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| Virginia(State or other jurisdictionof incorporation or organization)     | 54-1796693(I.R.S. EmployerIdentification No.) |
|--------------------------------------------------------------------------------|-----------------------------------------------|
| 340 West Main StreetAbingdon, Virginia(Address of principal executive offices) |  24210-1128(Zip Code)                    |

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|     | Table of Contents                                                                                                                         |        |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------|-------------|
|     |                                                                                                                                      | Page Number |
| Part I   |                                                                                                                                      |        |
|     |                                                                                                                                      |        |
| Item 1.  | Business                                                                                                                                  | 2           |
| Item 1A. | Risk Factors                                                                                                                              | 18          |
| Item 1B. | Unresolved Staff Comments                                                                                                                 | 18          |
| Item 2.  | Properties                                                                                                                                | 18          |
| Item 3.  | Legal Proceedings                                                                                                                         | 19          |
| Item 4.  | Reserved                                                                                                                                  | 19          |
|     |                                                                                                                                      |        |
|     |                                                                                                                                      |        |
| Part II  |                                                                                                                                      |        |
|     |                                                                                                                                      |        |
| Item 5.  | Market for Registrant’s Common Equity, Related Stockholder    Matters and Issuer Purchases of Equity Securities | 19          |
| Item 6.  | Selected Financial Data                                                                                                                   | 20          |
| Item 7.  | Management’s Discussion and Analysis of Financial Condition  and Results of Operations                                    | 20          |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                                                | 41          |
| Item 8.  | Financial Statements and Supplementary Data                                                                                               | 41          |
| Item 9A  | Changes in and Disagreements with Accountants on  Accounting and Financial Disclosure                                           | 41          |
| Item 9A  | Controls and Procedures                                                                                                                   | 41          |
| Item 9B. | Other Information                                                                                                                         | 42          |
|     |                                                                                                                                      |        |
|     |                                                                                                                                      |        |
| Part III |                                                                                                                                      |        |
|     |                                                                                                                                      |        |
| Item 10. | Directors, Executive Officers and Corporate Governance                                                                                    | 42          |
| Item 11. | Executive Compensation                                                                                                                    | 42          |
| Item 12. | Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters                                             | 42          |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence                                                                 | 43          |
| Item 14. | Principal Accounting Fees and Services                                                                                                    | 43          |
|     |                                                                                                                                      |        |
|     |                                                                                                                                      |        |
| Part IV  |                                                                                                                                      |        |
|     |                                                                                                                                      |        |
| Item 15. | Exhibits, Financial Statement Schedules                                                                                                   | 43          |
|     |                                                                                                                                      |        |
|     |                                                                                                                                      |        |

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| Period            | Class of Service           | Percentage of Total Revenues                                  |
|-------------------|----------------------------|---------------------------------------------------------------|
|              |                       |                                                          |
| December 31, 2010 | Interest and Fees on Loans |           83.70% |
| December 31, 2009 | Interest and Fees on Loans |          87.94%       |

| ·   | all of Washington County, Virginia |
|--------------------|------------------------------------|

| ·   | portions of Smyth County, Virginia |
|--------------------|------------------------------------|

| ·   | the City of Bristol, Virginia |
|--------------------|-------------------------------|

| ·   | the City of Bristol, Tennessee and adjacent portions of Sullivan County, Tennessee |
|--------------------|------------------------------------------------------------------------------------|

| ·   | the Town of Rogersville, Tennessee and adjacent portions of Hawkins County,  Tennessee |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | the City of Sevierville, Tennessee and adjacent portions of Sevier County, Tennessee, |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | the City of Knoxville, Tennessee and adjacent portions of Knox County, Tennessee |
|--------------------|----------------------------------------------------------------------------------|

| ·   | the Town of Banner Elk and adjacent portions of Avery County, North Carolina |
|--------------------|------------------------------------------------------------------------------|

| ·   | the Town of Boone and adjacent portions of Watauga County, North Carolina |
|--------------------|---------------------------------------------------------------------------|

