| Michigan                                                       | 38-3423227                      |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|                                                           |                                 |
| 1030 W. Norton Avenue, Muskegon, MI                            | 49441                                |
| (Address of principal executive offices)                       | (Zip Code)                      |

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

----

| PART I.  | Financial Information                                                                                                | Page No. |
|----------|----------------------------------------------------------------------------------------------------------------------|----------|
|     |                                                                                                                 |     |
|     | Item 1.   Financial Statements                                                                        | 1        |
|     |                                                                                                                 |     |
|     | Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32       |
|     |                                                                                                                 |     |
|     | Item 3.   Quantitative and Qualitative Disclosures about Market Risk                                  | 45       |
|     |                                                                                                                 |     |
|     | Item 4.   Controls and Procedures                                                                     | 45       |
|     |                                                                                                                 |     |
| PART II. | Other Information                                                                                                    |     |
|     |                                                                                                                 |     |
|     | Item 1.   Legal Proceedings                                                                           | 45       |
|     |                                                                                                                 |     |
|     | Item 1A. Risk Factors                                                                                                | 45       |
|     |                                                                                                                 |     |
|     | Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds                                 | 45       |
|     |                                                                                                                 |     |
|     | Item 3.   Defaults upon Senior Securities                                                             | 46       |
|     |                                                                                                                 |     |
|     | Item 4.   Reserved                                                                                    | 46       |
|     |                                                                                                                 |     |
|     | Item 5.   Other Information                                                                           | 46       |
|     |                                                                                                                 |     |
|     | Item 6.   Exhibits                                                                                    | 46       |
|     |                                                                                                                 |     |
|     | Signatures                                                                                                           | 47       |
|     |                                                                                                                 |     |

----

PART 

| ITEM 1. | FINANCIAL STATEMENTS (UNAUDITED) |
|---------|----------------------------------|

|                                                      |   | March 31,   |        |   | December 31, |   |
|-----------------------------------------------------------|--------|-------------|-------------|--------|--------------|--------|
|                                                      |   | 2011        |        |   | 2010         |   |
|                                                      |   | (unaudited) |        |   |         |   |
| ASSETS                                                    |   |        |        |   |         |   |
| Cash and due from financial institutions                  |   | $           | 2,266,480   |   |         | $      | 2,074,301 |   |
| Interest-bearing deposits in other financial institutions |   |        | 28,193,508  |   |         |   | 21,565,572 |   |
| Total cash and cash equivalents                           |   |        | 30,459,988  |   |         |   | 23,639,873 |   |
| Securities available for sale (at fair value)             |   |        | 35,583,067  |   |         |   | 36,503,903 |   |
| Loans held for sale                                       |   |        | 3,012,189   |   |         |   | 1,263,263 |   |
| Loans                                                     |   |        | 162,117,482 |   |         |   | 165,243,881 |   |
| Less: Allowance for loan losses                           |   |        | 5,255,868   |   |         |   | 4,791,907 |   |
| Net loans                                                 |   |        | 156,861,614 |   |         |   | 160,451,974 |   |
| Federal Home Loan Bank stock                              |   |        | 479,800     |   |         |   | 479,800 |   |
| Premises and equipment, net                               |   |        | 10,740,220  |   |         |   | 10,874,176 |   |
| Accrued interest receivable                               |   |        | 708,703     |   |         |   | 781,334 |   |
| Foreclosed assets                                         |   |        | 3,872,996   |   |         |   | 3,382,594 |   |
| Other assets                                              |   |        | 677,399     |   |         |   | 568,580 |   |
| Total assets                                              |   | $           | 242,395,976 |   |         | $      | 237,945,497 |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                |   |        |        |   |         |   |   |   |
| Deposits                                                  |   |        |        |   |         |   |   |   |
| Non-interest-bearing                                      |   | $           | 42,093,347  |   |         | $      | 33,326,683 |   |
| Interest-bearing                                          |   |        | 181,341,093 |   |         |   | 185,936,494 |   |
| Total deposits                                            |   |        | 223,434,440 |   |         |   | 219,263,177 |   |
| Federal funds purchased and repurchase agreements         |   |        | 8,407,631   |   |         |   | 7,460,795 |   |
| Federal Home Loan Bank advances                           |   |        | 0           |   |         |   | 0 |   |
| Notes payable                                             |   |        | 5,000,000   |   |         |   | 5,000,000 |   |
| Accrued expenses and other liabilities                    |   |        | 912,151     |   |         |   | 875,738 |   |
| Total liabilities                                         |   |        | 242,254,222 |   |         |   | 237,099,710 |   |
| Shareholders’ equity                                |   |        |        |   |         |   |   |   |
| Preferred Stock, no par value: 1,000,000 shares           |   |        |        |   |         |   |   |   |
| authorized and none issued                                |   |        | 0           |   |         |   | 0 |   |
| Common Stock, no par value: 9,000,000 shares authorized;  |   |        |        |   |         |   |   |   |
| 1,468,800 issued and outstanding                          |   |        | 13,296,691  |   |         |   | 13,296,691 |   |
| Retained deficit                                          |   |        | (13,351,241 | )      |         |   | (12,617,022 | ) |
| Accumulated other comprehensive income                    |   |        | 196,304     |   |         |   | 166,118 |   |
| Total shareholders’ equity                          |   |        | 141,754     |   |         |   | 845,787 |   |
| Total liabilities and shareholders’ equity          |   | $           | 242,395,976 |   |         | $      | 237,945,497 |   |
|                                                      |   |        |        |   |         |   |   |   |

----

|                                                           |   | Three Months   |      |   | Three Months   |   |
|----------------------------------------------------------------|--------|----------------|-----------|--------|----------------|--------|
|                                                           |   | Ended          |      |   | Ended          |   |
|                                                           |   | March 31, 2011 |      |   | March 31, 2010 |   |
| Interest and dividend income                                   |   |           |      |   |           |   |
| Loans, including fees                                          |   | $              | 2,565,081 |   |           | $      | 2,805,607 |   |
| Securities                                                     |   |           | 214,163   |   |           |   | 211,435 |   |
| Federal funds sold, FHLB dividends and other income            |   |           | 17,445    |   |           |   | 7,459 |   |
| Total interest income                                          |   |           | 2,796,689 |   |           |   | 3,024,501 |   |
| Interest expense                                               |   |           |      |   |           |   |   |   |
| Deposits                                                       |   |           | 811,595   |   |           |   | 1,107,977 |   |
| Repurchase agreements, federal funds purchased, and other debt |   |           | 11,502    |   |           |   | 20,571 |   |
| Federal Home Loan Bank advances and notes payable              |   |           | 102,890   |   |           |   | 184,532 |   |
| Total interest expense                                         |   |           | 925,987   |   |           |   | 1,313,080 |   |
|                                                           |   |           |      |   |           |   |   |   |
| Net Interest Income                                            |   |           | 1,870,702 |   |           |   | 1,711,421 |   |
| Provision for loan losses                                      |   |           | 704,505   |   |           |   | 529,081 |   |
|                                                           |   |           |      |   |           |   |   |   |
| Net Interest Income After Provision for Loan Losses            |   |           | 1,166,197 |   |           |   | 1,182,340 |   |
| Non-interest income                                            |   |           |      |   |           |   |   |   |
| Service charges on deposit accounts                            |   |           | 176,813   |   |           |   | 174,533 |   |
| Gain on sale of loans                                          |   |           | 157,560   |   |           |   | 45,906 |   |
| Gain on sale of securities                                     |   |           | 0         |   |           |   | 79,814 |   |
| Loss on sale of foreclosed assets                              |   |           | (799      | )      |           |   | (8,689 | ) |
| Other                                                          |   |           | 185,936   |   |           |   | 193,271 |   |
| Total non-interest income                                      |   |           | 519,510   |   |           |   | 484,835 |   |
|                                                           |   |           |      |   |           |   |   |   |
| Non-interest expense                                           |   |           |      |   |           |   |   |   |
| Salaries and employee benefits                                 |   |           | 1,025,340 |   |           |   | 1,032,156 |   |
| Occupancy                                                      |   |           | 181,361   |   |           |   | 165,616 |   |
| Furniture and equipment                                        |   |           | 132,486   |   |           |   | 159,128 |   |
| Advertising                                                    |   |           | 9,345     |   |           |   | 18,165 |   |
| Data processing                                                |   |           | 132,406   |   |           |   | 122,779 |   |
| Professional services                                          |   |           | 94,838    |   |           |   | 124,650 |   |
| Foreclosed asset impairment                                    |   |           | 167,866   |   |           |   | 24,655 |   |
| Other                                                          |   |           | 676,284   |   |           |   | 460,431 |   |
| Total non-interest expense                                     |   |           | 2,419,926 |   |           |   | 2,107,580 |   |
|                                                           |   |           |      |   |           |   |   |   |
| Loss Before Federal Income Taxes                               |   |           | (734,219  | )      |           |   | (440,405 | ) |
| Federal income tax expense (benefit)                           |   |           | 0         |   |           |   | 0 |   |
| Net Loss                                                       |   | $              | (734,219  | )      |           | $      | (440,405 | ) |
|                                                           |   |           |      |   |           |   |   |   |
| Comprehensive Loss                                             |   | $              | (704,033  | )      |           | $      | (430,812 | ) |
|                                                           |   |           |      |   |           |   |   |   |
| Weighted average shares outstanding                            |   |           | 1,468,800 |   |           |   | 1,468,800 |   |
| Diluted average shares outstanding                             |   |           | 1,468,800 |   |           |   | 1,468,800 |   |
| Basic loss per share                                           |   | $              | (0.50     | )      |           | $      | (0.30 | ) |
| Diluted loss per share                                         |   | $              | (0.50     | )      |           | $      | (0.30 | ) |

