage backed                                |   |          | 43,585 |   |   |   | 44,339 |   |
| Equity securities with no maturity             |   |          | 150    |   |   |   | 86 |   |
| Total investment securities available-for-sale |   | $             | 53,364 |   |   | $ | 51,584 |   |

|         |   | Period Ending June 30, |   |
|--------------|--------|------------------------|--------|
|         |   |  2012             |   |   | 2011 |   |
|         |   |                   |   |   |   |   |
| Proceeds     |   | $                      | 10,226 |   |   | $ | 32,232 |   |
| Gross Gains  |   |                   | 215    |   |   |   | 715 |   |
| Gross Losses |   |                   | -      |   |   |   | 40 |   |

----

|                              |   | June 30,2012 |    |   | December 31,2011 |   |
|-----------------------------------|--------|--------------|---------|--------|------------------|--------|
| Real estate secured loans:        |   |         |    |   |             |   |
| Residential 1-4 Family            |   | $            | 176,738 |   |             | $      | 166,414 |   |
| Multifamily                       |   |         | 5,599   |   |             |   | 5,144 |   |
| Commercial                        |   |         | 78,290  |   |             |   | 81,253 |   |
| Construction and land development |   |         | 36,075  |   |             |   | 39,241 |   |
| Total real estate secured loans   |   |         | 296,702 |   |             |   | 292,052 |   |
| Commercial and industrial         |   |         | 25,230  |   |             |   | 25,135 |   |
| Consumer                          |   |         | 2,054   |   |             |   | 2,037 |   |
| Other                             |   |         | 503     |   |             |   | 515 |   |
| Total gross loans                 |   |         | 324,489 |   |             |   | 319,739 |   |
| Allowance for loan losses         |   |         | (8,631  | )      |             |   | (10,691 | ) |
|                              |   | $            | 315,858 |   |             | $      | 309,048 |   |

| CreditGrade |   | Description                                                                                                                                                                               |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1           |   | Loans secured by cash collateral.                                                                                                                                                         |
| 2           |   | Loans secured by readily marketable collateral.                                                                                                                                           |
| 3           |   | Top quality loans with excellent repayment sources and no significant identifiable risk of collection.                                                                                    |
| 4           |   | Acceptable loans with adequate repayment sources and little identifiable risk of collection.                                                                                              |
| 5           |   | Acceptable loans with signs of weakness as to repayment or collateral, but with mitigating factors that minimize the risk of loss.                                                        |
| 6           |   | Watch List or Special Mention loans with underwriting tolerances and/or exceptions with no mitigating factors that may, due to economic or other factors, increase the risk of loss.      |
| 7           |   | Classified substandard loans inadequately protected by the paying capacity or net worth of the obligor, or of the collateral with weaknesses that jeopardize the liquidation of the debt. |
| 8           |   | Classified doubtful loans in which collection or liquidation in full is highly improbable.                                                                                                |
| 9           |   | Classified loss loans that are uncollectible and of such little value that continuance as an asset is not warranted.                                                                      |

----

|   |   | Real Estate Secured    |    |
|--------|--------|------------------------|---------|
|   |   | Residential 1-4 Family |    |   | Multi Family |   |   | Commercial |   |   | Construction and Land Development |   |
|   |   | 2012                   |    |   | 2011 |   |   | 2012 |   |   | 2011 |   |   | 2012 |   |   | 2011 |   |   | 2012 |   |   | 2011 |   |
| Grade  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1      |   | $                      | -       |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| 2      |   |                   | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 3      |   |                   | 52,455  |   |   |   | 44,087 |   |   |   | 620 |   |   |   | - |   |   |   | 8,319 |   |   |   | 8,469 |   |   |   | 6,212 |   |   |   | 7,851 |   |
| 4      |   |                   | 57,096  |   |   |   | 61,509 |   |   |   | 700 |   |   |   | 715 |   |   |   | 25,493 |   |   |   | 27,461 |   |   |   | 9,742 |   |   |   | 9,020 |   |
| 5      |   |                   | 47,516  |   |   |   | 45,213 |   |   |   | 2,218 |   |   |   | 1,921 |   |   |   | 26,083 |   |   |   | 26,026 |   |   |   | 16,021 |   |   |   | 14,575 |   |
| 6      |   |                   | 3,737   |   |   |   | 2,707 |   |   |   | - |   |   |   | - |   |   |   | 12,122 |   |   |   | 9,714 |   |   |   | 322 |   |   |   | 277 |   |
| 7      |   |                   | 12,881  |   |   |   | 11,957 |   |   |   | 2,061 |   |   |   | 2,508 |   |   |   | 5,753 |   |   |   | 8,781 |   |   |   | 3,778 |   |   |   | 4,306 |   |
| 8      |   |                   | 3,053   |   |   |   | 941 |   |   |   |   |   |   |   | - |   |   |   | 520 |   |   |   | 802 |   |   |   |   |   |   |   | 3,212 |   |
| 9      |   |                   | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total  |   | $                      | 176,738 |   |   | $ | 166,414 |   |   | $ | 5,599 |   |   | $ | 5,144 |   |   | $ | 78,290 |   |   | $ | 81,253 |   |   | $ | 36,075 |   |   | $ | 39,241 |   |

|   |   | Non-Real Estate Secured |   |   |     |   |   |   |   |   |   |
|--------|--------|-------------------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|
|   |   | Commercial              |   |   | Consumer |   |   | Other  |   |   | Total  |   |
|   |   | 2012                    |   |   | 2011     |   |   | 2012   |   |   | 2011   |   |   | 2012 |   |   | 2011 |   |   | 2012 |   |   | 2011 |   |
| Grade  |   |                    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1      |   | $                       | 2,344  |   |     | $      | 2,095  |   |   | $      | 158    |   |   | $ | 49 |   |   | $ | - |   |   | $ | - |   |   | $ | 2,502 |   |   | $ | 2,144 |   |
| 2      |   |                    | -      |   |     |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 3      |   |                    | 2,787  |   |     |   | 2,413  |   |   |   | 279    |   |   |   | 225 |   |   |   | 195 |   |   |   | 258 |   |   |   | 70,867 |   |   |   | 63,303 |   |
| 4      |   |                    | 5,437  |   |     |   | 5,408  |   |   |   | 227    |   |   |   | 237 |   |   |   | 243 |   |   |   | 257 |   |   |   | 98,938 |   |   |   | 104,607 |   |
| 5      |   |                    | 7,862  |   |     |   | 9,034  |   |   |   | 1,193  |   |   |   | 1,337 |   |   |   | 65 |   |   |   | - |   |   |   | 100,958 |   |   |   | 98,106 |   |
| 6      |   |                    | 3,866  |   |     |   | 3,992  |   |   |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 20,047 |   |   |   | 16,690 |   |
| 7      |   |                    | 2,934  |   |     |   | 2,193  |   |   |   | 197    |   |   |   | 189 |   |   |   | - |   |   |   | - |   |   |   | 27,604 |   |   |   | 29,934 |   |
| 8      |   |                    | -      |   |     |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,573 |   |   |   | 4,955 |   |
| 9      |   |                    | -      |   |     |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   |   |                    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total  |   | $                       | 25,230 |   |     | $      | 25,135 |   |   | $      | 2,054  |   |   | $ | 2,037 |   |   | $ | 503 |   |   | $ | 515 |   |   | $ | 324,489 |   |   | $ | 319,739 |   |

----

|                                   |   | 30-59 Days Past   Due |   |   | 60-89 Days Past    Due |   |   | Greater Than 90  Days |   |   |  Total Past  Due |   |   |    Current |   |   | Total Loans Receivable |   |    | Recorded Investment > 90 Days and  Accruing |   |
|----------------------------------------|--------|---------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|--------|---------------------------|--------|--------|------------------------|--------|---------|-----------------------------------------------------|--------|
| Real Estate Secured                    |   |                            |   |   |                             |   |   |                       |   |   |                       |   |   |                      |   |   |                   |   |    |                                                |   |
| 1-4 Family Residential                 |   | $                               | 3,671  |   |                             | $      | 1,092  |                       |   | $      | 4,712                      |   |   | $                         | 9,475  |   |                   | $      | 167,263 |                                                |   | $ | 176,738 |   |   | $ | - |   |
| Multifamily Residential                |   |                            | 384    |   |                             |   | -      |                       |   |   | -                          |   |   |                      | 384    |   |                   |   | 5,215   |                                                |   |   | 5,599 |   |   |   | - |   |
| Commercial Real Estate                 |   |                            | 552    |   |                             |   | 410    |                       |   |   | 804                        |   |   |                      | 1,766  |   |                   |   | 76,524  |                                                |   |   | 78,290 |   |   |   | - |   |
| Construction and Land Development |   |                            | 472    |   |                             |   | 275    |                       |   |   | 453                        |   |   |                      | 1,200  |   |                   |   | 34,875  |                                                |   |   | 36,075 |   |   |   |  - |   |
| Non Real Estate Secured                |   |                            |   |   |                             |   |   |                       |   |   |                       |   |   |                      |   |   |                   |   |    |                                                |   |   |   |   |   |   | - |   |
| Commercial and Industrial              |   |                            | 101    |   |                             |   | 144    |                       |   |   | 415                        |   |   |                      | 660    |   |                   |   | 24,570  |                                                |   |   | 25,230 |   |   |   | - |   |
| Consumer and Other                     |   |                            | 54     |   |                             |   | 2      |                       |   |   | 63                         |   |   |                      | 119    |   |                   |   | 2,438   |                                                |   |   | 2,557 |   |   |   | - |   |
|                                   |   |                            |   |   |                             |   |   |                       |   |   |                       |   |   |                      |   |   |                   |   |    |                                                |   |   |   |   |   |   |   |   |
| Total                                  |   | $                               | 5,234  |   |                             | $      | 1,923  |                       |   | $      | 6,447                      |   |   | $                         | 13,604 |   |                   | $      | 310,885 |                                                |   | $ | 324,489 |   |   | $ | - |   |