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| 1.   | Audited comparative annual financial statements. |
|----------------|--------------------------------------------------|

| 2.   | The independent public accountant’s report on the audited financial statements. |
|----------------|---------------------------------------------------------------------------------------|

| 3.   | A management report that contains a statement of management’s responsibilities for preparing the financial statement, establishing and maintaining an adequate internal control structure over financial reporting and complying with the laws and regulations designed by the FDIC and appropriate banking regulators. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | An assessment by management of the institutions compliance with the designated laws and regulations during the year. |
|----------------|----------------------------------------------------------------------------------------------------------------------|

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| ·   | the Total Capital ratio, which includes Tier 1 Capital and Tier 2 Capital; |
|--------------------|----------------------------------------------------------------------------|

| ·   | the Tier 1 Capital ratio; and |
|--------------------|-------------------------------|

| ·   | the leverage ratio. |
|--------------------|---------------------|

| ·   | “well capitalized” if it has a Total Capital ratio of 10% or greater, a Tier 1 Capital ratio of 6% or greater, and a leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | “adequately capitalized” if it has a Total Capital ratio of 8% or greater, a Tier 1 Capital ratio of 4% or greater, and a leverage ratio of 4% or greater – or 3% in certain circumstances – and is not well capitalized; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | “undercapitalized” if it has a Total Capital ratio of less than 8%, a Tier 1 Capital ratio of less than 4% - or 3% in certain circumstances; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | “significantly undercapitalized” if it has a Total Capital ratio of less than 6%, a Tier 1 Capital ratio of less than 3%, or a leverage ratio of less than 3%; or |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | “critically undercapitalized” if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | strengthen board oversight of the management and operations of the Bank; |
|--------------------|--------------------------------------------------------------------------|

| ·   | strengthen credit risk management and administration; |
|--------------------|-------------------------------------------------------|

| ·   | provide for the effective grading of the Bank’s loan portfolio; |
|--------------------|-----------------------------------------------------------------------|

| ·   | summarize the findings of its review of the adequacy of the staffing of its loan review function; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | improve the Bank’s position with respect to loans, relationships, or other assets in excess of $500,000 that currently are or in the future become past due more than 90 days, on the Bank’s problem loan list, or adversely classified in any report of examination of the Bank; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | review and revise the Bank’s methodology for determining the allowance for loan and lease losses (“ALLL”) and maintain an adequate ALLL; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | maintain sufficient capital at the Company and the Bank; |
|--------------------|----------------------------------------------------------|

| ·   | establish a revised written contingency funding plan; |
|--------------------|-------------------------------------------------------|

| ·   | establish a revised investment policy; |
|--------------------|----------------------------------------|

| ·   | improve the Bank’s earnings and overall condition; |
|--------------------|----------------------------------------------------------|

| ·   | revise the Bank’s information technology program; and |
|--------------------|-------------------------------------------------------------|

| ·   | establish a disaster recovery and business continuity program. |
|--------------------|----------------------------------------------------------------|

| ·   | establish a committee to monitor compliance with all aspects of the written agreement. |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | A new board oversight policy has been approved and implemented |
|--------------------|----------------------------------------------------------------|

| ·   | Completed revising the Bank’s loan grading system and ALLLR methodology |
|--------------------|-------------------------------------------------------------------------------|

| ·   | Implemented Problem Loan Action reports and Problem Asset reports for all assets over $500,000. These are reviewed with the Board and forwarded to the Federal Reserve Bank on a quarterly basis |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Completed revising the written contingency funding plan |
|--------------------|---------------------------------------------------------|

| ·   | Completed revising the investment policy |
|--------------------|------------------------------------------|

| ·   | Completed a three year capital plan targeted to improve the Company’s and Bank’s capital levels to include strategically reducing the risk weighted assets of the Company and improvement in earnings. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Completed a Business Continuity Plan and Disaster Recovery Plan |
|--------------------|-----------------------------------------------------------------|

| ·   | Formed a Directors’ compliance committee to monitor the progress of each item in the written agreement. The committee meets at least quarterly and files a report with the Federal Reserve Bank |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Common Stock Performance – 2010 |   |
|---------------------------------------|--------|
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | High |   |   | Low |   |   | Quarterly Average |   |   | Dividends per Share |   |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter                         |   | $ | 10.00 |   |   | $ | 5.05 |   |   | $ | 8.00 |   |   | $ | - |   |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Second Quarter                        |   | $ | 9.00 |   |   | $ | 3.25 |   |   | $ | 4.13 |   |   | $ | - |   |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Third Quarter                         |   | $ | 8.00 |   |   | $ | 3.50 |   |   | $ | 6.69 |   |   | $ | - |   |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fourth Quarter                        |   | $ | 7.50 |   |   | $ | 3.25 |   |   | $ | 5.59 |   |   | $ | - |   |