----

|                          |   |   |      |   |   |   |       |     |   |   | Accumulated   |   |   |                |    |
|-------------------------------|--------|--------|-----------|--------|--------|--------|------------|----------|--------|--------|---------------|--------|--------|---------------------|---------|
|                          |   |   |      |   |   |   |       |     |   |   | Other         |   |   | Total               |    |
|                          |   |   |      |   | Common |   |       | Retained |   |   | Comprehensive |   |   | Shareholders’ |    |
|                          |   | Shares |      |   | Stock  |   |       | Deficit  |   |   | Income        |   |   | Equity              |    |
|                          |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |
| Balance at January 1, 2010    |   |   | 1,468,800 |   |   | $      | 13,296,691 |     |   | $      | (3,734,295    | )      |   | $                   | 177,595 |   |   | $ | 9,739,991 |   |
|                          |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| Comprehensive loss:           |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| Net loss                      |   |   |      |   |   |   |       |     |   |   | (440,405      | )      |   |                |    |   |   |   | (440,405 | ) |
| Unrealized gain on securities |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| available for sale            |   |   |      |   |   |   |       |     |   |   |          |   |   |                | 9,593   |   |   |   | 9,593 |   |
| Total comprehensive loss      |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   | (430,812 | ) |
|                          |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| Balance at March 31, 2010     |   |   | 1,468,800 |   |   | $      | 13,296,691 |     |   | $      | (4,174,700    | )      |   | $                   | 187,188 |   |   | $ | 9,309,179 |   |
|                          |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
|                          |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| Balance at January 1, 2011    |   |   | 1,468,800 |   |   | $      | 13,296,691 |     |   | $      | (12,617,022   | )      |   | $                   | 166,118 |   |   | $ | 845,787 |   |
|                          |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| Comprehensive loss:           |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| Net loss                      |   |   |      |   |   |   |       |     |   |   | (734,219      | )      |   |                |    |   |   |   | (734,219 | ) |
| Unrealized gain on securities |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| available for sale            |   |   |      |   |   |   |       |     |   |   |          |   |   |                | 30,186  |   |   |   | 30,186 |   |
| Total comprehensive loss      |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   | (704,033 | ) |
|                          |   |   |      |   |   |   |       |     |   |   |          |   |   |                |    |   |   |   |   |   |
| Balance at March 31, 2011     |   |   | 1,468,800 |   |   | $      | 13,296,691 |     |   | $      | (13,351,241   | )      |   | $                   | 196,304 |   |   | $ | 875,973 |   |

----

|                                                             |   | Three Months   |       |   | Three Months   |   |
|------------------------------------------------------------------|--------|----------------|------------|--------|----------------|--------|
|                                                             |   | Ended          |       |   | Ended          |   |
|                                                             |   | March 31, 2011 |       |   | March 31, 2010 |   |
| Cash flows from operating activities                             |   |           |       |   |           |   |
| Net loss                                                         |   | $              | (734,219   | )      |           | $      | (440,405 | ) |
| Adjustments to reconcile net loss to net cash                    |   |           |       |   |           |   |   |   |
| from operating activities:                                       |   |           |       |   |           |   |   |   |
| Provision for loan losses                                        |   |           | 704,505    |   |           |   | 529,081 |   |
| Depreciation and amortization                                    |   |           | 133,711    |   |           |   | 161,505 |   |
| Net amortization of securities                                   |   |           | 63,444     |   |           |   | 36,330 |   |
| Net realized gain on sale of securities                          |   |           | 0          |   |           |   | (79,814 | ) |
| Net realized gain on sale of loans                               |   |           | (157,560   | )      |           |   | (45,906 | ) |
| Net realized loss on sale of foreclosed assets                   |   |           | 799        |   |           |   | 8,689 |   |
| Foreclosed asset impairment                                      |   |           | 167,866    |   |           |   | 24,655 |   |
| Originations of loans for sale                                   |   |           | (7,327,907 | )      |           |   | (2,776,126 | ) |
| Proceeds from loan sales                                         |   |           | 5,736,541  |   |           |   | 3,281,621 |   |
| Net change in:                                                   |   |           |       |   |           |   |   |   |
| Accrued interest receivable and other assets                     |   |           | (36,188    | )      |           |   | 115,664 |   |
| Accrued interest payable and other liabilities                   |   |           | 36,413     |   |           |   | 46,370 |   |
| Net cash from (used in) operating activities                     |   |           | (1,412,595 | )      |           |   | 861,664 |   |
| Cash flows from investing activities                             |   |           |       |   |           |   |   |   |
| Activity in available for sale securities:                       |   |           |       |   |           |   |   |   |
| Sales                                                            |   |           | 0          |   |           |   | 3,751,027 |   |
| Maturities, prepayments and calls                                |   |           | 3,920,664  |   |           |   | 3,469,445 |   |
| Purchases                                                        |   |           | (3,033,086 | )      |           |   | (9,654,156 | ) |
| Loan originations and payments, net                              |   |           | 2,219,028  |   |           |   | 1,172,721 |   |
| Additions to premises and equipment, net                         |   |           | 245        |   |           |   | (84,396 | ) |
| Proceeds from the sale of foreclosed assets                      |   |           | 7,760      |   |           |   | 53,104 |   |
| Net cash from (used in) investing activities                     |   |           | 3,114,611  |   |           |   | (1,292,255 | ) |
| Cash flows from financing activities                             |   |           |       |   |           |   |   |   |
| Net change in deposits                                           |   |           | 4,171,263  |   |           |   | 21,936,871 |   |
| Net change in federal funds purchased and                        |   |           |       |   |           |   |   |   |
| repurchase agreements                                            |   |           | 946,836    |   |           |   | 1,873,248 |   |
| Repayment of FHLB advance                                        |   |           | 0          |   |           |   | (1,500,000 | ) |
| Net cash from (used in) financing activities                     |   |           | 5,118,099  |   |           |   | 22,310,119 |   |
| Net change in cash and cash equivalents                          |   |           | 6,820,115  |   |           |   | 21,879,528 |   |
| Beginning cash and cash equivalents                              |   |           | 23,639,873 |   |           |   | 2,824,088 |   |
| Ending cash and cash equivalents                                 |   | $              | 30,459,988 |   |           | $      | 24,703,616 |   |
| Supplemental cash flow information:                              |   |           |       |   |           |   |   |   |
| Cash paid during the period for interest                         |   | $              | 444,124    |   |           | $      | 1,298,830 |   |
| Transfers from loans to foreclosed assets                        |   |           | 687,717    |   |           |   | 544,364 |   |
| Transfers from securities held to maturity to available for sale |   |           | 0          |   |           |   | 5,839,614 |   |
| Foreclosed asset sales financed by the Company                   |   |           | 20,890     |   |           |   | 71,019 |   |

----

| 1. | BASIS OF PRESENTATION AND RECENT DEVELOPMENTS: |
|----|------------------------------------------------|

----

| 1. | BASIS OF PRESENTATION AND RECENT DEVELOPMENTS (Continued): |
|----|------------------------------------------------------------|

----

| 1. | BASIS OF PRESENTATION AND RECENT DEVELOPMENTS (Continued): |
|----|------------------------------------------------------------|

| 2. | SECURITIES AVAILABLE FOR SALE: |
|----|--------------------------------|

|                                    |   |      |       |   | Gross      |   |    | Gross      |   |   |    |   |
|-----------------------------------------|--------|-----------|------------|--------|------------|--------|---------|------------|--------|--------|---------|--------|
|                                    |   | Amortized |       |   | Unrealized |   |    | Unrealized |   |   | Fair    |   |
| March 31, 2011                          |   | Cost      |       |   | Gains      |   |    | Losses     |   |   | Value   |   |
|                                    |   |      |       |   |       |   |    |       |   |   |    |   |
| US Treasury                             |   | $         | 4,034,734  |   |       | $      | 5,727   |       |   | $      | (930    | )      |   | $ | 4,039,531 |   |
| US Government and federal agency        |   |      | 13,668,240 |   |       |   | 174,396 |       |   |   | (15,523 | )      |   |   | 13,827,113 |   |
| Municipals                              |   |      | 3,177,917  |   |       |   | 68,004  |       |   |   | (1,726  | )      |   |   | 3,244,195 |   |
| Mortgage-backed and collateralized      |   |      |       |   |       |   |    |       |   |   |    |   |   |   |   |   |
| mortgage obligations– residential |   |      | 14,288,643 |   |       |   | 223,199 |       |   |   | (39,614 | )      |   |   | 14,472,228 |   |
|                                    |   | $         | 35,169,534 |   |       | $      | 471,326 |       |   | $      | (57,793 | )      |   | $ | 35,583,067 |   |

|                                    |   |      |       |   | Gross      |   |    | Gross      |   |   |     |   |
|-----------------------------------------|--------|-----------|------------|--------|------------|--------|---------|------------|--------|--------|----------|--------|
|                                    |   | Amortized |       |   | Unrealized |   |    | Unrealized |   |   | Fair     |   |
| December 31, 2010                       |   | Cost      |       |   | Gains      |   |    | Losses     |   |   | Value    |   |
|                                    |   |      |       |   |       |   |    |       |   |   |     |   |
| US Treasury                             |   | $         | 1,004,240  |   |       | $      | 6,854   |       |   | $      | 0        |   |   | $ | 1,011,094 |   |
| US Government and federal agency        |   |      | 16,696,952 |   |       |   | 222,261 |       |   |   | (10,497  | )      |   |   | 16,908,716 |   |
| Municipals                              |   |      | 3,179,898  |   |       |   | 62,864  |       |   |   | (4,468   | )      |   |   | 3,238,294 |   |
| Mortgage-backed and collateralized      |   |      |       |   |       |   |    |       |   |   |     |   |   |
| mortgage obligations– residential |   |      | 15,239,466 |   |       |   | 236,840 |       |   |   | (130,507 | )      |   |   | 15,345,799 |   |
|                                    |   | $         | 36,120,556 |   |       | $      | 528,819 |       |   | $      | (145,472 | )      |   | $ | 36,503,903 |   |