|                                   |   | 30-59 Days Past   Due |   |   | 60-89 Days Past    Due |   |   | Greater Than 90  Days |   |   |  Total Past  Due |   |   |    Current |   |   | Total Loans Receivable |   |    | Recorded Investment > 90 Days and  Accruing |   |
|----------------------------------------|--------|---------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|--------|---------------------------|--------|--------|------------------------|--------|---------|-----------------------------------------------------|--------|
| Real Estate Secured                    |   |                            |   |   |                             |   |   |                       |   |   |                       |   |   |                      |   |   |                   |   |    |                                                |   |   |   |   |   |   |   |   |
| 1-4 Family Residential                 |   | $                               | 4,897  |   |                             | $      | 957    |                       |   | $      | 4,981                      |   |   | $                         | 10,835 |   |                   | $      | 155,579 |                                                |   | $ | 166,414 |   |   | $ | - |   |
| Multifamily Residential                |   |                            | 391    |   |                             |   | -      |                       |   |   | 1,318                      |   |   |                      | 1,709  |   |                   |   | 3,435   |                                                |   |   | 5,144 |   |   |   | - |   |
| Commercial Real Estate                 |   |                            | 387    |   |                             |   | 3,503  |                       |   |   | 962                        |   |   |                      | 4,852  |   |                   |   | 76,401  |                                                |   |   | 81,253 |   |   |   | - |   |
| Construction and Land Development |   |                            | 933    |   |                             |   | 115    |                       |   |   | 3,781                      |   |   |                      | 4,829  |   |                   |   | 34,412  |                                                |   |   | 39,241 |   |   |   |  - |   |
| Non Real Estate Secured                |   |                            |   |   |                             |   |   |                       |   |   |                       |   |   |                      |   |   |                   |   |    |                                                |   |   |   |   |   |   | - |   |
| Commercial and Industrial              |   |                            | 1,055  |   |                             |   | 405    |                       |   |   | 260                        |   |   |                      | 1,720  |   |                   |   | 23,415  |                                                |   |   | 25,135 |   |   |   | - |   |
| Consumer and Other                     |   |                            | 54     |   |                             |   | 72     |                       |   |   | -                          |   |   |                      | 126    |   |                   |   | 2,426   |                                                |   |   | 2,552 |   |   |   | - |   |
|                                   |   |                            |   |   |                             |   |   |                       |   |   |                       |   |   |                      |   |   |                   |   |    |                                                |   |   |   |   |   |   |   |   |
| Total                                  |   | $                               | 7,717  |   |                             | $      | 5,052  |                       |   | $      | 11,302                     |   |   | $                         | 24,071 |   |                   | $      | 295,668 |                                                |   | $ | 319,739 |   |   | $ | - |   |

----

|                              |   | June 30,2012 |   |   | December 31,2011 |   |
|-----------------------------------|--------|--------------|--------|--------|------------------|--------|
|                              |   |         |   |   |             |   |
| 1-4 Family Residential            |   | $            | 7,747  |   |             | $      | 9,004 |   |
| Multifamily Residential           |   |         | 996    |   |             |   | 1,318 |   |
| Commercial Real Estate            |   |         | 2,079  |   |             |   | 5,749 |   |
| Construction and Land Development |   |         | 1,693  |   |             |   | 4,483 |   |
| Commercial and Industrial         |   |         | 779    |   |             |   | 714 |   |
| Consumer and Other                |   |         | 65     |   |             |   | - |   |
|                              |   |         |   |   |             |   |   |   |
| Total                             |   | $            | 13,359 |   |             | $      | 21,268 |   |

|                      |   | June 30,2012 |   |   | June 30,2011 |   |
|---------------------------|--------|--------------|--------|--------|--------------|--------|
|                      |   |         |   |   |         |   |
| Beginning balance         |   | $            | 10,691 |   |         | $      | 9,513 |   |
| Provision for loan losses |   |         | 430    |   |         |   | 3,643 |   |
| Net charge offs           |   |         | (2,490 | )      |         |   | (3,050 | ) |
| Ending balance            |   | $            | 8,631  |   |         | $      | 10,106 |   |

----

|                              |   | For the Six Months Ended June 30, 2012 |   |
|-----------------------------------|--------|----------------------------------------|--------|
|                              |   | Beginning Balance                      |   |   | Charge Offs |   |   | Recoveries |   |   | Provisions |   |   | Ending Allowance for Loan Losses |   |
|                              |   |                                   |   |   |   |   |   |   |   |   |   |   |   | General Reserves |   |   | Specific Reserves |   |   | Total |   |
| (Dollars in thousands)            |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real Estate Secured               |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 Family Residential            |   | $                                      | 2,861  |   |   | $ | (1,066 | ) |   | $ | 13 |   |   | $ | 624 |   |   | $ | 1,874 |   |   | $ | 558 |   |   | $ | 2,432 |   |
| Multifamily Residential           |   |                                   | 297    |   |   |   | - |   |   |   | 18 |   |   |   | (216 | ) |   |   | 99 |   |   |   |   |   |   |   | 99 |   |
| Commercial Real Estate            |   |                                   | 2,409  |   |   |   | (821 | ) |   |   | 1 |   |   |   | (95 | ) |   |   | 1,415 |   |   |   | 79 |   |   |   | 1,494 |   |
| Construction and Land Development |   |                                   | 633    |   |   |   | (617 | ) |   |   | 64 |   |   |   | 555 |   |   |   | 550 |   |   |   | 85 |   |   |   | 635 |   |
| Non Real Estate Secured           |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and Industrial         |   |                                   | 1,898  |   |   |   | (64 | ) |   |   | 7 |   |   |   | (393 | ) |   |   | 1,448 |   |   |   |   |   |   |   | 1,448 |   |
| Consumer and Other                |   |                                   | 41     |   |   |   | (25 | ) |   |   |   |   |   |   | 26 |   |   |   | 42 |   |   |   |   |   |   |   | 42 |   |
| Other                             |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other General Reserves            |   |                                   | 1,515  |   |   |   |   |   |   |   |   |   |   |   | 58 |   |   |   | 1,573 |   |   |   |   |   |   |   | 1,573 |   |
| Unallocated                       |   |                                   | 1,037  |   |   |   |   |   |   |   |   |   |   |   | (129 | ) |   |   | 908 |   |   |   |   |   |   |   | 908 |   |
| Total                             |   | $                                      | 10,691 |   |   | $ | (2,593 | ) |   | $ | 103 |   |   | $ | 430 |   |   | $ | 7,909 |   |   | $ | 722 |   |   | $ | 8,631 |   |

|                              |   | For the Six Months Ended June 30, 2011 |   |
|-----------------------------------|--------|----------------------------------------|--------|
|                              |   | Beginning Balance                      |   |   | Charge Offs |   |   | Recoveries |   |   | Provisions |   |   | Ending Allowance for Loan Losses |   |
|                              |   |                                   |   |   |   |   |   |   |   |   |   |   |   | General Reserves |   |   | Specific Reserves |   |   | Total |   |
| Real Estate Secured               |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 Family Residential            |   | $                                      | 2,532  |   |   | $ | (576 | ) |   | $ | 94 |   |   | $ | 570 |   |   | $ | 2,273 |   |   | $ | 347 |   |   | $ | 2,620 |   |
| Multifamily Residential           |   |                                   | 358    |   |   |   | (402 | ) |   |   | - |   |   |   | 80 |   |   |   | 36 |   |   |   | - |   |   |   | 36 |   |
| Commercial Real Estate            |   |                                   | 1,263  |   |   |   | (741 | ) |   |   | 6 |   |   |   | 1,571 |   |   |   | 1,218 |   |   |   | 881 |   |   |   | 2,099 |   |
| Construction and Land Development |   |                                   | 2,972  |   |   |   | (593 | ) |   |   | 96 |   |   |   | (677 | ) |   |   | 696 |   |   |   | 1,102 |   |   |   | 1,798 |   |
| Non Real Estate Secured           |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and Industrial         |   |                                   | 619    |   |   |   | (951 | ) |   |   | 34 |   |   |   | 2,087 |   |   |   | 1,789 |   |   |   | - |   |   |   | 1,789 |   |
| Consumer and Other                |   |                                   | 124    |   |   |   | (18 | ) |   |   | 1 |   |   |   | (62 | ) |   |   | 45 |   |   |   | - |   |   |   | 45 |   |
| Other                             |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other General Reserves            |   |                                   | 1,345  |   |   |   | ( - | ) |   |   | - |   |   |   | 35 |   |   |   | 1,380 |   |   |   | - |   |   |   | 1,380 |   |
| Unallocated                       |   |                                   | 300    |   |   |   | ( - | ) |   |   | - |   |   |   | 39 |   |   |   | 339 |   |   |   | - |   |   |   | 339 |   |
| Total                             |   | $                                      | 9,513  |   |   | $ | (3,281 | ) |   | $ | 231 |   |   | $ | 3,643 |   |   | $ | 7,776 |   |   | $ | 2,330 |   |   | $ | 10,106 |   |