----

| Common Stock Performance – 2009 |   |
|---------------------------------------|--------|
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | High |   |   | Low |   |   | Quarterly Average |   |   | Dividends per Share |   |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter                         |   | $ | 14.00 |   |   | $ | 9.10 |   |   | $ | 11.30 |   |   | $ | - |   |

| Second Quarter |   | $      | 9.34   |   |   | $      | 9.00   |   |   | $      | 9.19   |   |   | $      | -      |   |
|----------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Third Quarter  |   | $      | 14.00  |   |   | $      | 8.89   |   |   | $      | 11.81  |   |   | $      | .11    |   |
|           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fourth Quarter |   | $      | 13.00  |   |   | $      | 9.00   |   |   | $      | 11.96  |   |   | $      | -      |   |

| ·   | Our inability to comply with the Written agreement dated October 13, 2010 |
|--------------------|---------------------------------------------------------------------------|

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| ·   | Our inability to comply with certain covenants of the Company’s Loans with Community Bankers Bank; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | Continued problems related to the national credit crisis and deepening recession; |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Unemployment continuing to rise; |
|--------------------|----------------------------------|

| ·   | The ability to attract and maintain capital levels adequate to support the Company’s asset levels; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | Difficult market conditions in our industry; |
|--------------------|----------------------------------------------|

| ·   | Unprecedented levels of market volatility; |
|--------------------|--------------------------------------------|

| ·   | Effects of the soundness of other financial institutions; |
|--------------------|-----------------------------------------------------------|

| ·   | Potential impact on us of recently enacted legislation; |
|--------------------|---------------------------------------------------------|

| ·   | Further deterioration in the housing market and collateral values; |
|--------------------|--------------------------------------------------------------------|

| ·   | The ability to successfully manage the Company’s strategic plan. |
|--------------------|------------------------------------------------------------------------|

| ·   | The ability to continue to attract low cost core deposits to fund asset growth |
|--------------------|--------------------------------------------------------------------------------|

| ·   | Reliance on the Company’s management team, including its ability to attract and retain key personnel; |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | The successful management of interest rate risk; |
|--------------------|--------------------------------------------------|

| ·   | Further adverse changes in general economic and business conditions in the Company’s market area; |
|--------------------|---------------------------------------------------------------------------------------------------------|

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

| ·   | Risks inherent in making loans such as repayment risks and fluctuating collateral values; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Demand, development and acceptance of new products and services; |
|--------------------|------------------------------------------------------------------|

| ·   | Problems with technology utilized by the Company; |
|--------------------|---------------------------------------------------|

| ·   | Changing trends in customer profiles and behavior; and |
|--------------------|--------------------------------------------------------|

| ·   | Changes in banking and other laws and regulations applicable to the Company. |
|--------------------|------------------------------------------------------------------------------|

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|                                    |   | 2010   |   |   | 2009   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|
|                                    |   |   |   |   |   |   |
| Return on Average Assets                |   |   | (0.33  | %)     |   |   | (0.96 | %) |
| Return on Average Equity                |   |   | (6.01  | %)     |   |   | (16.02 | %) |
|                                    |   |   |   |   |   |   |   |   |
| Basic Earnings (Loss) Per Share         |   | $      | (0.43  | )      |   | $      | (1.27 | ) |
| Fully Diluted Earnings (Loss) per share |   | $      | (0.43  | )      |   | $      | (1.27 | ) |
| Net Interest Margin (1)                 |   |   | 3.33   | %      |   |   | 3.28 | % |
| Average Equity to Average Assets Raito  |   |   | 5.49   | %      |   |   | 5.98 | % |
| Net Interest Margin (1)                 |   |   | 3.41   | %      |   |   | 3.43 | % |
|                                    |   |   |   |   |   |   |   |   |