----

| 2. | SECURITIES AVAILABLE FOR SALE (Continued): |
|----|--------------------------------------------|

|                                     |   |      |       |
|------------------------------------------|--------|-----------|------------|
|                                     |   | Amortized |       |   | Fair |   |
|                                     |   | Cost      |       |   | Value |   |
| Due in one year or less                  |   | $         | 2,412,416  |   |   | $ | 2,425,631 |   |
| Due from one to five years               |   |      | 16,712,784 |   |   |   | 16,890,802 |   |
| Due from five to ten years               |   |      | 1,755,691  |   |   |   | 1,794,406 |   |
| Due in more than ten years               |   |      | 0          |   |   |   | 0 |   |
| Mortgage-backed and collateralized       |   |      |       |   |   |   |   |   |
| mortgage obligations – residential |   |      | 14,288,643 |   |   |   | 14,472,228 |   |
|                                     |   | $         | 35,169,534 |   |   | $ | 35,583,067 |   |

|                             |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total  |   |
|----------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|--------|--------|
|                             |   | Fair                |       |   | Unrealized          |   |     | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| March 31, 2011                   |   | Value               |       |   | Losses              |   |     | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| US Treasuries                    |   | $                   | 3,030,391  |   |                | $      | (930     | )      |   | $ | 0 |   |   | $ | 0 |   |   | $ | 3,030,391 |   |   | $ | (930 | ) |
| US Government and federal agency |   |                | 3,984,477  |   |                |   | (15,523  | )      |   |   | 0 |   |   |   | 0 |   |   |   | 3,984,477 |   |   |   | (15,523 | ) |
| Municipals                       |   |                | 352,985    |   |                |   | (1,726   | )      |   |   | 0 |   |   |   | 0 |   |   |   | 352,985 |   |   |   | (1,726 | ) |
| Mortgage-backed and              |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| collateralized mortgage          |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations - residential        |   |                | 8,044,852  |   |                |   | (39,614  | )      |   |   | 0 |   |   |   | 0 |   |   |   | 8,044,852 |   |   |   | (39,614 | ) |
|                             |   | $                   | 15,412,705 |   |                | $      | (57,793  | )      |   | $ | 0 |   |   | $ | 0 |   |   | $ | 15,412,705 |   |   | $ | (57,793 | ) |
|                             |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total  |   |
|                             |   | Fair                |       |   | Unrealized          |   |     | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| December 31, 2010                |   | Value               |       |   | Losses              |   |     | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| US Government and federal agency |   | $                   | 2,489,266  |   |                | $      | (10,497  | )      |   | $ | 0 |   |   | $ | 0 |   |   | $ | 2,489,266 |   |   | $ | (10,497 | ) |
| Municipals                       |   |                | 350,532    |   |                |   | (4,468   | )      |   |   | 0 |   |   |   | 0 |   |   |   | 350,532 |   |   |   | (4,468 | ) |
| Mortgage-backed and              |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| collateralized mortgage          |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations - residential        |   |                | 7,887,368  |   |                |   | (130,507 | )      |   |   | 0 |   |   |   | 0 |   |   |   | 7,887,368 |   |   |   | (130,507 | ) |
|                             |   | $                   | 10,727,166 |   |                | $      | (145,472 | )      |   | $ | 0 |   |   | $ | 0 |   |   | $ | 10,727,166 |   |   | $ | (145,472 | ) |

----

| 2. | SECURITIES AVAILABLE FOR SALE (Continued): |
|----|--------------------------------------------|

----

| 3. | LOANS |
|----|-------|

|                                       |   | March 31, |        |   | December 31, |   |
|--------------------------------------------|--------|-----------|-------------|--------|--------------|--------|
|                                       |   | 2011      |        |   | 2010         |   |
|                                       |   |      |        |   |         |   |
| Commercial                                 |   | $         | 58,547,470  |   |         | $      | 58,416,643 |   |
| Commercial Real Estate:                    |   |      |        |   |         |   |   |   |
| General                                    |   |      | 56,603,106  |   |         |   | 58,996,411 |   |
| Construction                               |   |      | 9,359,374   |   |         |   | 8,782,762 |   |
| Consumer:                                  |   |      |        |   |         |   |   |   |
| Lines of credit                            |   |      | 15,587,977  |   |         |   | 15,954,866 |   |
| Other                                      |   |      | 2,818,811   |   |         |   | 3,087,409 |   |
| Credit card                                |   |      | 510,220     |   |         |   | 520,095 |   |
| Residential                                |   |      | 18,726,265  |   |         |   | 19,534,704 |   |
|                                       |   |      | 162,153,223 |   |         |   | 165,292,890 |   |
| Less:  Allowance for loan losses |   |      | (5,255,868  | )      |         |   | (4,791,907 | ) |
| Net deferred loan fees                     |   |      | (35,741     | )      |         |   | (49,009 | ) |
| Loans, net                                 |   | $         | 156,861,614 |   |         | $      | 160,451,974 |   |

----

| 4. | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS |
|----|----------------------------------------------|

|                       |   | Three Months Ended |      |   | Three Months Ended |   |
|----------------------------|--------|--------------------|-----------|--------|--------------------|--------|
|                       |   | March 31, 2011     |      |   | March 31, 2010     |   |
| Allowance for loan losses: |   |               |      |   |               |   |
| Beginning balance          |   | $                  | 4,791,907 |   |               | $      | 3,782,132 |   |
| Charge-offs                |   |               | (283,397  | )      |               |   | (1,014,632 | ) |
| Recoveries                 |   |               | 42,853    |   |               |   | 20,985 |   |
| Provision for loan losses  |   |               | 704,505   |   |               |   | 529,081 |   |
| Ending balance             |   | $                  | 5,255,868 |   |               | $      | 3,317,566 |   |

| March 31, 2011                                                                                         |   | Commercial |       |   | CommercialReal Estate |   |       | Consumer |   |   | Residential |   |   | Total  |       |
|--------------------------------------------------------------------------------------------------------|--------|------------|------------|--------|-----------------------|--------|------------|----------|--------|--------|-------------|--------|--------|--------|------------|
| Allowance for loan losses:                                                                             |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |
|     Beginning balance                                                              |   | $          | 1,218,865  |   |                  | $      | 2,896,176  |     |   | $      | 546,603     |   |   | $      | 130,263    |   |   | $ | 4,791,907 |   |
|       Charge-offs                                                        |   |       | (134,701   | )      |                  |   | (88,238    | )        |   |   | (60,458     | )      |   |   | 0          |   |   |   | (283,397 | ) |
|       Recoveries                                                         |   |       | 27,648     |   |                  |   | 3,498      |     |   |   | 11,707      |   |   |   | 0          |   |   |   | 42,853 |   |
|       Provision for loan losses                                          |   |       | 49,094     |   |                  |   | 393,603    |     |   |   | 133,464     |   |   |   | 128,344    |   |   |   | 704,505 |   |
|     Ending balance                                                                 |   | $          | 1,160,906  |   |                  | $      | 3,205,039  |     |   | $      | 631,316     |   |   | $      | 258,607    |   |   | $ | 5,255,868 |   |
|                                                                                                   |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |   |   |   |   |   |
|     Ending allowance balance attributable to loans:                                |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |   |   |   |   |   |
|       Individually evaluated for impairment                              |   | $          | 139,094    |   |                  | $      | 2,176,621  |     |   | $      | 177,287     |   |   | $      | 143,186    |   |   | $ | 2,636,188 |   |
|       Collectively evaluated for impairment                              |   |       | 1,021,812  |   |                  |   | 1,028,418  |     |   |   | 454,029     |   |   |   | 115,421    |   |   |   | 2,619,680 |   |
|             Total ending allowance balance |   | $          | 1,160,906  |   |                  | $      | 3,205,039  |     |   | $      | 631,316     |   |   | $      | 258,607    |   |   | $ | 5,255,868 |   |
|                                                                                                   |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |   |   |   |   |   |
| Loans:                                                                                                 |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |   |   |   |   |   |
|       Individually evaluated for impairment                              |   | $          | 4,712,309  |   |                  | $      | 8,861,899  |     |   | $      | 337,975     |   |   | $      | 883,555    |   |   | $ | 14,795,738 |   |
|       Collectively evaluated for impairment                              |   |       | 54,044,661 |   |                  |   | 57,415,496 |     |   |   | 18,629,486  |   |   |   | 17,892,830 |   |   |   | 147,982,473 |   |
|             Total ending loans balance     |   | $          | 58,756,970 |   |                  | $      | 66,277,395 |     |   | $      | 18,967,461  |   |   | $      | 18,776,385 |   |   | $ | 162,778,211 |   |

----

| 4. | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued): |
|----|-----------------------------------------------------------|

| December 31, 2010                               |   | Commercial |       |   | CommercialReal Estate |   |       | Consumer |   |   | Residential |   |   | Total  |       |
|-------------------------------------------------|--------|------------|------------|--------|-----------------------|--------|------------|----------|--------|--------|-------------|--------|--------|--------|------------|
| Allowance for loan losses:                      |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |
| Ending allowance balance attributable to loans: |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |
| Individually evaluated for impairment           |   | $          | 195,684    |   |                  | $      | 1,789,936  |     |   | $      | 85,233      |   |   | $      | 49,145     |   |   | $ | 2,119,998 |   |
| Collectively evaluated for impairment           |   |       | 1,023,181  |   |                  |   | 1,106,240  |     |   |   | 461,370     |   |   |   | 81,118     |   |   |   | 2,671,909 |   |
| Total ending allowance balance                  |   | $          | 1,218,865  |   |                  | $      | 2,896,176  |     |   | $      | 546,603     |   |   | $      | 130,263    |   |   | $ | 4,791,907 |   |
|                                            |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |   |   |   |   |   |
| Loans:                                          |   |       |       |   |                  |   |       |     |   |   |        |   |   |   |       |   |   |   |   |   |
| Individually evaluated for impairment           |   | $          | 4,276,850  |   |                  | $      | 8,405,141  |     |   | $      | 307,307     |   |   | $      | 1,339,741  |   |   | $ | 14,329,039 |   |
| Collectively evaluated for impairment           |   |       | 54,326,131 |   |                  |   | 59,724,688 |     |   |   | 19,096,341  |   |   |   | 18,508,671 |   |   |   | 151,655,831 |   |
| Total ending loans balance                      |   | $          | 58,602,981 |   |                  | $      | 68,129,829 |     |   | $      | 19,403,648  |   |   | $      | 19,848,412 |   |   | $ | 165,984,870 |   |