----

|                              |   | For the Three Months Ended June 30, 2012 |   |
|-----------------------------------|--------|------------------------------------------|--------|
|                              |   | Beginning  Balance                  |   |   | Charge Offs |   |   | Recoveries |   |   | Provisions |   |   | Ending Allowance for Loan Losses |   |
| (Dollars in thousands)            |   |                                     |   |   |   |   |   |   |   |   |   |   |   | General  Reserves |   |   | Specific  Reserves |   |   | Total |   |
| Real Estate Secured               |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 Family Residential            |   | $                                        | 2,234  |   |   | $ | (479 | ) |   | $ |   |   |   | $ | 677 |   |   | $ | 1,874 |   |   | $ | 558 |   |   | $ | 2,432 |   |
| Multifamily Residential           |   |                                     | 277    |   |   |   |   |   |   |   | 18 |   |   |   | (196 | ) |   |   | 99 |   |   |   |   |   |   |   | 99 |   |
| Commercial Real Estate            |   |                                     | 1,868  |   |   |   | (289 | ) |   |   | 1 |   |   |   | (86 | ) |   |   | 1,415 |   |   |   | 79 |   |   |   | 1,494 |   |
| Construction and Land Development |   |                                     | 1,311  |   |   |   | (480 | ) |   |   | 11 |   |   |   | (207 | ) |   |   | 550 |   |   |   | 85 |   |   |   | 635 |   |
| Non Real Estate Secured           |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and Industrial         |   |                                     | 1,340  |   |   |   | (64 | )  |   |   | 4 |   |   |   | 168 |   |   |   | 1,448 |   |   |   |   |   |   |   | 1,448 |   |
| Consumer and Other                |   |                                     | 47     |   |   |   |   |   |   |   |   |   |   |   | (5 | ) |   |   | 42 |   |   |   |   |   |   |   | 42 |   |
| Other                             |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other General Reserves            |   |                                     | 1,529  |   |   |   |   |   |   |   |   |   |   |   | 44 |   |   |   | 1,573 |   |   |   |   |   |   |   | 1,573 |   |
| Unallocated                       |   |                                     | 973    |   |   |   |   |   |   |   |   |   |   |   | (65 | ) |   |   | 908 |   |   |   |   |   |   |   | 908 |   |
| Total                             |   | $                                        | 9,579  |   |   | $ | (1,312 | ) |   | $ | 34 |   |   | $ | 330 |   |   | $ | 7,909 |   |   | $ | 722 |   |   | $ | 8,631 |   |

|                              |   | For the Three Months Ended June 30, 2011 |   |
|-----------------------------------|--------|------------------------------------------|--------|
|                              |   | Beginning  Balance                  |   |   | Charge Offs |   |   | Recoveries |   |   | Provisions |   |   | Ending Allowance for Loan Losses |   |
|                              |   |                                     |   |   |   |   |   |   |   |   |   |   |   | General  Reserves |   |   | Specific  Reserves |   |   | Total |   |
| Real Estate Secured               |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 Family Residential            |   | $                                        | 2,670  |   |   | $ | (261 | ) |   | $ | 53 |   |   | $ | 158 |   |   | $ | 2,273 |   |   | $ | 347 |   |   | $ | 2,620 |   |
| Multifamily Residential           |   |                                     | 141    |   |   |   | ( - | ) |   |   | - |   |   |   | (105 | ) |   |   | 36 |   |   |   | - |   |   |   | 36 |   |
| Commercial Real Estate            |   |                                     | 1,345  |   |   |   | (510 | ) |   |   | 6 |   |   |   | 1,258 |   |   |   | 1,218 |   |   |   | 881 |   |   |   | 2,099 |   |
| Construction and Land Development |   |                                     | 2,035  |   |   |   | (488 | ) |   |   | 88 |   |   |   | 163 |   |   |   | 696 |   |   |   | 1,102 |   |   |   | 1,798 |   |
| Non Real Estate Secured           |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and Industrial         |   |                                     | 845    |   |   |   | (114 | ) |   |   | 34 |   |   |   | 1,024 |   |   |   | 1,789 |   |   |   | - |   |   |   | 1,789 |   |
| Consumer and Other                |   |                                     | 152    |   |   |   | (9 | ) |   |   | - |   |   |   | (98 | ) |   |   | 45 |   |   |   | - |   |   |   | 45 |   |
| Other                             |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other General Reserves            |   |                                     | 1,329  |   |   |   | ( - | ) |   |   | - |   |   |   | 51 |   |   |   | 1,380 |   |   |   | - |   |   |   | 1,380 |   |
| Unallocated                       |   |                                     | 297    |   |   |   | ( - | )  |   |   | - |   |   |   | 42 |   |   |   | 339 |   |   |   | - |   |   |   | 339 |   |
| Total                             |   | $                                        | 8,814  |   |   | $ | (1,382 | ) |   | $ | 181 |   |   | $ | 2,493 |   |   | $ | 7,776 |   |   | $ | 2,330 |   |   | $ | 10,106 |   |

----

|                                   |   | For the Year Ended December 31, 2011 |   |
|----------------------------------------|--------|--------------------------------------|--------|
|                                   |   | Beginning  Balance              |   |   | Charge Offs |   |   | Recoveries |   |   | Provisions |   |   | Ending Allowance for Loan Losses |   |
| (Dollars in thousands)                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   | General  Reserves |   |   | Specific  Reserves |   |   | Total |   |
| Real Estate Secured                    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 Family Residential                 |   | $                                    | 2,532  |   |   | $ | (1,119 | ) |   | $ | 125 |   |   | $ | 1,323 |   |   | $ | 1,763 |   |   | $ | 1,098 |   |   | $ | 2,861 |   |
| Multifamily Residential                |   |                                 | 358    |   |   |   | (502 | ) |   |   | - |   |   |   | 441 |   |   |   | 175 |   |   |   | 122 |   |   |   | 297 |   |
| Commercial Real Estate                 |   |                                 | 1,263  |   |   |   | (2,116 | ) |   |   | 30 |   |   |   | 3,232 |   |   |   | 1,691 |   |   |   | 718 |   |   |   | 2,409 |   |
| Construction and Land Development |   |                                 | 2,972  |   |   |   | (4,021 | ) |   |   | 124 |   |   |   | 1,558 |   |   |   | 625 |   |   |   | 8 |   |   |   | 633 |   |
| Non Real Estate Secured                |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and Industrial              |   |                                 | 619    |   |   |   | (1,464 | ) |   |   | 125 |   |   |   | 2,618 |   |   |   | 1,898 |   |   |   | - |   |   |   | 1,898 |   |
| Consumer and Other                     |   |                                 | 124    |   |   |   | (28 | ) |   |   | 1 |   |   |   | (56 | ) |   |   | 41 |   |   |   | - |   |   |   | 41 |   |
| Other                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other General Reserves                 |   |                                 | 1,345  |   |   |   | - |   |   |   | - |   |   |   | 170 |   |   |   | 1,515 |   |   |   | - |   |   |   | 1,515 |   |
| Unallocated                            |   |                                 | 300    |   |   |   | - |   |   |   | - |   |   |   | 737 |   |   |   | 1,037 |   |   |   | - |   |   |   | 1,037 |   |
| Total                                  |   | $                                    | 9,513  |   |   | $ | (9,250 | ) |   | $ | 405 |   |   | $ | 10,023 |   |   | $ | 8,745 |   |   | $ | 1,946 |   |   | $ | 10,691 |   |

----

|                                   |   | As of June 30, 2012                              |   |
|----------------------------------------|--------|--------------------------------------------------|--------|
| Loans Receivable:                      |   | Individually evaluated  for impairment |   |   | Collectively evaluated  for impairment |   |   |  Total |   |
|                                   |   |                                             |   |   |   |   |   |   |   |
| Real Estate Secured                    |   |                                             |   |   |   |   |   |   |   |
| 1-4 Family Residential                 |   | $                                                | 9,026  |   |   | $ | 167,712 |   |   | $ | 176,738 |   |
| Multifamily Residential                |   |                                             | 1,676  |   |   |   | 3,923 |   |   |   | 5,599 |   |
| Commercial Real Estate                 |   |                                             | 1,902  |   |   |   | 76,388 |   |   |   | 78,290 |   |
| Construction and Land Development |   |                                             | 1,233  |   |   |   | 34,842 |   |   |   | 36,075 |   |
| Non Real Estate Secured                |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Commercial and Industrial              |   |                                             | -      |   |   |   | 25,230 |   |   |   | 25,230 |   |
| Consumer and Other                     |   |                                             | -      |   |   |   | 2,557 |   |   |   | 2,557 |   |
| Total:                                 |   | $                                                | 13,837 |   |   | $ | 310,652 |   |   | $ | 324,489 |   |

|                                   |   | As of December 31, 2011                          |   |
|----------------------------------------|--------|--------------------------------------------------|--------|
| Loans Receivable:                      |   | Individually evaluated  for impairment |   |   | Collectively evaluated for impairment |   |   |  Total |   |
|                                   |   |                                             |   |   |   |   |   |   |   |
| Real Estate Secured                    |   |                                             |   |   |   |   |   |   |   |
| 1-4 Family Residential                 |   | $                                                | 7,668  |   |   | $ | 158,746 |   |   | $ | 166,414 |   |
| Multifamily Residential                |   |                                             | 2,117  |   |   |   | 3,027 |   |   |   | 5,144 |   |
| Commercial Real Estate                 |   |                                             | 5,568  |   |   |   | 75,685 |   |   |   | 81,253 |   |
| Construction and Land Development |   |                                             | 4,216  |   |   |   | 35,025 |   |   |   | 39,241 |   |
| Non Real Estate Secured                |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Commercial and Industrial              |   |                                             | -      |   |   |   | 25,135 |   |   |   | 25,135 |   |
| Consumer and Other                     |   |                                             | -      |   |   |   | 2,552 |   |   |   | 2,552 |   |
| Total:                                 |   | $                                                | 19,569 |   |   | $ | 300,170 |   |   | $ | 319,739 |   |