|       |   | 12/31/10 |    |   | 12/31/09 |   |
|------------|--------|----------|---------|--------|----------|--------|
|       |   |     |    |   |     |   |
| Securities |   | $        | 56,096  |   |     | $      | 70,948 |   |
| Loans, net |   | $        | 440,274 |   |     | $      | 474,438 |   |
| Deposits   |   | $        | 536,772 |   |     | $      | 519,904 |   |
| Assets     |   | $        | 655,508 |   |     | $      | 645,307 |   |

|                                     |   | 12/31/10 |                                                                                                         |   | 12/31/09 |   |
|------------------------------------------|--------|----------|--------------------------------------------------------------------------------------------------------------|--------|----------|--------|
|                                     |   |     |                                                                                                         |   |     |   |
| Non- accrual loans                       |   | $        |                 14,353            |   |     | $      |                 11,559 |   |
| Loans past due over 90 days              |   |     |                   4,528 |   |     |   |                   4,260 |   |
| Other real estate owned                  |   |     |  15,316                                                                                            |   |     |   |  6,847  |   |
| Allowance for loan losses to total loans |   |     | 2.29%                                                                                                   |   |     |   | 2.40%  |   |
| Net charge-off ratio                     |   |     | 1.28%                                                                                                   |   |     |   | 0.63%  |   |

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|                                                                                                                                                                                                                      |   |  Year Ended December 31,      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|
|                                                                                                                                                                                                                      |   |                               |
|                                                                                                                                                                                                                      |   |  2010                         |                                                  2009                                                                             2008 |
|                                                                                                                                                                                                                      |   | (Dollars in Thousands)   |
|                                                                                                                                                                                                                      |   |  AverageBalance               |   |   |  InterestIncome/Expense |   |   |  Yield/Rate |   |   |  AverageBalance |   |   |  InterestIncome/Expense |   |   |  Yield/Rate |   |   | AverageBalance  |   |   |  InterestIncome/Expense |   |   |  Yield/Rate |   |
|                                                                                                                                                                                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                                                                                                                                                                                    |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest earning assets  (taxable-equivalent basis):                                                                                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Loans (net of unearned discount) (1)                                                                                                                                                                                |   | $                                  |  479,367 |   |   | $ |   28,140 |   |   |   | 5.87 | % |   | $ |  490,481 |   |   | $ |   30,338 |   |   |   | 6.19 | % |   | $ |  477,027 |   |   | $ |   32,937 |   |   |   | 6.90 | % |
| Securities (2)(3)                                                                                                                                                                                                         |   |                               | 71,565 |   |   |   | 2,658 |   |   |   | 4.95 |   |   |   | 98,791 |   |   |   | 4,126 |   |   |   | 5.41 |   |   |   | 137,664 |   |   |   | 6,296 |   |   |   | 5.60 |   |
| Federal funds sold                                                                                                                                                                                                        |   |                               | 26,300 |   |   |   | 60 |   |   |   | 0.23 |   |   |   | 6,838 |   |   |   | 10 |   |   |   | 0.15 |   |   |   | 4,163 |   |   |   | 85 |   |   |   | 2.04 |   |
|  Total interest-earning assets                                                                                                                                                                                       |   | $                                  |   577,232 |   |   | $ |  30,858 |   |   |   | 5.50 | % |   | $ |  596,110 |   |   | $ |  34,474 |   |   |   | 5.99 | % |   | $ |  618,854 |   |   | $ |  39,318 |   |   |   | 6.58 | % |
|  LIABILITIES                                                                                                                                                                                                         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                                                                                                                                                             |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Interest bearing deposits                                                                                                                                                                                           |   | $                                  |  440,737 |   |   | $ |   8,859 |   |   |   | 2.01 | % |   | $ |  434,983 |   |   | $ |   11,246 |   |   |   | 2.59 | % |   | $ |  430,347 |   |   | $ |   14,823 |   |   |   | 3.44 | % |
|  Other interest bearing  liabilities                                                                                                                                                                       |   |                               |  84,729 |   |   |   |  3,679 |   |   |   |  4.34 |   |   |   |  103,071 |   |   |   |  4,899 |   |   |   |  4.75 |   |   |   |  107,876 |   |   |   |  4,800 |   |   |   |  4.45 |   |
|  Total interest-bearing  liabilities                                                                                                                                                                       |   | $                                  |  525,466 |   |   | $ |  12,538 |   |   |   | 2.39 | % |   | $ |  538,054 |   |   | $ |  16,145 |   |   |   | 3.00 | % |   | $ |  538,223 |   |   | $ |  19,623 |   |   |   | 3.65 | % |
|  Net interest income                                                                                                                                                                                                 |   |                               |   |   |   | $ |   18,320 |   |   |   |   |   |   |   |   |   |   | $ |   18,329 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ |   19,694 |   |   |   |
| Net margin on interest earning assets on a  tax equivalent basis                                                                                                                                                |   |                               |   |   |   |   |   |   |   |   | 3.33 | % |   |   |   |   |   |   |   |   |   |   | 3.28 | % |   |   |   |   |   |   |   |   |   |   | 3.41  |  % |   |   |   |   |
|  Average interest spread                                                                                                                                                                                             |   |                               |   |   |   |   |   |   |   |   | 3.11 | % |   |   |   |   |   |   |   |   |   |   | 2.99 | % |   |   |   |   |   |   |   |   |   |   | 2.93  |  % |   |   |   |   |
|                                                                                                                                                                                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)  For the purposes of these computations, non-accruing loans are included in the daily average loan amounts outstanding.                                                                                     |
| (2) Tax equivalent adjustments (using 34% federal tax rates) have been made in calculating yields on tax-free investments. Virginia banks are exempt from state income tax.                                          |
| (3) The yield on securities classified as available for sale is computed based on the average balance of the historical amortized cost balance without the effects of the fair value adjustment required by ASC 320. |