----

| 4. | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued): |
|----|-----------------------------------------------------------|

|                                |   |       |       |   | Unpaid    |   |       |      |   |   | Average    |   |   | Interest   |       |   | Interest Income |   |
|-------------------------------------|--------|------------|------------|--------|-----------|--------|------------|-----------|--------|--------|------------|--------|--------|------------|------------|--------|-----------------|--------|
|                                |   | Recorded   |       |   | Principal |   |       | Related   |   |   | Recorded   |   |   | Income     |       |   | Cash Basis      |   |
| March 31, 2011                      |   | Investment |       |   | Balance   |   |       | Allowance |   |   | Investment |   |   | Recognized |       |   | Recognized      |   |
| With no related allowance recorded: |   |       |       |   |      |   |       |      |   |   |       |   |   |       |       |   |            |   |
| Commercial                          |   | $          | 4,196,360  |   |      | $      | 4,194,212  |      |   | $      | 0          |   |   | $          | 3,955,325  |   |            | $      | 21,231 |   |   | $ | 20,373 |   |
| Commercial Real Estate:             |   |       |       |   |      |   |       |      |   |   |       |   |   |       |       |   |            |   |   |   |   |   |   |   |
| General                             |   |       | 1,897,094  |   |      |   | 1,897,272  |      |   |   | 0          |   |   |       | 2,099,458  |   |            |   | 1,858 |   |   |   | 1,748 |   |
| Construction                        |   |       | 458,001    |   |      |   | 458,001    |      |   |   | 0          |   |   |       | 482,221    |   |            |   | 0 |   |   |   | 0 |   |
| Consumer:                           |   |       |       |   |      |   |       |      |   |   |       |   |   |       |       |   |            |   |   |   |   |   |   |   |
| Lines of credit                     |   |       | 80,506     |   |      |   | 80,506     |      |   |   | 0          |   |   |       | 82,200     |   |            |   | 298 |   |   |   | 0 |   |
| Other                               |   |       | 18,900     |   |      |   | 18,900     |      |   |   | 0          |   |   |       | 18,900     |   |            |   | 0 |   |   |   | 0 |   |
| Residential                         |   |       | 193,851    |   |      |   | 194,367    |      |   |   | 0          |   |   |       | 348,433    |   |            |   | 1,895 |   |   |   | 1,895 |   |
| Subtotal                            |   | $          | 6,844,712  |   |      | $      | 6,843,258  |      |   | $      | 0          |   |   | $          | 6,986,537  |   |            | $      | 25,282 |   |   | $ | 24,016 |   |
|                                |   |       |       |   |      |   |       |      |   |   |       |   |   |       |       |   |            |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |       |       |   |      |   |       |      |   |   |       |   |   |       |       |   |            |   |   |   |   |   |   |   |
| Commercial                          |   | $          | 515,949    |   |      | $      | 513,733    |      |   | $      | 139,094    |   |   | $          | 595,863    |   |            | $      | 7,164 |   |   | $ | 6,854 |   |
| Commercial Real Estate:             |   |       |       |   |      |   |       |      |   |   |       |   |   |       |       |   |            |   |   |   |   |   |   |   |
| General                             |   |       | 4,320,184  |   |      |   | 4,305,083  |      |   |   | 964,492    |   |   |       | 3,722,050  |   |            |   | 38,128 |   |   |   | 27,697 |   |
| Construction                        |   |       | 2,186,620  |   |      |   | 2,186,620  |      |   |   | 1,212,129  |   |   |       | 2,160,400  |   |            |   | 0 |   |   |   | 0 |   |
| Consumer:                           |   |       |       |   |      |   |       |      |   |   |       |   |   |       |       |   |            |   |   |   |   |   |   |   |
| Lines of credit                     |   |       | 188,005    |   |      |   | 187,643    |      |   |   | 133,623    |   |   |       | 203,284    |   |            |   | 1,086 |   |   |   | 1,060 |   |
| Other                               |   |       | 45,648     |   |      |   | 45,524     |      |   |   | 38,748     |   |   |       | 46,081     |   |            |   | 367 |   |   |   | 367 |   |
| Credit card                         |   |       | 4,916      |   |      |   | 4,916      |      |   |   | 4,916      |   |   |       | 3,630      |   |            |   | 0 |   |   |   | 0 |   |
| Residential                         |   |       | 689,704    |   |      |   | 700,076    |      |   |   | 143,186    |   |   |       | 550,782    |   |            |   | 1,037 |   |   |   | 1,037 |   |
| Subtotal                            |   | $          | 7,951,026  |   |      | $      | 7,943,595  |      |   | $      | 2,636,188  |   |   | $          | 7,282,090  |   |            | $      | 47,782 |   |   | $ | 37,015 |   |
| Total                               |   | $          | 14,795,738 |   |      | $      | 14,786,853 |      |   | $      | 2,636,188  |   |   | $          | 14,268,627 |   |            | $      | 73,064 |   |   | $ | 61,031 |   |

----

| 4. | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued): |
|----|-----------------------------------------------------------|

|                                |   |       |       |   | Unpaid    |   |       |      |   |
|-------------------------------------|--------|------------|------------|--------|-----------|--------|------------|-----------|--------|
|                                |   | Recorded   |       |   | Principal |   |       | Related   |   |
| December 31, 2010                   |   | Investment |       |   | Balance   |   |       | Allowance |   |
| With no related allowance recorded: |   |       |       |   |      |   |       |      |   |
| Commercial                          |   | $          | 3,692,148  |   |      | $      | 3,689,868  |      |   | $ | 0 |   |
| Commercial Real Estate:             |   |       |       |   |      |   |       |      |   |   |   |   |
| General                             |   |       | 2,684,164  |   |      |   | 2,681,391  |      |   |   | 0 |   |
| Construction                        |   |       | 664,866    |   |      |   | 664,866    |      |   |   | 0 |   |
| Consumer:                           |   |       |       |   |      |   |       |      |   |   |   |   |
| Lines of credit                     |   |       | 108,274    |   |      |   | 108,274    |      |   |   | 0 |   |
| Other                               |   |       | 18,900     |   |      |   | 18,900     |      |   |   | 0 |   |
| Residential                         |   |       | 848,983    |   |      |   | 849,457    |      |   |   | 0 |   |
| Subtotal                            |   | $          | 8,017,335  |   |      | $      | 8,012,756  |      |   | $ | 0 |   |
|                                |   |       |       |   |      |   |       |      |   |   |   |   |
| With an allowance recorded:         |   |       |       |   |      |   |       |      |   |   |   |   |
| Commercial                          |   | $          | 584,702    |   |      | $      | 582,331    |      |   | $ | 195,684 |   |
| Commercial Real Estate:             |   |       |       |   |      |   |       |      |   |   |   |   |
| General                             |   |       | 3,088,254  |   |      |   | 3,078,481  |      |   |   | 575,175 |   |
| Construction                        |   |       | 1,967,857  |   |      |   | 1,967,857  |      |   |   | 1,214,761 |   |
| Consumer:                           |   |       |       |   |      |   |       |      |   |   |   |   |
| Lines of credit                     |   |       | 131,515    |   |      |   | 131,149    |      |   |   | 42,799 |   |
| Other                               |   |       | 45,829     |   |      |   | 45,696     |      |   |   | 39,645 |   |
| Credit card                         |   |       | 2,789      |   |      |   | 2,789      |      |   |   | 2,789 |   |
| Residential                         |   |       | 490,758    |   |      |   | 490,385    |      |   |   | 49,145 |   |
| Subtotal                            |   | $          | 6,311,704  |   |      | $      | 6,298,688  |      |   | $ | 2,119,998 |   |
| Total                               |   | $          | 14,329,039 |   |      | $      | 14,311,444 |      |   | $ | 2,119,998 |   |

----

| 4. | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued): |
|----|-----------------------------------------------------------|

|                    |   | March 31, 2011 |      |   | December 31, 2010 |   |
|-------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                    |   |           |      |   | Recorded          |   |   |   |   |   | Recorded |   |
|                    |   |           |      |   | Investment >   |   |   |   |   |   | Investment > |   |
|                    |   |           |      |   | 90 Days and       |   |   |   |   |   | 90 Days and |   |
|                    |   | Non Accrual    |      |   | Accruing          |   |   | Non Accrual |   |   | Accruing |   |
| Commercial              |   | $              | 1,708,032 |   |              | $      | 0 |   |   | $ | 1,316,168 |   |   | $ | 0 |   |
| Commercial Real Estate: |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| General                 |   |           | 2,755,448 |   |              |   | 0 |   |   |   | 3,143,819 |   |   |   | 0 |   |
| Construction            |   |           | 2,644,621 |   |              |   | 0 |   |   |   | 2,632,723 |   |   |   | 0 |   |
| Consumer:               |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Lines of credit         |   |           | 213,453   |   |              |   | 0 |   |   |   | 214,489 |   |   |   | 0 |   |
| Other                   |   |           | 437       |   |              |   | 0 |   |   |   | 0 |   |   |   | 1,776 |   |
| Credit card             |   |           | 0         |   |              |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
| Residential             |   |           | 614,461   |   |              |   | 0 |   |   |   | 748,166 |   |   |   | 0 |   |
| Total                   |   | $              | 7,936,452 |   |              | $      | 0 |   |   | $ | 8,055,365 |   |   | $ | 1,776 |   |

----

| 4. | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued): |
|----|-----------------------------------------------------------|