----

|                                |   | Unpaid Principal Balance |   |   | Recorded Investment (1) |   |   | Related Allowance |   |   | Life to Date Charge offs |   |   | Average Recorded Investment |   |   | Interest Income Recognized |   |
|-------------------------------------|--------|--------------------------|--------|--------|-------------------------|--------|--------|-------------------|--------|--------|--------------------------|--------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| With no related allowance recorded: |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| 1-4 Family Residential              |   | $                        | 7,514  |   |                    | $      | 6,914  |              |   | $      | -                        |   |   | $                           | 600    |   |                       | $      | 6,993 |   |   | $ | 27 |   |
| Multifamily Residential             |   |                     | 1,676  |   |                    |   | 1,676  |              |   |   | -                        |   |   |                        | -      |   |                       |   | 1,731 |   |   |   | 27 |   |
| Commercial Real Estate              |   |                     | 2,191  |   |                    |   | 1,474  |              |   |   | -                        |   |   |                        | 717    |   |                       |   | 1,628 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 766    |   |                    |   | 766    |              |   |   | -                        |   |   |                        | -      |   |                       |   | 784 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 2,112  |   |                    | $      | 2,112  |              |   | $      | 558                      |   |   | $                           | -      |   |                       | $      | 2,138 |   |   | $ | - |   |
| Multifamily Residential             |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Commercial Real Estate              |   |                     | 428    |   |                    |   | 428    |              |   |   | 79                       |   |   |                        | -      |   |                       |   | 433 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 467    |   |                    |   | 467    |              |   |   | 85                       |   |   |                        | -      |   |                       |   | 479 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 9,626  |   |                    | $      | 9,026  |              |   | $      | 558                      |   |   | $                           | 600    |   |                       | $      | 9,131 |   |   | $ | 27 |   |
| Multifamily Residential             |   |                     | 1,676  |   |                    |   | 1,676  |              |   |   | -                        |   |   |                        | -      |   |                       |   | 1,731 |   |   |   | 27 |   |
| Commercial Real Estate              |   |                     | 2,619  |   |                    |   | 1,902  |              |   |   | 79                       |   |   |                        | 717    |   |                       |   | 2,061 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 1,233  |   |                    |   | 1,233  |              |   |   | 85                       |   |   |                        | -      |   |                       |   | 1,263 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   | $                        | 15,154 |   |                    | $      | 13,837 |              |   | $      | 722                      |   |   | $                           | 1,317  |   |                       | $      | 14,186 |   |   | $ | 54 |   |

----

|                                |   | Unpaid Principal Balance |   |   | Recorded Investment (1) |   |   | Related Allowance |   |   | Life to Date Charge offs |   |   | Average Recorded Investment |   |   | Interest Income Recognized |   |
|-------------------------------------|--------|--------------------------|--------|--------|-------------------------|--------|--------|-------------------|--------|--------|--------------------------|--------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| With no related allowance recorded: |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| 1-4 Family Residential              |   | $                        | 1,575  |   |                    | $      | 1,426  |              |   | $      | -                        |   |   | $                           | 149    |   |                       | $      | 1,373 |   |   | $ | 8 |   |
| Multifamily Residential             |   |                     | 810    |   |                    |   | 810    |              |   |   | -                        |   |   |                        | -      |   |                       |   | 718 |   |   |   | 28 |   |
| Commercial Real Estate              |   |                     | 4,099  |   |                    |   | 3,380  |              |   |   | -                        |   |   |                        | 719    |   |                       |   | 3,503 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 1,151  |   |                    |   | 665    |              |   |   | -                        |   |   |                        | 486    |   |                       |   | 782 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 1,646  |   |                    | $      | 1,560  |              |   | $      | 347                      |   |   | $                           | 86     |   |                       | $      | 1,149 |   |   | $ | 10 |   |
| Multifamily Residential             |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Commercial Real Estate              |   |                     | 5,080  |   |                    |   | 5,080  |              |   |   | 881                      |   |   |                        | -      |   |                       |   | 4,483 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 7,490  |   |                    |   | 7,333  |              |   |   | 1,102                    |   |   |                        | 157    |   |                       |   | 6,605 |   |   |   | 97 |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 3,221  |   |                    | $      | 2,986  |              |   | $      | 347                      |   |   | $                           | 235    |   |                       | $      | 2,522 |   |   | $ | 18 |   |
| Multifamily Residential             |   |                     | 810    |   |                    |   | 810    |              |   |   | -                        |   |   |                        | -      |   |                       |   | 718 |   |   |   | 28 |   |
| Commercial Real Estate              |   |                     | 9,179  |   |                    |   | 8,460  |              |   |   | 881                      |   |   |                        | 719    |   |                       |   | 7,986 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 8,641  |   |                    |   | 7,998  |              |   |   | 1,102                    |   |   |                        | 643    |   |                       |   | 7,387 |   |   |   | 97 |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   | $                        | 21,851 |   |                    | $      | 20,254 |              |   | $      | 2,330                    |   |   | $                           | 1,597  |   |                       | $      | 18,613 |   |   | $ | 143 |   |

----

|                                |   | Unpaid Principal Balance |   |   | Recorded Investment (1) |   |   | Related Allowance |   |   | Life to Date Charge offs |   |   | Average Recorded Investment |   |   | Interest Income Recognized |   |
|-------------------------------------|--------|--------------------------|--------|--------|-------------------------|--------|--------|-------------------|--------|--------|--------------------------|--------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| With no related allowance recorded: |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| 1-4 Family Residential              |   | $                        | 7,514  |   |                    | $      | 6,914  |              |   | $      | -                        |   |   | $                           | 600    |   |                       | $      | 7,137 |   |   | $ | 12 |   |
| Multifamily Residential             |   |                     | 1,676  |   |                    |   | 1,676  |              |   |   | -                        |   |   |                        | -      |   |                       |   | 1,729 |   |   |   | 13 |   |
| Commercial Real Estate              |   |                     | 2,191  |   |                    |   | 1,474  |              |   |   | -                        |   |   |                        | 717    |   |                       |   | 1,619 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 766    |   |                    |   | 766    |              |   |   | -                        |   |   |                        | -      |   |                       |   | 776 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 2,112  |   |                    | $      | 2,112  |              |   | $      | 558                      |   |   | $                           | -      |   |                       | $      | 2,131 |   |   | $ | - |   |
| Multifamily Residential             |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Commercial Real Estate              |   |                     | 428    |   |                    |   | 428    |              |   |   | 79                       |   |   |                        | -      |   |                       |   | 430 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 467    |   |                    |   | 467    |              |   |   | 85                       |   |   |                        | -      |   |                       |   | 474 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 9,626  |   |                    | $      | 9,026  |              |   | $      | 558                      |   |   | $                           | 600    |   |                       | $      | 9,268 |   |   | $ | 12 |   |
| Multifamily Residential             |   |                     | 1,676  |   |                    |   | 1,676  |              |   |   | -                        |   |   |                        | -      |   |                       |   | 1,729 |   |   |   | 13 |   |
| Commercial Real Estate              |   |                     | 2,619  |   |                    |   | 1,902  |              |   |   | 79                       |   |   |                        | 717    |   |                       |   | 2,049 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 1,233  |   |                    |   | 1,233  |              |   |   | 85                       |   |   |                        | -      |   |                       |   | 1,250 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   | $                        | 15,154 |   |                    | $      | 13,837 |              |   | $      | 722                      |   |   | $                           | 1,317  |   |                       | $      | 14,296 |   |   | $ | 25 |   |

----

|                                |   | Unpaid Principal Balance |   |   | Recorded Investment (1) |   |   | Related Allowance |   |   | Life to Date Charge offs |   |   | Average Recorded Investment |   |   | Interest Income Recognized |   |
|-------------------------------------|--------|--------------------------|--------|--------|-------------------------|--------|--------|-------------------|--------|--------|--------------------------|--------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| With no related allowance recorded: |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| 1-4 Family Residential              |   | $                        | 1,575  |   |                    | $      | 1,426  |              |   | $      | -                        |   |   | $                           | 149    |   |                       | $      | 1,374 |   |   | $ | 4 |   |
| Multifamily Residential             |   |                     | 810    |   |                    |   | 810    |              |   |   | -                        |   |   |                        | -      |   |                       |   | 769 |   |   |   | 14 |   |
| Commercial Real Estate              |   |                     | 4,099  |   |                    |   | 3,380  |              |   |   | -                        |   |   |                        | 719    |   |                       |   | 3,444 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 1,151  |   |                    |   | 665    |              |   |   | -                        |   |   |                        | 486    |   |                       |   | 771 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 1,646  |   |                    | $      | 1,560  |              |   | $      | 347                      |   |   | $                           | 86     |   |                       | $      | 1,165 |   |   | $ | 4 |   |
| Multifamily Residential             |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Commercial Real Estate              |   |                     | 5,080  |   |                    |   | 5,080  |              |   |   | 881                      |   |   |                        | -      |   |                       |   | 4,662 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 7,490  |   |                    |   | 7,333  |              |   |   | 1,102                    |   |   |                        | 157    |   |                       |   | 6,507 |   |   |   | 6 |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 3,221  |   |                    | $      | 2,986  |              |   | $      | 347                      |   |   | $                           | 237    |   |                       | $      | 2,539 |   |   | $ | 8 |   |
| Multifamily Residential             |   |                     | 810    |   |                    |   | 810    |              |   |   | -                        |   |   |                        | -      |   |                       |   | 769 |   |   |   | 14 |   |
| Commercial Real Estate              |   |                     | 9,179  |   |                    |   | 8,460  |              |   |   | 881                      |   |   |                        | 719    |   |                       |   | 8,106 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 8,641  |   |                    |   | 7,998  |              |   |   | 1,102                    |   |   |                        | 643    |   |                       |   | 7,278 |   |   |   | 6 |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   | $                        | 21,851 |   |                    | $      | 20,254 |              |   | $      | 2,330                    |   |   | $                           | 1,597  |   |                       | $      | 18,692 |   |   | $ | 28 |   |