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|                                                        |   | 2010 Compared to 2009                       |             |
|-------------------------------------------------------------|--------|---------------------------------------------|------------------|
|    Increase (Decrease) in                    |   | Increase (decrease) due to change in volume |             |   | Increase (decrease) due to change in rate |   |   |  Net increase(decrease) |   |
|                                                        |   | (Dollars in Thousands)                      |             |
|  INTEREST INCOMESecurities                             |   | $                                           |  (1,349     | ) |   | $ | (119 | ) |   | $ | (1,468 | ) |
| Federal funds sold                                          |   |                                        | 44               |   |   |   | 6 |   |   |   | 50 |   |
| Loans                                                       |   |                                        |  (652       | ) |   |   | (1,546 | ) |   |   | ( 2,198 | ) |
|  Total Income Change                                   |   | $                                           | (1,957           | ) |   | $ | (1,659 | ) |   | $ | (3,616 | ) |
|  INTEREST EXPENSESavings and time deposits             |   | $                                           |  116        |   |   | $ | (2,503 | ) |   | $ | (2,387 | ) |
| Other interest-bearing  liabilities               |   |                                        |   (797 |   |   |   | (423 | ) |   |   |  (1,220 | ) |
|  Total Expense Change                                  |   | $                                           | (681             | ) |   | $ | (2,926 | ) |   | $ | (3,607 | ) |
|  Increase (Decrease) in  Net Interest Income |   | $                                           | (1,276           | ) |   | $ |  1,267 |   |   | $ | (9 | ) |