|                    |   |            |      |   |            |   |    | Greater Than 90 |   |            |           |   |   |    |      |   |           |   |
|-------------------------|--------|-----------------|-----------|--------|-----------------|--------|---------|-----------------|--------|-----------------|----------------|--------|--------|---------|-----------|--------|----------------|--------|
|                    |   | 30-59 Days Past |      |   | 60-89 Days Past |   |    | Days and Non    |   |            |           |   |   |    |      |   | Total Recorded |   |
| March 31, 2011          |   | Due             |      |   | Due             |   |    | Accrual         |   |            | Total Past Due |   |   | Current |      |   | Investment     |   |
| Commercial              |   | $               | 297,113   |   |            | $      | 121,284 |            |   | $               | 1,708,032      |   |   | $       | 2,126,429 |   |           | $      | 56,630,541 |   |   | $ | 58,756,970 |   |
| Commercial Real Estate: |   |            |      |   |            |   |    |            |   |            |           |   |   |    |      |   |           |   |   |   |   |   |   |   |
| General                 |   |            | 661,882   |   |            |   | 326,585 |            |   |            | 2,755,448      |   |   |    | 3,743,915 |   |           |   | 53,149,339 |   |   |   | 56,893,254 |   |
| Construction            |   |            | 0         |   |            |   | 0       |            |   |            | 2,644,621      |   |   |    | 2,644,621 |   |           |   | 6,739,520 |   |   |   | 9,384,141 |   |
| Consumer:               |   |            |      |   |            |   |    |            |   |            |           |   |   |    |      |   |           |   |   |   |   |   |   |   |
| Lines of credit         |   |            | 21,831    |   |            |   | 0       |            |   |            | 213,453        |   |   |    | 235,284   |   |           |   | 15,428,074 |   |   |   | 15,663,358 |   |
| Other                   |   |            | 893       |   |            |   | 0       |            |   |            | 437            |   |   |    | 1,330     |   |           |   | 2,792,553 |   |   |   | 2,793,883 |   |
| Credit card             |   |            | 0         |   |            |   | 1,630   |            |   |            | 0              |   |   |    | 1,630     |   |           |   | 508,590 |   |   |   | 510,220 |   |
| Residential             |   |            | 451,729   |   |            |   | 0       |            |   |            | 614,461        |   |   |    | 1,066,190 |   |           |   | 17,710,195 |   |   |   | 18,776,385 |   |
| Total                   |   | $               | 1,433,448 |   |            | $      | 449,499 |            |   | $               | 7,936,452      |   |   | $       | 9,819,399 |   |           | $      | 152,958,812 |   |   | $ | 162,778,211 |   |
|                    |   |            |      |   |            |   |    |            |   |            |           |   |   |    |      |   |           |   |   |   |   |   |   |   |
|                    |   |            |      |   |            |   |    |            |   |            |           |   |   |    |      |   |           |   |   |   |   |   |   |   |
|                    |   |            |      |   |            |   |    |            |   | Greater Than 90 |           |   |   |    |      |   |           |   |   |   |   |   |   |
|                    |   | 30-59 Days Past |      |   | 60-89 Days Past |   |    | Days and Non    |   |            |           |   |   |    |      |   |           |   | Total Recorded |   |
| December 31, 2010       |   | Due             |      |   | Due             |   |    | Accrual         |   |            | Total Past Due |   |   | Current |      |   | Investment     |   |
| Commercial              |   | $               | 627,034   |   |            | $      | 0       |            |   | $               | 1,316,168      |   |   | $       | 1,943,202 |   |           | $      | 56,659,779 |   |   | $ | 58,602,981 |   |
| Commercial Real Estate: |   |            |      |   |            |   |    |            |   |            |           |   |   |    |      |   |           |   |   |   |   |   |   |   |
| General                 |   |            | 157,637   |   |            |   | 217,803 |            |   |            | 3,143,819      |   |   |    | 3,519,259 |   |           |   | 55,802,388 |   |   |   | 59,321,647 |   |
| Construction            |   |            | 0         |   |            |   | 0       |            |   |            | 2,632,723      |   |   |    | 2,632,723 |   |           |   | 6,175,459 |   |   |   | 8,808,182 |   |
| Consumer:               |   |            |      |   |            |   |    |            |   |            |           |   |   |    |      |   |           |   |   |   |   |   |   |   |
| Lines of credit         |   |            | 79,191    |   |            |   | 35,460  |            |   |            | 214,489        |   |   |    | 329,140   |   |           |   | 15,619,003 |   |   |   | 15,948,143 |   |
| Other                   |   |            | 12,054    |   |            |   | 0       |            |   |            | 1,776          |   |   |    | 13,830    |   |           |   | 2,921,580 |   |   |   | 2,935,410 |   |
| Credit card             |   |            | 0         |   |            |   | 0       |            |   |            | 0              |   |   |    | 0         |   |           |   | 520,095 |   |   |   | 520,095 |   |
| Residential             |   |            | 94,404    |   |            |   | 0       |            |   |            | 748,166        |   |   |    | 842,570   |   |           |   | 19,005,842 |   |   |   | 19,848,412 |   |
| Total                   |   | $               | 970,320   |   |            | $      | 253,263 |            |   | $               | 8,057,141      |   |   | $       | 9,280,724 |   |           | $      | 156,704,146 |   |   | $ | 165,984,870 |   |

----

| 4. | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued): |
|----|-----------------------------------------------------------|

| 1.   | Exceptional. Loans with an exceptional credit rating. |
|----------------|-------------------------------------------------------|

| 2.   | Quality. Loans with excellent sources of repayment that conform, in all respects, to Bank policy and regulatory requirements. These are loans for which little repayment risk has been identified |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Above Average. Loans with above average sources of repayment and minimal identified credit or collateral exceptions and minimal repayment risk. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Average. Loans with average sources of repayment that materially conform to Bank policy and regulatory requirements. Repayment risk is considered average. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Acceptable. Loans with acceptable sources of repayment and risk. |
|----------------|------------------------------------------------------------------|

| 5W.   | Watch. Loans considered to be below average quality. The loans are often fundamentally sound but require more frequent management review because of an adverse financial event. Risk of non payment is elevated. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | Special Mention. Loans that have potential weaknesses and deserve close attention. If uncorrected, further deterioration is likely. Risk of non payment is above average. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | Substandard. Loans that are inadequately protected by the borrower’s capacity to pay or the collateral pledged. Risk of non payment is high. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | Doubtful. Loans in this grade have identified weaknesses that make full repayment highly questionable and improbable. |
|----------------|-----------------------------------------------------------------------------------------------------------------------|

----

| 4.  | ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued): |
|----------|-----------------------------------------------------------|

|   |   |       |       |   | Commercial Real Estate |   |       | Commercial Real Estate |   |
|--------|--------|------------|------------|--------|------------------------|--------|------------|------------------------|--------|
|   |   | Commercial |       |   | General                |   |       | Construction           |   |
|   |   | March 31,  |       |   | December 31,           |   |       | March 31,              |   |   | December 31, |   |   | March 31, |   |   | December 31, |   |
|   |   | 2011       |       |   | 2010                   |   |       | 2011                   |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| 1      |   | $          | 0          |   |                   | $      | 0          |                   |   | $ | 0 |   |   | $ | 0 |   |   | $ | 0 |   |   | $ | 0 |   |
| 2      |   |       | 582,361    |   |                   |   | 583,364    |                   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
| 3      |   |       | 1,714,115  |   |                   |   | 1,722,896  |                   |   |   | 3,398,840 |   |   |   | 3,443,220 |   |   |   | 30,289 |   |   |   | 30,927 |   |
| 4      |   |       | 20,363,874 |   |                   |   | 21,109,601 |                   |   |   | 17,297,781 |   |   |   | 17,362,231 |   |   |   | 3,110,369 |   |   |   | 2,727,615 |   |
| 5      |   |       | 23,033,370 |   |                   |   | 19,659,157 |                   |   |   | 21,158,122 |   |   |   | 24,656,543 |   |   |   | 3,558,961 |   |   |   | 1,702,025 |   |
| 5W     |   |       | 1,003,591  |   |                   |   | 1,687,613  |                   |   |   | 5,025,745 |   |   |   | 4,399,618 |   |   |   | 0 |   |   |   | 1,484,710 |   |
| 6      |   |       | 6,679,840  |   |                   |   | 9,349,408  |                   |   |   | 5,423,268 |   |   |   | 4,777,202 |   |   |   | 0 |   |   |   | 190,333 |   |
| 7      |   |       | 3,923,874  |   |                   |   | 3,292,002  |                   |   |   | 2,930,112 |   |   |   | 2,328,376 |   |   |   | 39,901 |   |   |   | 39,849 |   |
| 8      |   |       | 1,455,945  |   |                   |   | 1,198,940  |                   |   |   | 1,659,386 |   |   |   | 2,354,457 |   |   |   | 2,644,621 |   |   |   | 2,632,723 |   |
| Total  |   | $          | 58,756,970 |   |                   | $      | 58,602,981 |                   |   | $ | 56,893,254 |   |   | $ | 59,321,647 |   |   | $ | 9,384,141 |   |   | $ | 8,808,182 |   |

|       |   | Residential |       |
|------------|--------|-------------|------------|
|       |   | March 31,   |       |   | December 31, |   |
|       |   | 2011        |       |   | 2010 |   |
| Performing |   | $           | 17,892,830 |   |   | $ | 18,508,671 |   |
| Impaired   |   |        | 883,555    |   |   |   | 1,339,741 |   |
| Total      |   | $           | 18,776,385 |   |   | $ | 19,848,412 |   |

|       |   | Consumer – Lines of credit |       |   | Consumer – Other |   |       | Consumer – Credit card |   |
|------------|--------|----------------------------------|------------|--------|------------------------|--------|------------|------------------------------|--------|
|       |   | March 31,                        |       |   | December 31,           |   |       | March 31,                    |   |   | December 31, |   |   | March 31, |   |   | December 31, |   |
|       |   | 2011                             |       |   | 2010                   |   |       | 2011                         |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Performing |   | $                                | 15,394,847 |   |                   | $      | 15,708,354 |                         |   | $ | 2,729,335 |   |   | $ | 2,870,681 |   |   | $ | 505,304 |   |   | $ | 517,306 |   |
| Impaired   |   |                             | 268,511    |   |                   |   | 239,789    |                         |   |   | 64,548 |   |   |   | 64,729 |   |   |   | 4,916 |   |   |   | 2,789 |   |
| Total      |   | $                                | 15,663,358 |   |                   | $      | 15,948,143 |                         |   | $ | 2,793,883 |   |   | $ | 2,935,410 |   |   | $ | 510,220 |   |   | $ | 520,095 |   |