----

|                                |   | Unpaid Principal Balance |   |   | Recorded Investment (1) |   |   | Related Allowance |   |   | Life to Date Charge offs |   |   | Average Recorded Investment |   |   | Interest Income Recognized |   |
|-------------------------------------|--------|--------------------------|--------|--------|-------------------------|--------|--------|-------------------|--------|--------|--------------------------|--------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| With no related allowance recorded: |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |
| 1-4 Family Residential              |   | $                        | 2,805  |   |                    | $      | 2,564  |              |   | $      | -                        |   |   | $                           | 241    |   |                       | $      | 2,603 |   |   | $ | 15 |   |
| Multifamily Residential             |   |                     | 1,131  |   |                    |   | 1,131  |              |   |   | -                        |   |   |                        | -      |   |                       |   | 1,224 |   |   |   | - |   |
| Commercial Real Estate              |   |                     | 2,602  |   |                    |   | 2,175  |              |   |   | -                        |   |   |                        | 427    |   |                       |   | 2,366 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 6,533  |   |                    |   | 4,141  |              |   |   | -                        |   |   |                        | 2,392  |   |                       |   | 5,773 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 5,104  |   |                    | $      | 5,104  |              |   | $      | 1,099                    |   |   | $                           | -      |   |                       | $      | 5,142 |   |   | $ | 5 |   |
| Multifamily Residential             |   |                     | 986    |   |                    |   | 986    |              |   |   | 122                      |   |   |                        | -      |   |                       |   | 923 |   |   |   | 48 |   |
| Commercial Real Estate              |   |                     | 3,393  |   |                    |   | 3,393  |              |   |   | 717                      |   |   |                        | -      |   |                       |   | 3,636 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 245    |   |                    |   | 75     |              |   |   | 8                        |   |   |                        | 170    |   |                       |   | 143 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| 1-4 Family Residential              |   | $                        | 7,909  |   |                    | $      | 7,668  |              |   | $      | 1,099                    |   |   | $                           | 241    |   |                       | $      | 7,745 |   |   | $ | 20 |   |
| Multifamily Residential             |   |                     | 2,117  |   |                    |   | 2,117  |              |   |   | 122                      |   |   |                        | -      |   |                       |   | 2,147 |   |   |   | 48 |   |
| Commercial Real Estate              |   |                     | 5,995  |   |                    |   | 5,568  |              |   |   | 717                      |   |   |                        | 427    |   |                       |   | 6,002 |   |   |   | - |   |
| Construction and Land Development   |   |                     | 6,778  |   |                    |   | 4,216  |              |   |   | 8                        |   |   |                        | 2,562  |   |                       |   | 5,916 |   |   |   | - |   |
| Commercial and Industrial           |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
| Consumer and Other                  |   |                     | -      |   |                    |   | -      |              |   |   | -                        |   |   |                        | -      |   |                       |   | - |   |   |   | - |   |
|                                |   |                     |   |   |                    |   |   |              |   |   |                     |   |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Total:                              |   | $                        | 22,799 |   |                    | $      | 19,569 |              |   | $      | 1,946                    |   |   | $                           | 3,230  |   |                       | $      | 21,810 |   |   | $ | 68 |   |

----

----

----

|                                     |   | June 30, 2012                                |   |
|------------------------------------------|--------|----------------------------------------------|--------|
|                                     |   | QuotedMarket Price inActive Markets(Level 1) |   |   | SignificantOther ObservableInputs(Level 2) |   |   | Significant UnobservableInputs(Level 3) |   |   | Total |   |
| Available-for-sale investment securities |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Mortgage backed                          |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Government sponsored enterprises         |   | $                                            | -      |   |   | $ | 42,959 |   |   | $ | - |   |   | $ | 42,959 |   |
| Other                                    |   |                                         | -      |   |   |   | 1,380 |   |   |   | - |   |   |   | 1,380 |   |
| Municipals                               |   |                                         | -      |   |   |   | 5,912 |   |   |   | - |   |   |   | 5,912 |   |
| Other                                    |   |                                         | -      |   |   |   | 86 |   |   |   | 1,247 |   |   |   | 1,333 |   |
|                                     |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value               |   | $                                            | -      |   |   | $ | 50,337 |   |   | $ | 1,247 |   |   | $ | 51,584 |   |

|                                     |   | December 31, 2011                            |   |
|------------------------------------------|--------|----------------------------------------------|--------|
|                                     |   | QuotedMarket Price inActive Markets(Level 1) |   |   | SignificantOther ObservableInputs(Level 2) |   |   | Significant UnobservableInputs(Level 3) |   |   | Total |   |
| Available-for-sale investment securities |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage backed                          |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Government sponsored enterprises         |   | $                                            | -      |   |   | $ | 38,232 |   |   | $ | - |   |   | $ | 38,232 |   |
| Other                                    |   |                                         | -      |   |   |   | 1,545 |   |   |   | - |   |   |   | 1,545 |   |
| Municipals                               |   |                                         | -      |   |   |   | 7,605 |   |   |   | - |   |   |   | 7,605 |   |
| Other                                    |   |                                         | -      |   |   |   | 86 |   |   |   | 1,490 |   |   |   | 1,576 |   |
|                                     |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value               |   | $                                            | -      |   |   | $ | 47,468 |   |   | $ | 1,490 |   |   | $ | 48,958 |   |

|                                                             |   | June 30,2012 |   |   | June 30,2011 |   |
|------------------------------------------------------------------|--------|--------------|--------|--------|--------------|--------|
|                                                             |   |         |   |   |         |   |
| Beginning of Year Balance                                        |   | $            | 1,490  |   |         | $      | 1,195 |   |
| Discount Accretion                                               |   |         | 4      |   |         |   | 4 |   |
| Other-than-temporary impairment on available for sale securities |   |         | -      |   |         |   | (176 | ) |
| Unrealized Gain (Loss)                                           |   |         | (247   | )      |         |   | 558 |   |
| Ending Balance                                                   |   | $            | 1,247  |   |         | $      | 1,581 |   |

----

| Security Type              |   | Fair Value |   | Valuation Technique |                  | Unobservable Input |                                                               | Rates  |
|----------------------------|--------|------------|--------|---------------------|-----------------------|--------------------|--------------------------------------------------------------------|--------|
|                       |   |       |   |                |                  |               |                                                               |   |   |   |   |
| Trust Preferred Securities |   | $          | 1,247  |                | Discounted cash flows |               | Discount Rate (Approximately)                                      |   |   | 17% |   |
|                       |   |       |   |                |                  |               | Weighted Default Probability for deferring issuers (Approximately) |   |   | 54% |   |
|                       |   |       |   |                |                  |               | Recovery Rate on deferring issuers                                 |   | 10% | - | 15% |
|                       |   |       |   |                |                  |               | Default Probability for current issuers                            |   | 0.33% | - | 7.50% |

|                                                 |   | June 30, 2012 |    |   | June 30, 2011 |   |
|------------------------------------------------------|--------|---------------|---------|--------|---------------|--------|
| Interest income on securities                        |   | $             | -       |   |          | $      | - |   |
| Other than temporary impairment recorded in earnings |   |          |  - |   |          |   |    (176 | )  |
| Total                                                |   | $             | -       |   |          | $      | (176 | )  |

|                              |   | June 30, 2012                                  |   |
|-----------------------------------|--------|------------------------------------------------|--------|
|                              |   | Quoted Market Price in Active Markets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant UnobservableInputs(Level 3) |   |   | Total |   |
| Impaired Loans                    |   |                                           |   |   |   |   |   |   |   |   |   |   |
| 1 - 4 Family Residential          |   | $                                              | -      |   |   | $ | - |   |   | $ | 4,607 |   |   | $ | 4,607 |   |
| Commercial Real Estate            |   |                                           | -      |   |   |   | - |   |   |   | 869 |   |   |   | 869 |   |
| Construction and Land Development |   |                                           | -      |   |   |   | - |   |   |   | 382 |   |   |   | 382 |   |
| Other Real Estate Owned           |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1 – 4 Family Residential    |   |                                           |   |   |   |   |   |   |   |   | 1,417 |   |   |   | 1,417 |   |
| Commercial Real Estate            |   |                                           | -      |   |   |   | - |   |   |   | 3,721 |   |   |   | 3,721 |   |
| Construction and Land Development |   |                                           | -      |   |   |   | - |   |   |   | 4,766 |   |   |   | 4,766 |   |
|                              |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value        |   | $                                              | -      |   |   | $ | - |   |   | $ | 15,762 |   |   | $ | 15,762 |   |

----

|                              |   | December 31, 2011                              |   |
|-----------------------------------|--------|------------------------------------------------|--------|
|                              |   | Quoted Market Price in Active Markets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant UnobservableInputs(Level 3) |   |   | Total |   |
| Impaired Loans                    |   |                                           |   |   |   |   |   |   |   |   |   |   |
| 1 - 4 Family Residential          |   | $                                              | -      |   |   | $ | - |   |   | $ | 5,677 |   |   | $ | 5,677 |   |
| Multifamily Residential           |   |                                           | -      |   |   |   | - |   |   |   | 864 |   |   |   | 864 |   |
| Commercial Real Estate            |   |                                           | -      |   |   |   | - |   |   |   | 3,477 |   |   |   | 3,477 |   |
| Construction and Land Development |   |                                           | -      |   |   |   | - |   |   |   | 3,204 |   |   |   | 3,204 |   |
| Other Real Estate Owned           |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1 – 4 Family Residential    |   |                                           | -      |   |   |   | - |   |   |   | 743 |   |   |   | 743 |   |
| Multifamily Residential           |   |                                           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial Real Estate            |   |                                           | -      |   |   |   | - |   |   |   | 4,941 |   |   |   | 4,941 |   |
| Construction and Land Development |   |                                           | -      |   |   |   | - |   |   |   | 3,639 |   |   |   | 3,639 |   |
|                              |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value        |   | $                                              | -      |   |   | $ | - |   |   | $ | 22,545 |   |   | $ | 22,545 |   |