|                                                        |   | 2009 Compared to 2008                       |         |
|-------------------------------------------------------------|--------|---------------------------------------------|--------------|
|    Increase (Decrease) in                    |   | Increase (decrease) due to change in volume |         |   | Increase (decrease) due to change in rate |   |   |  Net increase(decrease) |   |
|                                                        |   | (Dollars in Thousands)                      |         |
|  INTEREST INCOMESecurities                             |   | $                                           |  (2,104 | ) |   | $ | (66 | ) |   | $ | (2,170 | ) |
| Federal funds sold                                          |   |                                        | 4            |   |   |   | (78 | ) |   |   | (74 | ) |
| Loans                                                       |   |                                        |  832    |   |   |   | (3,431 | ) |   |   | ( 2,599 | ) |
|  Total Income Change                                   |   | $                                           | (1,268       | ) |   | $ | (3,575 | ) |   | $ | (4,843 | ) |
|  INTEREST EXPENSESavings and time deposits             |   | $                                           |  120    |   |   | $ | (3,697 | ) |   | $ | (3,577 | ) |
| Other interest-bearing  liabilities               |   |                                        |  (228   | ) |   |   |  327 |   |   |   |  99 |   |
|  Total Expense Change                                  |   | $                                           | (108         | ) |   | $ | (3,370 | ) |   | $ | (3,478 | ) |
|  Increase (Decrease) in  Net Interest Income |   | $                                           | (1,160       | ) |   | $ | (205 | ) |   | $ | (1,365 | ) |