----

| 5. | FORECLOSED ASSETS |
|----|-------------------|

|                                           |   | March 31, |      |   | March 31, |   |
|------------------------------------------------|--------|-----------|-----------|--------|-----------|--------|
|                                           |   | 2011      |      |   | 2010      |   |
| Beginning of year                              |   | $         | 3,382,594 |   |      | $      | 6,440,916 |   |
| Additions                                      |   |      | 687,717   |   |      |   | 544,364 |   |
| Proceeds from sales                            |   |      | (28,650   | )      |      |   | (124,123 | ) |
| Losses from sales                              |   |      | (799      | )      |      |   | (8,689 | ) |
| Direct write-downs                             |   |      | (167,866  | )      |      |   | (24,655 | ) |
| End of period                                  |   | $         | 3,872,996 |   |      | $      | 6,827,813 |   |
|                                           |   |      |      |   |      |   |   |   |
| Expenses related to foreclosed assets include: |   |      |      |   |      |   |   |   |
| Operating expenses, net of rental income       |   | $         | 50,041    |   |      | $      | 17,769 |   |

| 6.  | PREMISES AND EQUIPMENT |
|----------|------------------------|

|                                      |   | March 31, |       |   | December 31, |   |
|-------------------------------------------|--------|-----------|------------|--------|--------------|--------|
|                                      |   | 2011      |       |   | 2010         |   |
| Land & land improvements              |   | $         | 5,447,328  |   |         | $      | 5,447,328 |   |
| Buildings & building improvements     |   |      | 6,132,163  |   |         |   | 6,132,163 |   |
| Furniture, fixtures and equipment         |   |      | 3,652,390  |   |         |   | 3,652,390 |   |
| Construction in process                   |   |      | 17,618     |   |         |   | 17,618 |   |
|                                      |   |      | 15,249,499 |   |         |   | 15,249,499 |   |
| Less:  accumulated depreciation |   |      | 4,509,279  |   |         |   | 4,375,323 |   |
|                                      |   | $         | 10,740,220 |   |         | $      | 10,874,176 |   |

| 7. | DEPOSITS |
|----|----------|

|                     |   | March 31, |        |   | December 31, |   |
|--------------------------|--------|-----------|-------------|--------|--------------|--------|
|                     |   | 2011      |        |   | 2010         |   |
| Non-interest-bearing DDA |   | $         | 42,093,347  |   |         | $      | 33,326,683 |   |
| Interest-bearing DDA     |   |      | 22,805,784  |   |         |   | 23,944,608 |   |
| Money market             |   |      | 19,494,064  |   |         |   | 18,493,059 |   |
| Savings                  |   |      | 9,926,111   |   |         |   | 7,388,395 |   |
| Time, under $100,000     |   |      | 77,403,173  |   |         |   | 78,893,224 |   |
| Time, over $100,000      |   |      | 51,711,961  |   |         |   | 57,217,208 |   |
| Total Deposits           |   | $         | 223,434,440 |   |         | $      | 219,263,177 |   |

----

| 7. | DEPOSITS (Continued): |
|----|-----------------------|

| Due in 3 months or less  | $7,884,000  |
|--------------------------|-------------|
| Due in 3-12 months       | $22,508,000 |
| Due in one or more years | $3,462,000  |

| 8. | SHORT-TERM BORROWINGS |
|----|-----------------------|

|                                    |   | Repurchase |       |   | Discount |   |
|-----------------------------------------|--------|------------|------------|--------|----------|--------|
|                                    |   | Agreements |       |   | Window   |   |
|                                    |   |       |       |   |     |   |
| Outstanding at March 31, 2011           |   | $          | 8,407,631  |   |     | $      | 0 |   |
| Average interest rate at period end     |   |       | 0.75       | %      |     |   | 0.00 |   |
| Average balance during period           |   |       | 7,033,456  |   |     |   | 0 |   |
| Average interest rate during period     |   |       | 0.65       | %      |     |   | 0.00 |   |
| Maximum month end balance during period |   |       | 8,407,631  |   |     |   | 0 |   |
|                                    |   |       |       |   |     |   |   |   |
| Outstanding at December 31, 2010        |   | $          | 7,460,795  |   |     | $      | 0 |   |
| Average interest rate at year-end       |   |       | 0.72       | %      |     |   | 0.00 |   |
| Average balance during year             |   |       | 8,598,005  |   |     |   | 315,425 |   |
| Average interest rate during year       |   |       | 0.86       | %      |     |   | 0.50 |   |
| Maximum month end balance during year   |   |       | 10,132,049 |   |     |   | 0 |   |

| 9. | FEDERAL HOME LOAN BANK BORROWINGS: |
|----|------------------------------------|

----

| 10. | SUBORDINATED DEBENTURES |
|-----|-------------------------|

| 11. | NOTES PAYABLE |
|-----|---------------|

----

| 12. | COMMITMENTS AND OFF-BALANCE SHEET RISK |
|-----|----------------------------------------|

|                                               |   | March 31, 2011 |       |   | December 31, 2010 |   |
|----------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|
|                                               |   |           |       |   |              |   |
|  Unused lines of credit and letters of credit |   | $              | 28,040,262 |   |              | $      | 26,119,226 |   |
|  Commitments to make loans                    |   |           | 100,440    |   |              |   | 95,470 |   |

| 13.  | FAIR VALUE MEASUREMENTS |
|-----------|-------------------------|

----

| 13. | FAIR VALUE MEASUREMENTS (Continued) |
|-----|-------------------------------------|

----

| 13. | FAIR VALUE MEASUREMENTS (Continued) |
|-----|-------------------------------------|

|                           |   |   |       |   | Fair Value Measurements Using |   |
|--------------------------------|--------|--------|------------|--------|-------------------------------|--------|
|                           |   |   |       |   | Quoted Prices                 |   |   | Significant |   |   |   |   |
|                           |   |   |       |   | in Active                     |   |   | Other |   |   | Significant |   |
|                           |   |   |       |   | Markets for                   |   |   | Observable |   |   | Unobservable |   |
|                           |   |   |       |   | Identical Assets              |   |   | Inputs |   |   | Inputs |   |
| March 31, 2011                 |   | Total  |       |   | (Level 1)                     |   |   | (Level 2) |   |   | (Level 3) |   |
| Available for sale securities: |   |   |       |   |                          |   |   |   |   |   |   |   |
| US Treasury                    |   | $      | 4,039,531  |   |                          | $      | 4,039,531 |   |   | $ | 0 |   |   | $ | 0 |   |
| US Government and              |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| federal agency                 |   |   | 13,827,113 |   |                          |   | 0 |   |   |   | 13,827,113 |   |   |   | 0 |   |
| Municipal securities           |   |   | 3,244,195  |   |                          |   | 0 |   |   |   | 3,244,195 |   |   |   | 0 |   |
| Mortgage-backed and            |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| collateralized mortgage        |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| obligations– residential |   |   | 14,472,228 |   |                          |   | 0 |   |   |   | 14,472,228 |   |   |   | 0 |   |
|                           |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Servicing assets               |   |   | 82,239     |   |                          |   | 0 |   |   |   | 82,239 |   |   |   | 0 |   |
|                           |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
|                           |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010              |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities: |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| US Treasury                    |   | $      | 1,011,094  |   |                          | $      | 1,011,094 |   |   | $ | 0 |   |   | $ | 0 |   |
| US Government and              |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| federal agency                 |   |   | 16,908,716 |   |                          |   | 1,000,000 |   |   |   | 15,908,716 |   |   |   | 0 |   |
| Municipal securities           |   |   | 3,238,294  |   |                          |   | 0 |   |   |   | 3,238,294 |   |   |   | 0 |   |
| Mortgage-backed and            |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| collateralized mortgage        |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| obligations– residential |   |   | 15,345,799 |   |                          |   | 0 |   |   |   | 15,345,799 |   |   |   | 0 |   |
|                           |   |   |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Servicing assets               |   |   | 38,858     |   |                          |   | 0 |   |   |   | 38,858 |   |   |   | 0 |   |

----

| 13. | FAIR VALUE MEASUREMENTS (Continued) |
|-----|-------------------------------------|

|                    |   |   |      |   |         |   |
|-------------------------|--------|--------|-----------|--------|--------------|--------|
|                    |   |   |      |   | Significant  |   |
|                    |   |   |      |   | Unobservable |   |
|                    |   |   |      |   | Inputs       |   |
|                    |   | Total  |      |   | (Level 3)    |   |
| March 31, 2011          |   |   |      |   |         |   |
| Impaired loans:         |   |   |      |   |         |   |
| Commercial              |   | $      | 374,639   |   |         | $      | 374,639 |   |
| Commercial Real Estate: |   |   |      |   |         |   |   |   |
| General                 |   |   | 3,340,591 |   |         |   | 3,340,591 |   |
| Construction            |   |   | 974,491   |   |         |   | 974,491 |   |
| Consumer:               |   |   |      |   |         |   |   |   |
| Lines of credit         |   |   | 54,020    |   |         |   | 54,020 |   |
| Other                   |   |   | 6,776     |   |         |   | 6,776 |   |
| Residential             |   |   | 556,890   |   |         |   | 556,890 |   |
| Foreclosed assets:      |   |   |      |   |         |   |   |   |
| Commercial Real Estate: |   |   |      |   |         |   |   |   |
| General                 |   |   | 1,548,792 |   |         |   | 1,548,792 |   |
| Construction            |   |   | 2,005,831 |   |         |   | 2,005,831 |   |
| Residential             |   |   | 187,456   |   |         |   | 187,456 |   |
|                    |   |   |      |   |         |   |   |   |
| December 31, 2010       |   |   |      |   |         |   |   |   |
| Impaired loans:         |   |   |      |   |         |   |   |   |
| Commercial              |   | $      | 386,647   |   |         | $      | 386,647 |   |
| Commercial Real Estate: |   |   |      |   |         |   |   |   |
| General                 |   |   | 2,503,306 |   |         |   | 2,503,306 |   |
| Construction            |   |   | 753,096   |   |         |   | 753,096 |   |
| Consumer:               |   |   |      |   |         |   |   |   |
| Lines of credit         |   |   | 88,350    |   |         |   | 88,350 |   |
| Other                   |   |   | 6,051     |   |         |   | 6,051 |   |
| Residential             |   |   | 441,240   |   |         |   | 441,240 |   |
| Foreclosed assets:      |   |   |      |   |         |   |   |   |
| Commercial Real Estate: |   |   |      |   |         |   |   |   |
| General                 |   |   | 1,061,170 |   |         |   | 1,061,170 |   |
| Construction            |   |   | 2,005,831 |   |         |   | 2,005,831 |   |
| Residential             |   |   | 163,786   |   |         |   | 163,786 |   |