----

|                                                             |   | Valuation Techniques                     |   | Unobservable Inputs                                             |   | Range                                                                           |
|------------------------------------------------------------------|--------|------------------------------------------|--------|-----------------------------------------------------------------|--------|---------------------------------------------------------------------------------|
| Impaired Loans                                                   |   |                                     |   |                                                            |   |                                                                            |
| 1 - 4 Family Residential                                         |   | Sales comparison approach                |   | Bank Owned DiscountAppraisal Time Adjustment                    |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years         |
| Multifamily Residential                                          |   | Sales comparison approach                |   | Bank Owned DiscountAppraisal Time Adjustment                    |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years         |
| Commercial Real Estate                                           |   | Sales comparison approachIncome approach |   | Bank Owned DiscountAppraisal Time AdjustmentCapitalization Rate |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years8% - 12% |
| Construction and Land Development                                |   | Sales comparison approach                |   | Bank Owned DiscountAppraisal Time Adjustment                    |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years         |
| Other Real Estate Owned                                          |   |                                     |   |                                                            |   |                                                                            |
| Commercial Office Properties                                     |   | Sales comparison approachIncome approach |   | Bank Owned DiscountAppraisal Time AdjustmentCapitalization Rate |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years8% - 12% |
| Commercial Lots                                                  |   | Sales comparison approach                |   | Bank Owned DiscountAppraisal Time Adjustment                    |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years         |
| Residential 1 – 4 Family Lots and Homes Under Construction |   | Sales comparison approach                |   | Bank Owned DiscountAppraisal Time Adjustment                    |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years         |
| Residential 1 – 4 Family Homes                             |   | Sales comparison approach                |   | Bank Owned DiscountAppraisal Time Adjustment                    |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years         |
| Multifamily Properties                                           |   | Sales comparison approach                |   | Bank Owned DiscountAppraisal Time Adjustment                    |   | 10%-20%0% - < 1 year20% - 1-2 years25% - 2-3 years30% - > 3 years         |

----

|                                     |   | Fair Value Measurements at June 30, 2012 Using: |    |
|------------------------------------------|--------|-------------------------------------------------|---------|
|                                     |   | Carrying Amount                                 |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Financial assets:                        |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                |   | $                                               | 20,717  |   |   | $ | 20,717 |   |   | $ | - |   |   | $ | - |   |   | $ | 20,717 |   |
| Available for sale investment securities |   |                                            | 51,584  |   |   |   | - |   |   |   | 50,337 |   |   |   | 1,247 |   |   |   | 51,584 |   |
| Federal Home Loan Bank Stock             |   |                                            | 3,118   |   |   |   | - |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |
| Loans held for sale                      |   |                                            | 378     |   |   |   | - |   |   |   | 378 |   |   |   | - |   |   |   | 378 |   |
| Loans, net                               |   |                                            | 315,858 |   |   |   | - |   |   |   | - |   |   |   | 314,957 |   |   |   | 314,957 |   |
| Accrued interest receivable              |   |                                            | 1,269   |   |   |   | - |   |   |   | 181 |   |   |   | 1,088 |   |   |   | 1,269 |   |
|                                     |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                   |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                 |   |                                            | 338,477 |   |   |   | 156,473 |   |   |   | 179,240 |   |   |   | - |   |   |   | 335,713 |   |
| Short term borrowings                    |   |                                            | 2,138   |   |   |   | - |   |   |   | 2,138 |   |   |   | - |   |   |   | 2,138 |   |
| Advances from Federal Home Loan Bank     |   |                                            | 52,000  |   |   |   | - |   |   |   | 58,161 |   |   |   | - |   |   |   | 58,161 |   |
| Junior subordinated debentures           |   |                                            | 10,310  |   |   |   | - |   |   |   | - |   |   |   | 4,581 |   |   |   | 4,581 |   |
| Accrued interest payable                 |   |                                            | 1,011   |   |   |   | 27 |   |   |   | 828 |   |   |   | 156 |   |   |   | 1,011 |   |

|                                                 |   | December 31, 2011 |    |
|------------------------------------------------------|--------|-------------------|---------|
|                                                 |   | CarryingAmount    |    |   | FairValue |   |
| Financial assets:                                    |   |              |    |   |   |   |
| Cash and cash equivalents                            |   | $                 | 18,037  |   |   | $ | 18,037 |   |
| Available for sale investment securities             |   |              | 48,958  |   |   |   | 48,958 |   |
|     Federal Home Loan Bank Stock |   |              | 3,487   |   |   |   | N/A |   |
| Loans held for sale                                  |   |              | 995     |   |   |   | 995 |   |
| Loans, net                                           |   |              | 309,048 |   |   |   | 308,507 |   |
|    Accrued interest receivable        |   |              | 1,329   |   |   |   | 1,329 |   |
|                                                 |   |              |    |   |   |   |   |   |
| Financial liabilities:                               |   |              |    |   |   |   |   |   |
| Deposits                                             |   |              | 316,147 |   |   |   | 313,613 |   |
| Short term borrowings                                |   |              | 6,850   |   |   |   | 6,850 |   |
| Advances from Federal Home Loan Bank                 |   |              | 60,000  |   |   |   | 66,309 |   |
| Junior subordinated debentures                       |   |              | 10,310  |   |   |   | 4,502 |   |
|    Accrued interest payable           |   |              | 700     |   |   |   | 700 |   |

----

----

| o | future economic and business conditions; |
|---|------------------------------------------|

| o | lack of sustained growth and disruptions in the economy of the Greater Charleston area, including, but not limited to, continued falling real estate values and increasing levels of unemployment; |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | government monetary and fiscal policies; |
|---|------------------------------------------|

| o | the effects of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest sensitive assets and liabilities; |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | the effects of competition from a wide variety of local, regional, national and other providers of financial, investment, and insurance services; |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------|

| o | the effects of credit rating downgrades on the value of investment securities issued or guaranteed by various governments and government agencies, including the United States of America; |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | credit risks; |
|---|---------------|

| o | higher than anticipated levels of defaults on loans; |
|---|------------------------------------------------------|

| o | perceptions by depositors about the safety of their deposits; |
|---|---------------------------------------------------------------|

| o | the failure of assumptions underlying the establishment of the allowance for loan losses and other estimates, including the value of collateral securing loans; |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | changes in assumptions underlying allowances on deferred tax assets; |
|---|----------------------------------------------------------------------|

| o | changes in assumptions underlying, or accuracy of, analysis relating to other-than-temporary impairment of assets; |
|---|--------------------------------------------------------------------------------------------------------------------|

| o  | accuracy of fair value measurements and the methods and assumptions used to estimate fair value; |
|---------|--------------------------------------------------------------------------------------------------|

| o | the risks of opening new offices, including, without limitation, the related costs and time of building customer relationships and integrating operations as part of these endeavors and the failure to achieve expected gains, revenue growth and/or expense savings from such endeavors; |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | changes in laws and regulations, including tax, banking and securities laws and regulations and deposit insurance assessments; |
|---|--------------------------------------------------------------------------------------------------------------------------------|

| o | the effect of agreements with regulatory authorities, which restrict various activities and impose additionaladministrative requirements without commensurate benefits; |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | changes in the requirements of regulatory agencies; |
|---|-----------------------------------------------------|

| o | changes in accounting policies, rules and practices; |
|---|------------------------------------------------------|

| o | changes in technology or products may be more difficult or costly, or less effective than anticipated; |
|---|--------------------------------------------------------------------------------------------------------|

| o | the effects of war or other conflicts, acts of terrorism or other catastrophic events that may affect general economic conditions and economic confidence; |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | ability to continue to weather the current economic downturn; |
|---|---------------------------------------------------------------|

| o | loss of consumer or investor confidence; and |
|---|----------------------------------------------|

| o | other factors and information described in any of the reports that we file with the Securities and ExchangeCommission under the Securities Exchange Act of 1934. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                     |   | For the six months ended |    |   | For the six months ended |   |
|----------------------------------------------------------|--------|--------------------------|---------|--------|--------------------------|--------|
|                                                     |   | June 30, 2012            |    |   | June 30, 2011            |   |
|                                                     |   | Average Balance          |    |   | Income/Expense           |   |   | Yield/Rate(1) |   |   | Average Balance |   |   | Income/Expense |   |   | Yield/Rate(1) |   |
| Assets                                                   |   |                     |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Federal funds sold                              |   | $                        | 14,384  |   |                     | $      | 16 |   |   |   | 0.23 | % |   | $ | 15,910 |   |   | $ | 17 |   |   |   | 0.22 | % |
| Investments – taxable                              |   |                     | 47,840  |   |                     |   | 529 |   |   |   | 2.22 |   |   |   | 62,474 |   |   |   | 852 |   |   |   | 2.75 |   |
| Investments - nontaxable (2)                             |   |                     | 6,115   |   |                     |   | 122 |   |   |   | 4.02 |   |   |   | 12,030 |   |   |   | 246 |   |   |   | 4.13 |   |
| Total investments and federal funds sold                 |   |                     | 68,339  |   |                     |   | 667 |   |   |   | 1.96 |   |   |   | 90,414 |   |   |   | 1,115 |   |   |   | 2.49 |   |
| Loans (3)(4)                                             |   |                     | 304,718 |   |                     |   | 8,377 |   |   |   | 5.51 |   |   |   | 313,240 |   |   |   | 8,965 |   |   |   | 5.75 |   |
| Total earning assets/interest income                     |   |                     | 373,057 |   |                     |   |   9,044 |   |   |   | 4.86 | % |   |   | 403,654 |   |   |   |  10,080 |   |   |   | 5.02 | % |
| Other assets                                             |   |                     | 59,004  |   |                     |   |   |   |   |   |   |   |   |   | 68,175 |   |   |   |   |   |   |   |   |   |
| Total assets                                             |   | $                        | 432,061 |   |                     |   |   |   |   |   |   |   |   | $ | 471,829 |   |   |   |   |   |   |   |   |   |
| Liabilities                                              |   |                     |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings and transaction accounts                         |   | $                        | 111,687 |   |                     |   | 375 |   |   |   | 0.67 | % |   | $ | 98,635 |   |   |   | 634 |   |   |   | 1.30 | % |
| Time deposits                                            |   |                     | 176,942 |   |                     |   | 1,005 |   |   |   | 1.14 |   |   |   | 219,333 |   |   |   | 1,667 |   |   |   | 1.53 |   |
| Other borrowings                                         |   |                     | 58,034  |   |                     |   | 1,080 |   |   |   | 3.73 |   |   |   | 63,692 |   |   |   | 1,120 |   |   |   | 3.55 |   |
| Subordinated debt                                        |   |                     | 10,310  |   |                     |   | 103 |   |   |   | 2.00 |   |   |   | 10,310 |   |   |   | 91 |   |   |   | 1.77 |   |
| Total interest bearing liabilities/interest expense |   |                     | 356,973 |   |                     |   | 2,563 |   |   |   | 1.44 |   |   |   | 391,970 |   |   |   | 3,512 |   |   |   | 1.81 |   |
| Non-interest bearing liabilities                         |   |                     | 43,432  |   |                     |   |   |   |   |   |   |   |   |   | 33,791 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                        |   |                     | 400,405 |   |                     |   | 2,563 |   |   |   | 1.28 |   |   |   | 425,761 |   |   |   | 3,512 |   |   |   | 1.66 |   |
| Equity                                                   |   |                     | 31,656  |   |                     |   |   |   |   |   |   |   |   |   | 46,068 |   |   |   |   |   |   |   |   |   |
| Total liabilities and equity                             |   | $                        | 432,061 |   |                     |   |   |   |   |   |   |   |   | $ | 471,829 |   |   |   |   |   |   |   |   |   |
| Net interest income/margin (5)                           |   |                     |    |   |                     | $      | 6,481 |   |   |   | 3.48 | % |   |   |   |   |   | $ | 6,568 |   |   |   | 3.27 | % |
| Net interest spread (6)                                  |   |                     |    |   |                     |   |   |   |   |   | 3.42 | % |   |   |   |   |   |   |   |   |   |   | 3.22 | % |

| (1) | Annualized |
|-----|------------|

| (2) | Yield is not calculated on a tax equivalent basis due to the full valuation allowance on the deferred tax asset. |
|-----|------------------------------------------------------------------------------------------------------------------|

| (3) | Does not include nonaccruing loans. |
|-----|-------------------------------------|

| (4) | Income includes loan fees of $394,000 in 2012 and $369,000 in 2011. |
|-----|---------------------------------------------------------------------|

| (5) | Net interest income divided by total earning assets. |
|-----|------------------------------------------------------|

| (6) | Total interest earning assets yield less interest bearing liabilities rate. |
|-----|-----------------------------------------------------------------------------|

----

----

|                                                |   | For the three months ended |    |   | For the three months ended |   |
|-----------------------------------------------------|--------|----------------------------|---------|--------|----------------------------|--------|
|                                                |   | June 30, 2012              |    |   | June 30, 2011              |   |
|                                                |   | Average Balance            |    |   | Income/Expense             |   |   | Yield/Rate(1) |   |   | Average Balance |   |   | Income/Expense |   |   | Yield/Rate(1) |   |
| Assets                                              |   |                       |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Federal funds sold                         |   | $                          | 15,886  |   |                       | $      | 10 |   |   |   | 0.26 | % |   | $ | 18,150 |   |   | $ | 11 |   |   |   | 0.23 | % |
| Investments – taxable                         |   |                       | 49,955  |   |                       |   | 292 |   |   |   | 2.34 |   |   |   | 66,533 |   |   |   | 462 |   |   |   | 2.79 |   |
| Investments - nontaxable (2)                        |   |                       | 5,588   |   |                       |   | 55 |   |   |   | 3.98 |   |   |   | 11,798 |   |   |   | 123 |   |   |   | 4.19 |   |
| Total investments and federal funds sold            |   |                       | 71,429  |   |                       |   | 357 |   |   |   | 2.01 |   |   |   | 96,481 |   |   |   | 596 |   |   |   | 2.48 |   |
| Loans (3)(4)                                        |   |                       | 307,213 |   |                       |   | 4,222 |   |   |   | 5.51 |   |   |   | 312,005 |   |   |   | 4,474 |   |   |   | 5.75 |   |
| Total earning assets/interest income                |   |                       | 378,642 |   |                       |   | 4,579 |   |   |   | 4.85 | % |   |   | 408,486 |   |   |   | 5,070 |   |   |   | 4.98 | % |
| Other assets                                        |   |                       | 57,717  |   |                       |   |   |   |   |   |   |   |   |   | 65,000 |   |   |   |   |   |   |   |   |   |
| Total assets                                        |   | $                          | 436,359 |   |                       |   |   |   |   |   |   |   |   | $ | 473,486 |   |   |   |   |   |   |   |   |   |
| Liabilities                                         |   |                       |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings and transaction accounts                    |   | $                          | 111,590 |   |                       |   | 186 |   |   |   | 0.67 | % |   | $ | 101,887 |   |   |   | 329 |   |   |   | 1.30 | % |
| Time deposits                                       |   |                       | 180,243 |   |                       |   | 500 |   |   |   | 1.11 |   |   |   | 218,634 |   |   |   | 818 |   |   |   | 1.50 |   |
| Other borrowings                                    |   |                       | 55,021  |   |                       |   | 539 |   |   |   | 3.93 |   |   |   | 60,934 |   |   |   | 542 |   |   |   | 3.57 |   |
| Subordinated debt                                   |   |                       | 10,310  |   |                       |   | 50 |   |   |   | 1.96 |   |   |   | 10,310 |   |   |   | 46 |   |   |   | 1.78 |   |
| Total interest bearing liabilities/interest expense |   |                       | 357,164 |   |                       |   | 1,275 |   |   |   | 1.43 |   |   |   | 391,765 |   |   |   | 1,735 |   |   |   | 1.78 |   |
| Non-interest bearing liabilities                    |   |                       | 47,192  |   |                       |   |   |   |   |   |   |   |   |   | 35,465 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                   |   |                       | 404,356 |   |                       |   | 1,275 |   |   |   | 1.27 |   |   |   | 427,230 |   |   |   | 1,735 |   |   |   | 1.63 |   |
| Equity                                              |   |                       | 32,003  |   |                       |   |   |   |   |   |   |   |   |   | 46,256 |   |   |   |   |   |   |   |   |   |
| Total liabilities and equity                        |   | $                          | 436,359 |   |                       |   |   |   |   |   |   |   |   | $ | 473,486 |   |   |   |   |   |   |   |   |   |
| Net interest income/margin (5)                      |   |                       |    |   |                       | $      | 3,304 |   |   |   | 3.42 | % |   |   |   |   |   | $ | 3,335 |   |   |   | 3.27 | % |
| Net interest spread (6)                             |   |                       |    |   |                       |   |   |   |   |   | 3.42 | % |   |   |   |   |   |   |   |   |   |   | 3.20 | % |

| (1) | Annualized |
|-----|------------|

| (2) | Yield is not calculated on a tax equivalent basis due to the full valuation allowance on the deferred tax asset. |
|-----|------------------------------------------------------------------------------------------------------------------|

| (3)  | Does not include nonaccruing loans. |
|-----------|-------------------------------------|

| (4)  | Income includes loan fees of $189,000 in 2012 and $175,000 in 2011. |
|-----------|---------------------------------------------------------------------|

| (5)  | Net interest income divided by total earning assets. |
|-----------|------------------------------------------------------|

| (6)  | Total interest earning assets yield less interest bearing liabilities rate. |
|-----------|-----------------------------------------------------------------------------|

----

|                                     |   | Analysis of Changes in Net Interest Income For the six months ended June 30, 2012 Versus six months ended June 30, 2011 (1) |   |
|------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|
|                                     |   | Volume                                                                                                                      |   |   | Rate |   |   | Net Change |   |
| Interest income:                         |   |                                                                                                                        |   |   |   |   |   |   |   |
|                                     |   |                                                                                                                        |   |   |   |   |   |   |   |
| Cash and Federal funds sold              |   | $                                                                                                                           | (2     | ) |   | $ | 1 |   |   | $ | (1 | ) |
| Investments - taxable                    |   |                                                                                                                        | (200   | ) |   |   | (123 | ) |   |   | (323 | ) |
| Investments - non taxable (2)            |   |                                                                                                                        | (122   | ) |   |   | (2 | ) |   |   | (124 | ) |
| Total investments and federal funds sold |   |                                                                                                                        | (324   | ) |   |   | (124 | ) |   |   | (448 | ) |
| Net loans (3)(4)                         |   |                                                                                                                        | (245   | ) |   |   | (343 | ) |   |   | (588 | ) |
| Total interest income                    |   |                                                                                                                        | (569   | ) |   |   | (467 | ) |   |   | (1,036 | ) |
| Interest expense:                        |   |                                                                                                                        |   |   |   |   |   |   |   |   |   |   |
| Savings and transaction accounts         |   |                                                                                                                        | 84     |   |   |   | (343 | ) |   |   | (259 | ) |
| Time deposits                            |   |                                                                                                                        | (324   | ) |   |   | (338 | ) |   |   | (662 | ) |
| Other borrowings                         |   |                                                                                                                        | (100   | ) |   |   | 60 |   |   |   | (40 | ) |
| Subordinated debt                        |   |                                                                                                                        |   |   |   |   | 12 |   |   |   | 12 |   |
| Total interest expense                   |   |                                                                                                                        | (340   | ) |   |   | (609 | ) |   |   | (949 | ) |
| Net interest income                      |   | $                                                                                                                           | (229   | ) |   | $ | 142 |   |   | $ | (87 | ) |

|   | (1) | Changes in rate/volume have been allocated to each category on a consistent basis between rate and volume. |
|--------|-----|------------------------------------------------------------------------------------------------------------|

|   | (2) | Yield is not calculated on a tax equivalent basis due to the full valuation allowance on the deferred tax asset. |
|--------|-----|------------------------------------------------------------------------------------------------------------------|

|   | (3) | Income includes loan fees of $394,000 in 2012 and $369,000 in 2011. |
|--------|-----|---------------------------------------------------------------------|

|   | (4) | Does not include nonaccruing loans. |
|--------|-----|-------------------------------------|