----

| 13. | FAIR VALUE MEASUREMENTS (Continued) |
|-----|-------------------------------------|

|                            |   | March 31, |    |   | December 31,   |   |
|---------------------------------|--------|-----------|---------|--------|----------------|--------|
|                            |   | 2011      |    |   | 2010           |   |
|                            |   | Carrying  |    |   | Fair           |   |   | Carrying |   |   | Fair |   |
|                            |   | Amount    |    |   | Value          |   |   | Amount |   |   | Value |   |
|                            |   |      |    |   | (in thousands) |   |   |   |   |
| Financial assets                |   |      |    |   |           |   |   |   |   |   |   |   |
| Cash and cash equivalents       |   | $         | 30,460  |   |           | $      | 30,460 |   |   | $ | 23,640 |   |   | $ | 23,640 |   |
| Loans held for sale             |   |      | 3,012   |   |           |   | 3,019 |   |   |   | 1,263 |   |   |   | 1,273 |   |
| Loans, net (including impaired) |   |      | 156,862 |   |           |   | 149,038 |   |   |   | 160,452 |   |   |   | 154,484 |   |
| FHLB stock                      |   |      | 480     |   |           |   | N/A |   |   |   | 480 |   |   |   | N/A |   |
| Accrued interest receivable     |   |      | 709     |   |           |   | 709 |   |   |   | 781 |   |   |   | 781 |   |
|                            |   |      |    |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities           |   |      |    |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                        |   |      | 223,434 |   |           |   | 227,194 |   |   |   | 219,263 |   |   |   | 220,711 |   |
| Federal funds purchased and     |   |      |    |   |           |   |   |   |   |   |   |   |   |   |   |   |
| repurchase agreements           |   |      | 8,408   |   |           |   | 8,408 |   |   |   | 7,461 |   |   |   | 7,461 |   |
| Subordinated debentures         |   |      | 4,500   |   |           |   | 2,930 |   |   |   | 4,500 |   |   |   | 3,172 |   |
| Notes payable                   |   |      | 5,000   |   |           |   | 2,500 |   |   |   | 5,000 |   |   |   | 2,500 |   |
| Accrued interest payable        |   |      | 451     |   |           |   | 451 |   |   |   | 362 |   |   |   | 362 |   |

----

| 13. | FAIR VALUE MEASUREMENTS (Continued) |
|-----|-------------------------------------|

| 14. | INCOME TAXES |
|-----|--------------|

| 15. | REGULATORY MATTERS |
|-----|--------------------|

----

| 15.  | REGULATORY MATTERS (Continued) |
|-----------|--------------------------------|

|                                       |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |
|--------------------------------------------|--------|--------|------------|--------|-------------------|--------|--------|------------------|--------|--------|------------------|--------|--------|--------|--------|
|                                       |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |
|                                       |   |   |       |   |              |   |   | Minimum Required |   |   | Minimum Required |   |
|                                       |   |   |       |   |              |   |   | For Capital      |   |   | Under            |   |
|                                       |   | Actual |       |   | Adequacy Purposes |   |   | Consent Order    |   |
|                                       |   | Amount |       |   | Ratio             |   |   | Amount           |   |   | Ratio            |   |   | Amount |   |   | Ratio |   |
|                                       |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
| March 31, 2011                             |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
| Total Capital (Tier 1 and                  |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
| Tier 2) to risk-weighted                   |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
|     assets of the Bank |   | $      | 11,857,913 |   |              |   | 6.84   | %                |   | $      | 13,868,719       |   |   |   | 8.00   | % |   | $ | 19,069,489 |   |   |   | 11.00 | % |
| Tier 1 (Core) Capital                      |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     to risk-weighted   |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     assets of the Bank |   |   | 9,652,791  |   |              |   | 5.57   |             |   |   | 6,934,360        |   |   |   | 4.00   |   |   |   | N/A |   |   |   | N/A |   |
| Tier 1 (Core) Capital                      |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     to average assets  |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     of the Bank        |   |   | 9,652,791  |   |              |   | 4.03   |             |   |   | 9,582,876        |   |   |   | 4.00   |   |   |   | 20,363,611 |   |   |   | 8.50 |   |
|                                       |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                       |   |   |       |   |              |   |   | Minimum Required |   |   | Minimum Required |   |
|--------------------------------------------|--------|--------|------------|--------|-------------------|--------|--------|------------------|--------|--------|------------------|--------|
|                                       |   |   |       |   |              |   |   | For Capital      |   |   | Under            |   |
|                                       |   | Actual |       |   | Adequacy Purposes |   |   | Consent Order    |   |
|                                       |   | Amount |       |   | Ratio             |   |   | Amount           |   |   | Ratio            |   |   | Amount |   |   | Ratio |   |
|                                       |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
| December 31, 2010                          |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
| Total Capital (Tier 1 and                  |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
| Tier 2) to risk-weighted                   |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |
|     assets of the Bank |   | $      | 12,501,302 |   |              |   | 7.06   | %                |   | $      | 14,173,103       |   |   |   | 8.00 | % |   | $ | 19,488,017 |   |   |   | 11.00 | % |
| Tier 1 (Core) Capital                      |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     to risk-weighted   |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     assets of the Bank |   |   | 10,254,935 |   |              |   | 5.79   |             |   |   | 7,086,552        |   |   |   | 4.00 |   |   |   | N/A |   |   |   | N/A |   |
| Tier 1 (Core) Capital                      |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     to average assets  |   |   |       |   |              |   |   |             |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     of the Bank        |   |   | 10,254,935 |   |              |   | 4.25   |             |   |   | 9,646,274        |   |   |   | 4.00 |   |   |   | 20,498,333 |   |   |   | 8.50 |   |

----

| 15.  | REGULATORY MATTERS (Continued) |
|-----------|--------------------------------|

----

| 15. | REGULATORY MATTERS (Continued) |
|-----|--------------------------------|

----

| 16.  | OTHER COMPREHENSIVE INCOME |
|-----------|----------------------------|

|                                                           |   | Three Months   |   |   | Three Months   |   |
|----------------------------------------------------------------|--------|----------------|--------|--------|----------------|--------|
|                                                           |   | Ended          |   |   | Ended          |   |
|                                                           |   | March 31, 2011 |   |   | March 31, 2010 |   |
|                                                           |   |           |   |   |           |   |
| Unrealized holding gains on held to maturity securities        |   |           |   |   |           |   |
|     transferred to available for sale      |   | $              | 0      |   |           | $      | 28,192 |   |
| Unrealized holding gains on available for sale securities      |   |           | 30,380 |   |           |   | 61,215 |   |
| Less reclassification adjustments for (gains) and losses later |   |           |   |   |           |   |   |   |
|     recognized in income                   |   |           | (194   | )      |           |   | (79,814 | ) |
|                                                           |   |           |   |   |           |   |   |   |
| Net unrealized gain (loss)                                     |   |           | 30,186 |   |           |   | 9,593 |   |
| Tax effect                                                     |   |           | 0      |   |           |   | 0 |   |
|                                                           |   |           |   |   |           |   |   |   |
| Other comprehensive income (loss)                              |   | $              | 30,186 |   |           | $      | 9,593 |   |

----

| ITEM 2.   | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------------------|---------------------------------------------------------------------------------------------|

----

----

----

----

|                                           |   | March 31, 2011 |      |   | December 31, 2010 |   |
|------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                                           |   |           |      |   | Percent of        |   |   |   |   |   | Percent of |   |
|                                           |   |           |      |   | Loans in Each     |   |   |   |   |   | Loans in Each |   |
| Balance at End of Period                       |   |           |      |   | Category to       |   |   |   |   |   | Category to |   |
| Applicable to:                                 |   | Amount         |      |   | Total Loans       |   |   | Amount |   |   | Total Loans |   |
|     Commercial             |   | $              | 1,160,906 |   |              |   | 36.1 | % |   | $ | 1,218,865 |   |   |   | 35.3 | % |
|     Commercial Real Estate |   |           | 3,205,039 |   |              |   | 40.7 |   |   |   | 2,896,176 |   |   |   | 41.0 |   |
|     Consumer               |   |           | 631,316   |   |              |   | 11.7 |   |   |   | 546,603 |   |   |   | 11.9 |   |
|     Residential            |   |           | 258,607   |   |              |   | 11.5 |   |   |   | 130,263 |   |   |   | 11.8 |   |
| Total                                          |   | $              | 5,255,868 |   |              |   | 100 | % |   | $ | 4,791,907 |   |   |   | 100 | % |

----

|   | 1 Extension risk, as related to loans, exists when booking fixed rate loans with long final contractual maturities. When a customer is contractually allowed longer to return its borrowed principal and rates rise, the Bank is delayed from taking advantage of the opportunity to reinvest the returning principal at the higher market rate. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                |   | Within |       |   | Three to |   |       | One to |   |   | After      |   |   |   |       |
|-----------------------------------------------------|--------|--------|------------|--------|----------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|
|                                                |   | Three  |       |   | Twelve   |   |       | Five   |   |   | Five       |   |   |   |       |
|                                                |   | Months |       |   | Months   |   |       | Years  |   |   | Years      |   |   | Total  |       |
|                                                |   |   |       |   |     |   |       |   |   |   |       |   |   |   |       |
|     Commercial                  |   | $      | 9,441,051  |   |     | $      | 25,033,208 |   |   | $      | 20,691,125 |   |   | $      | 3,346,345  |   |   | $ | 58,511,729 |   |
|     Commercial Real Estate:     |   |   |       |   |     |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
|       General         |   |   | 7,143,509  |   |     |   | 8,826,441  |   |   |   | 37,866,962 |   |   |   | 2,766,194  |   |   |   | 56,603,106 |   |
|       Construction    |   |   | 1,344,288  |   |     |   | 4,168,388  |   |   |   | 3,797,399  |   |   |   | 49,299     |   |   |   | 9,359,374 |   |
|     Consumer:                   |   |   |       |   |     |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
|       Lines of credit |   |   | 348,048    |   |     |   | 1,673,123  |   |   |   | 6,848,682  |   |   |   | 6,718,124  |   |   |   | 15,587,977 |   |
|       Other           |   |   | 104,693    |   |     |   | 279,647    |   |   |   | 1,953,894  |   |   |   | 480,577    |   |   |   | 2,818,811 |   |
|       Credit card     |   |   | 57,450     |   |     |   | 178,373    |   |   |   | 274,397    |   |   |   | 0          |   |   |   | 510,220 |   |
|     Residential                 |   |   | 142,780    |   |     |   | 289,281    |   |   |   | 10,889     |   |   |   | 18,283,315 |   |   |   | 18,726,265 |   |
|                                                |   | $      | 18,581,819 |   |     | $      | 40,448,461 |   |   | $      | 71,443,348 |   |   | $      | 31,643,854 |   |   | $ | 162,117,482 |   |
| Loans at fixed rates                                |   | $      | 10,351,379 |   |     | $      | 24,866,600 |   |   | $      | 59,058,541 |   |   | $      | 22,571,630 |   |   | $ | 116,848,150 |   |
| Loans at variable rates                             |   |   | 8,230,440  |   |     |   | 15,581,861 |   |   |   | 12,384,807 |   |   |   | 9,072,224  |   |   |   | 45,269,332 |   |
|                                                |   | $      | 18,581,819 |   |     | $      | 40,448,461 |   |   | $      | 71,443,348 |   |   | $      | 31,643,854 |   |   | $ | 162,117,482 |   |