----

|                                     |   | Analysis of Changes in Net Interest Income For the three months ended June 30, 2012 Versus three months ended June 30, 2011 (1) |   |
|------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                     |   | Volume                                                                                                                               |   |   | Rate |   |   | Net Change |   |
| Interest income:                         |   |                                                                                                                                 |   |   |   |   |   |   |   |
|                                     |   |                                                                                                                                 |   |   |   |   |   |   |   |
| Cash and Federal funds sold              |   | $                                                                                                                                    | (1     | ) |   | $ | 1 |   |   | $ | (1 | ) |
| Investments - taxable                    |   |                                                                                                                                 | (115   | ) |   |   | (55 | ) |   |   | (170 | ) |
| Investments - non taxable (2)            |   |                                                                                                                                 | (65    | ) |   |   | (2 | ) |   |   | (67 | ) |
| Total investments and federal funds sold |   |                                                                                                                                 | (181   | ) |   |   | (57 | ) |   |   | (238 | ) |
| Net loans (3)(4)                         |   |                                                                                                                                 | (69    | ) |   |   | (184 | ) |   |   | (253 | ) |
| Total interest income                    |   |                                                                                                                                 | (250   | ) |   |   | (241 | ) |   |   | (491 | ) |
| Interest expense:                        |   |                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Savings and transaction accounts         |   |                                                                                                                                 | 31     |   |   |   | (174 | ) |   |   | (143 | ) |
| Time deposits                            |   |                                                                                                                                 | (144   | ) |   |   | (174 | ) |   |   | (318 | ) |
| Other borrowings                         |   |                                                                                                                                 | (52    | ) |   |   | 49 |   |   |   | (3 | ) |
| Subordinated debt                        |   |                                                                                                                                 |   |   |   |   | 4 |   |   |   | 4 |   |
| Total interest expense                   |   |                                                                                                                                 | (165   | ) |   |   | (295 | ) |   |   | (460 | ) |
| Net interest income                      |   | $                                                                                                                                    | (85    | ) |   | $ | 54 |   |   | $ | (31 | ) |

| (1)  | Changes in rate/volume have been allocated to each category on a consistent basis between rate and volume. |
|-----------|------------------------------------------------------------------------------------------------------------|

| (2)  | Yield is not calculated on a tax equivalent basis due to the full valuation allowance on the deferred tax asset. |
|-----------|------------------------------------------------------------------------------------------------------------------|

| (3) | Income includes loan fees of $189,000 in 2012 and $175,000 in 2011. |
|-----|---------------------------------------------------------------------|

| (4) | Does not include nonaccruing loans. |
|-----|-------------------------------------|

----

----

|                                |   | June 30, 2012 |   |   | December 31, 2011 |   |
|-------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                |   |          |   |   |              |   |
| Construction and Land Development   |   | $             | 2,287  |   |              | $      | 3,035 |   |
| 1 – 4 Family                  |   |          | 7,882  |   |              |   | 4,020 |   |
| Multifamily                         |   |          | 1,065  |   |              |   | 1,190 |   |
| Commercial Real Estate              |   |          | 4,248  |   |              |   | 4,015 |   |
| Commercial and Industrial and Other |   |          | 2,511  |   |              |   | 1,634 |   |
| Total                               |   | $             | 17,993 |   |              | $      | 13,894 |   |

----

| Maturity       |   | Rate   |   | Balance |   |
|----------------|--------|--------|--------|---------|--------|
|           |   |   |   |    |   |   |
| September 2013 |   |   | 3.92   | %       |   | $ | 2,000,000 |   |
| June 2014      |   |   | 4.75   | %       |   |   | 10,000,000 |   |
| October 2016   |   |   | 4.25   | %       |   |   | 5,000,000 |   |
| November 2016  |   |   | 4.08   | %       |   |   | 5,000,000 |   |
| January 2017   |   |   | 4.35   | %       |   |   | 5,000,000 |   |
| January 2017   |   |   | 4.40   | %       |   |   | 5,000,000 |   |
| January 2017   |   |   | 4.46   | %       |   |   | 5,000,000 |   |
| January 2017   |   |   | 4.60   | %       |   |   | 5,000,000 |   |
| March 2018     |   |   | 2.33   | %       |   |   | 5,000,000 |   |
| April 2018     |   |   | 3.03   | %       |   |   | 5,000,000 |   |
|           |   |   |   |    |   |   |   |   |
| Balance        |   |   |   |    |   | $ | 52,000,000 |   |

----

|                                     |   | Capital Ratios |   |
|------------------------------------------|--------|----------------|--------|
|                                     |   | Actual         |   |   | Well Capitalized Requirement |   |   | Adequately Capitalized Requirement |   |
|                                     |   | Amount         |   |   | Ratio |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| (Dollars in thousands)                   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Bank                                 |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total capital (to risk-weighted assets)  |   | $              | 44,837 |   |   |   | 13.66 | % |   | $ | 32,824 |   |   |   | 10.00 | % |   | $ | 26,259 |   |   |   | 8.00 | % |
| Tier 1 capital (to risk-weighted assets) |   |           | 40,676 |   |   |   | 12.39 | % |   |   | 19,695 |   |   |   | 6.00 | % |   |   | 13,130 |   |   |   | 4.00 | % |
| Tier 1 capital (to average assets)       |   |           | 40,676 |   |   |   | 9.37 | % |   |   | 21,703 |   |   |   | 5.00 | % |   |   | 17,362 |   |   |   | 4.00 | % |
| The Company                              |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total capital (to risk-weighted assets)  |   |           | 48,135 |   |   |   | 14.57 | % |   |   | N/A |   |   |   | N/A |   |   |   | 26,437 |   |   |   | 8.00 | % |
| Tier 1 capital (to risk-weighted assets) |   |           | 43,949 |   |   |   | 13.30 | % |   |   | N/A |   |   |   | N/A |   |   |   | 13,219 |   |   |   | 4.00 | % |
| Tier 1 capital (to average assets)       |   |           | 43,949 |   |   |   | 10.17 | % |   |   | N/A |   |   |   | N/A |   |   |   | 17,282 |   |   |   | 4.00 | % |

|                                |   |  Within One Month |   |   | After One Through Three Months |   |   | After Three Through Twelve Months |   |   | Within One Year |   |   | Greater Than One Year |   |   |   Total |   |
|-------------------------------------|--------|------------------------|--------|--------|-------------------------------------|--------|--------|-----------------------------------|--------|--------|-----------------|--------|--------|-----------------------|--------|--------|-------------------|--------|
|                                |   |                   |   |   |                                |   |   |                              |   |   |            |   |   |                  |   |   |              |   |
| Unused commitments to extend credit |   | $                      | 1,960  |   |                                | $      | 522    |                              |   | $      | 5,392           |   |   | $                     | 7,874  |   |              | $      | 10,713 |   |   | $ | 18,587 |   |
| Standby letters of credit           |   |                   | -      |   |                                |   | 225    |                              |   |   | 20              |   |   |                  | 245    |   |              |   | 132 |   |   |   | 377 |   |
| Totals                              |   | $                      | 1,960  |   |                                | $      | 747    |                              |   | $      | 5,412           |   |   | $                     | 8,119  |   |              | $      | 10,845 |   |   | $ | 18,964 |   |

----

----

| 31-1  | Rule 13a-14(a) Certifications of CEO |
|------------|--------------------------------------|

| 31-2  | Rule 13a-14(a) Certifications of CFO |
|------------|--------------------------------------|

| 32  | Section 1350 Certification |
|----------|----------------------------|

| Date:           August 10, 2012 | By:    | /s/ L. Wayne Pearson    |
|----------------------------------------------------------------------------------------|--------|-------------------------|
|                                                                                   |   | L. Wayne Pearson        |
|                                                                                   |   | Chief Executive Officer |

| Date:           August 10, 2012 | By:    | /s/ William C. Heslop   |
|----------------------------------------------------------------------------------------|--------|-------------------------|
|                                                                                   |   | William C. Heslop       |
|                                                                                   |   | Chief Financial Officer |

----

| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|-----------------------------------------------------------------------------------------------------|

| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|-----------------------------------------------------------------------------------------------------|

| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  This exhibit is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 but is instead furnished as provided by applicable rules of the Securities and Exchange Commission. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 101.INS** | XBRL Instance |
|-----------|---------------|

| 101.SCH** | XBRL Taxonomy Extension Schema |
|-----------|--------------------------------|

| 101.CAL** | XBRL Taxonomy Extension Calculation |
|-----------|-------------------------------------|

| 101.DEF** | XBRL Taxonomy Extension Definition |
|-----------|------------------------------------|

| 101.LAB** | XBRL Taxonomy Extension Labels |
|-----------|--------------------------------|

| 101.PRE** | XBRL Taxonomy Extension Presentation |
|-----------|--------------------------------------|

| ** | XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended; is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended; and otherwise is not subject to liability under these sections. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|