----

----

----

|                                                        |   | Three months ended March 31, |        |
|-------------------------------------------------------------|--------|------------------------------|-------------|
|                                                        |   | 2011                         |        |   | 2010 |   |
|                                                        |   | Average                      |        |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                                        |   | Balance                      |        |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| Assets                                                      |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold and interest-                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     bearing deposits with banks         |   | $                            | 22,922,886  |   |   | $ | 13,694 |   |   |   | 0.24 | % |   | $ | 9,096,118 |   |   | $ | 5,422 |   |   |   | 0.24 | % |
|     Securities                          |   |                         | 36,549,057  |   |   |   | 231,646 |   |   |   | 2.54 |   |   |   | 28,642,857 |   |   |   | 241,220 |   |   |   | 3.37 |   |
|     Loans (including held for sale      |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     and non accrual)                    |   |                         | 165,999,072 |   |   |   | 2,565,081 |   |   |   | 6.18 |   |   |   | 182,555,777 |   |   |   | 2,805,607 |   |   |   | 6.15 |   |
|                                                        |   |                         | 225,471,015 |   |   |   | 2,810,421 |   |   |   | 4.99 |   |   |   | 220,294,752 |   |   |   | 3,052,249 |   |   |   | 5.54 |   |
|     Other assets                        |   |                         | 14,126,330  |   |   |   |   |   |   |   |   |   |   |   | 20,629,566 |   |   |   |   |   |   |   |   |   |
|                                                        |   | $                            | 239,597,345 |   |   |   |   |   |   |   |   |   |   | $ | 240,924,318 |   |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders’ Equity                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Interest-bearing deposits           |   | $                            | 181,014,112 |   |   | $ | 811,595 |   |   |   | 1.79 | % |   | $ | 183,853,617 |   |   | $ | 1,107,977 |   |   |   | 2.41 | % |
|     Federal funds purchased, repur-     |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     chase agreements and Federal        |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Reserve Bank borrowings |   |                         | 7,033,456   |   |   |   | 11,502 |   |   |   | 0.65 |   |   |   | 8,452,582 |   |   |   | 20,571 |   |   |   | 0.97 |   |
|     Subordinated Debentures, notes      |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     payable and FHLB advances           |   |                         | 9,500,000   |   |   |   | 102,890 |   |   |   | 4.33 |   |   |   | 15,366,667 |   |   |   | 184,532 |   |   |   | 4.80 |   |
|                                                        |   |                         | 197,547,568 |   |   |   | 925,987 |   |   |   | 1.87 |   |   |   | 207,672,866 |   |   |   | 1,313,080 |   |   |   | 2.53 |   |
|     Non-interest-bearing deposits       |   |                         | 40,668,116  |   |   |   |   |   |   |   |   |   |   |   | 21,728,258 |   |   |   |   |   |   |   |   |   |
|     Other liabilities                   |   |                         | 598,751     |   |   |   |   |   |   |   |   |   |   |   | 699,350 |   |   |   |   |   |   |   |   |   |
|     Shareholders’ Equity          |   |                         | 782,910     |   |   |   |   |   |   |   |   |   |   |   | 10,823,844 |   |   |   |   |   |   |   |   |   |
|                                                        |   | $                            | 239,597,345 |   |   |   |   |   |   |   |   |   |   | $ | 240,924,318 |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent                         |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| basis)                                                      |   |                         |        |   |   |   | 1,884,434 |   |   |   |   |   |   |   |   |   |   |   | 1,739,169 |   |   |   |   |   |
| Net interest spread on earning assets                       |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (tax equivalent basis)                                      |   |                         |        |   |   |   |   |   |   |   | 3.12 | % |   |   |   |   |   |   |   |   |   |   | 3.01 | % |
| Net interest margin on earning                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets (tax equivalent basis)                               |   |                         |        |   |   |   |   |   |   |   | 3.34 | % |   |   |   |   |   |   |   |   |   |   | 3.16 | % |
| Average interest-earning assets to average interest-        |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| bearing liabilities                                         |   |                         |        |   |   |   |   |   |   |   | 114.14 | % |   |   |   |   |   |   |   |   |   |   | 106.08 | % |
| Tax equivalent adjustment                                   |   |                         |        |   |   |   | 13,732 |   |   |   |   |   |   |   |   |   |   |   | 27,748 |   |   |   |   |   |
| Net interest income                                         |   |                         |        |   |   | $ | 1,870,702 |   |   |   |   |   |   |   |   |   |   | $ | 1,711,421 |   |   |   |   |   |

----

----

|                                                                |   | Interest Rate Sensitivity Period |       |
|---------------------------------------------------------------------|--------|----------------------------------|------------|
|                                                                |   | Within                           |       |   | Three to |   |   | One to |   |   | After |   |   |   |   |
|                                                                |   | Three                            |       |   | Twelve |   |   | Five |   |   | Five |   |   |   |   |
|                                                                |   | Months                           |       |   | Months |   |   | Years |   |   | Years |   |   | Total |   |
| Earning assets                                                      |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
|     Interest-bearing deposits                   |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
|       in other financial institutions |   | $                                | 28,193,508 |   |   | $ | 0 |   |   | $ | 0 |   |   | $ | 0 |   |   | $ | 28,193,508 |   |
|     Securities (including FHLB stock)           |   |                             | 4,598,567  |   |   |   | 4,407,777 |   |   |   | 21,713,047 |   |   |   | 5,343,476 |   |   |   | 36,062,867 |   |
|     Loans held for sale                         |   |                             | 9,707      |   |   |   | 142,918 |   |   |   | 166,125 |   |   |   | 2,693,439 |   |   |   | 3,012,189 |   |
|     Loans                                       |   |                             | 63,810,555 |   |   |   | 24,005,836 |   |   |   | 56,389,452 |   |   |   | 17,911,639 |   |   |   | 162,117,482 |   |
|                                                                |   |                             | 96,612,337 |   |   |   | 28,556,531 |   |   |   | 78,268,624 |   |   |   | 25,948,554 |   |   |   | 229,386,046 |   |
| Interest-bearing liabilities                                        |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Savings and checking                        |   |                             | 52,225,959 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 52,225,959 |   |
|     Time deposits <$100,000                  |   |                             | 5,089,509  |   |   |   | 23,163,125 |   |   |   | 49,150,539 |   |   |   | 0 |   |   |   | 77,403,173 |   |
|     Time deposits >$100,000                  |   |                             | 12,774,441 |   |   |   | 33,031,493 |   |   |   | 5,906,027 |   |   |   | 0 |   |   |   | 51,711,961 |   |
|     Repurchase agreements and                   |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Federal funds purchased         |   |                             | 8,407,631  |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 8,407,631 |   |
|     Subordinated debt and Federal               |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Home Loan Bank advances         |   |                             | 9,500,000  |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 9,500,000 |   |
|                                                                |   |                             | 87,997,540 |   |   |   | 56,194,618 |   |   |   | 55,056,566 |   |   |   | 0 |   |   |   | 199,248,724 |   |
| Net asset (liability) repricing gap                                 |   | $                                | 8,614,797  |   |   | $ | (27,638,087 | ) |   | $ | 23,212,058 |   |   | $ | 25,948,554 |   |   | $ | 30,137,322 |   |
| Cumulative net asset (liability)                                    |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       repricing gap                   |   | $                                | 8,614,797  |   |   | $ | (19,023,290 | ) |   | $ | 4,188,768 |   |   | $ | 30,137,322 |   |   |   |   |   |

----

----

| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|---------|------------------------------------------------------------|

|  ITEM 4. | CONTROLS AND PROCEDURES |
|---------------|-------------------------|

| ITEM 1. | LEGAL PROCEEDINGS |
|---------|-------------------|

| ITEM 1A. | RISK FACTORS |
|----------|--------------|

| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|---------|-------------------------------------------------------------|

----

| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
|---------|---------------------------------|

| ITEM 4. | RESERVED |
|---------|----------|

| ITEM 5. | OTHER INFORMATION |
|---------|-------------------|

| ITEM 6. | EXHIBITS |
|---------|----------|

| EXHIBIT NO. | EXHIBIT DESCRIPTION                                                                                                                                  |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                 |
| 3.1         | Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Company’s June 30, 2004 Form 10-QSB (SEC file number 333-63769). |
|        |                                                                                                                                                 |
| 3.2         | Bylaws of the Company are incorporated by reference to exhibit 3(ii) of the Company’s Form 8-K filed July 5, 2006 (SEC file number 000-51166). |
|        |                                                                                                                                                 |
| 31.1        | Rule 13a-14(a) Certification of the principal executive officer.                                                                                     |
|        |                                                                                                                                                 |
| 31.2        | Rule 13a-14(a) Certification of the principal financial officer.                                                                                     |
|        |                                                                                                                                                 |
| 32.1        | Section 1350 Chief Executive Officer Certification.                                                                                                  |
|        |                                                                                                                                                 |
| 32.2        | Section 1350 Chief Financial Officer Certification.                                                                                                  |

----

SIGNATURES

----

| EXHIBIT NO. | EXHIBIT DESCRIPTION                                                                                                                                  |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                 |
| 3.1         | Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Company’s June 30, 2004 Form 10-QSB (SEC file number 333-63769). |
|        |                                                                                                                                                 |
| 3.2         | Bylaws of the Company are incorporated by reference to exhibit 3(ii) of the Company’s Form 8-K filed July 5, 2006 (SEC file number 000-51166). |
|        |                                                                                                                                                 |
| 31.1        | Rule 13a-14(a) Certification of the principal executive officer.                                                                                     |
|        |                                                                                                                                                 |
| 31.2        | Rule 13a-14(a) Certification of the principal financial officer.                                                                                     |
|        |                                                                                                                                                 |
| 32.1        | Section 1350 Chief Executive Officer Certification.                                                                                                  |
|        |                                                                                                                                                 |
| 32.2        | Section 1350 Chief Financial Officer Certification.                                                                                                  |

----