----

----

|                                                                          |   | Years Ended December 31,(Dollars in Thousands) |           |
|-------------------------------------------------------------------------------|--------|------------------------------------------------|----------------|
|                                                                          |   | 2010                                           |           |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Allowance for loan losses at  beginning of year                     |   | $                                              | 11,681         |   |   | $ | 5,171 |   |   | $ | 4,630 |   |   | $ | 4,565 |   |   | $ | 4,359 |   |
| Loans charged off:                                                            |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Residential 1-4 Family                                            |   |                                           | 907            |   |   |   | 119 |   |   |   | 98 |   |   |   | 3 |   |   |   | 13 |   |
|   Multifamily                                                       |   |                                           | 258            |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Construction and Land Loans                                       |   |                                           | 1.747          |   |   |   | - |   |   |   | 19 |   |   |   | - |   |   |   | 1 |   |
|   Commercial, Owner Occupied                                        |   |                                           | 746            |   |   |   | 1,013 |   |   |   | 106 |   |   |   | 77 |   |   |   | 21 |   |
|   Commercial, Non-owner occupied                                    |   |                                           | 46             |   |   |   | 40 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Second Mortgages                                                  |   |                                           | 485            |   |   |   | - |   |   |   | 61 |   |   |   | 16 |   |   |   | - |   |
|   Equity Lines of Credit                                            |   |                                           | 81             |   |   |   | 84 |   |   |   | - |   |   |   | 3 |   |   |   | 23 |   |
|   Farmland                                                          |   |                                           | 131            |   |   |   | 403 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                          |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Secured (other ) and unsecured                                    |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Personal                                                    |   |                                           | 556            |   |   |   | 670 |   |   |   | 606 |   |   |   | 444 |   |   |   | 539 |   |
|   Commercial                                                        |   |                                           | 1,056          |   |   |   | 698 |   |   |   | 195 |   |   |   | 47 |   |   |   | 206 |   |
|   Agricultural                                                      |   |                                           | 24             |   |   |   | - |   |   |   | 16 |   |   |   | 12 |   |   |   | - |   |
|    Overdrafts                                                  |   |                                           |  207      |   |   |   |  220 |   |   |   |  215 |   |   |   |  230 |   |   |   |  277 |   |
|           Total             |   |                                           | 6,244          |   |   |   | 3,247 |   |   |   | 1,316 |   |   |   | 832 |   |   |   | 1,080 |   |
|  Recoveries of loans previously  charged off:                  |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Residential 1-4 Family                                            |   |                                           | 1              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Multifamily                                                       |   |                                           | -              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Construction and Land Loans                                       |   |                                           | -              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1 |   |
|   Commercial, Owner Occupied                                        |   |                                           | 3              |   |   |   | - |   |   |   | 1 |   |   |   | 54 |   |   |   | - |   |
|   Commercial, Non-owner occupied                                    |   |                                           | -              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Second Mortgages                                                  |   |                                           | -              |   |   |   | 1 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Equity Lines of Credit                                            |   |                                           | 1              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 9 |   |
|   Farmland                                                          |   |                                           | -              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                          |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Secured (other ) and unsecured                                    |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Personal                                                          |   |                                           | 54             |   |   |   | 114 |   |   |   | 144 |   |   |   | 121 |   |   |   | 115 |   |
|  Commercial                                                              |   |                                           | 19             |   |   |   | 12 |   |   |   | 122 |   |   |   | 36 |   |   |   | 14 |   |
|  Agricultural                                                            |   |                                           | 3              |   |   |   | 16 |   |   |   | - |   |   |   | 1 |   |   |   | - |   |
|  Overdrafts                                                              |   |                                           | 3              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                          |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|             Total |   |                                           | 84             |   |   |   | 143 |   |   |   | 267 |   |   |   | 212 |   |   |   | 139 |   |
|                                                                          |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loans charged off                                                         |   |                                           | 6,160          |   |   |   | 3,104 |   |   |   | 1,049 |   |   |   | 620 |   |   |   | 941 |   |
| Provision for loan losses                                                     |   |                                           | 4,799          |   |   |   | 9,614 |   |   |   | 1,590 |   |   |   | 685 |   |   |   | 1,147 |   |
| Allowance for loan losses end of year                                         |   | $                                              |   10,320  |   |   | $ |   11,681 |   |   | $ |  5,171 |   |   | $ |  4,630 |   |   | $ |  4,565 |   |
| Average total loans (net of unearned income)                                  |   | $                                              |   479,367 |   |   | $ |   490,481 |   |   | $ |  477,027 |   |   | $ |  441,308 |   |   | $ |  422,525 |   |
| Total loans (net of unearned income) at year-end                              |   | $                                              |   450,594 |   |   | $ |   486,119 |   |   | $ |  490,425 |   |   | $ |  451,291 |   |   | $ |  437,599 |   |
| Ratio of net charge-offs to average loans                                     |   |                                           | 1.28           | % |   |   | 0.63 | % |   |   | 0.22 | % |   |   | 0.14 | % |   |   | 0.22 | % |
| Ratio of provision for loan losses to average loans                           |   |                                           | 1.00           | % |   |   | 1.96 | % |   |   | 0.33 | % |   |   | 0.15 | % |   |   | 0.27 | % |
| Ratio of provision for loan losses to net charge-off                          |   |                                           | 77.91          | % |   |   | 309.72 | % |   |   | 151.57 | % |   |   | 110.48 | % |   |   | 121.89 | % |
| Allowance for loan losses to year-end loans                                   |   |                                           | 2.29           | % |   |   | 2.40 | % |   |   | 1.05 | % |   |   | 1.03 | % |   |   | 1.04 | % |
|                                                                          |   |                                           |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                               |   | 2010                   |   |   | 2009   |   |   | 2008   |   |   | 2007   |   |   | 2006   |   |
|----------------------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                               |   | (Amounts in thousands) |   |
|                                               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-performing loans                               |   | $                      | 18,881 |   |   | $      | 15,819 |   |   | $      | 6,934  |   |   | $      | 8,117  |   |   | $ | 3,400 |   |
| Non-accrual loans                                  |   | $                      | 14,353 |   |   | $      | 11,559 |   |   | $      | 6,278  |   |   | $      | 7,849  |   |   | $ | 2,696 |   |
| Loans past-due 90 days and more and still accruing |   | $                      | 4,528  |   |   | $      | 4,260  |   |   | $      | 656    |   |   | $      | 268    |   |   | $ | 704 |   |
| Interest income lost on non-accruing loans         |   | $                      | 925    |   |   | $      | 497    |   |   | $      | 417    |   |   | $      | 333    |   |   | $ | 234 |   |
|                                               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                                     |   | December 31,Percent of Loans on each Category (Dollars in Thousands) |         |
|------------------------------------------|--------|---------------------------------------------------------------------------|--------------|
|                                     |   |  2010                                                                |         |   | 2009 |   |   | 2008 |   |
|                                     |   | Allowance forLoan Loss                                                    |         |   | Percentage of Total Allowance |   |   | Percentage ofTotal Loans |   |   | Allowance forLoan Loss |   |   | Percentage of Total Allowance |   |   | Percentage ofTotal Loans |   |   | Allowance forLoan Loss |   |   | Percentage of Total Allowance |   |   | Percentage ofTotal Loans |   |
|  Residential 1-4 Family             |   | $                                                                         |  1521   |   |   |   | 14.74 | % |   |   | 38.91 | % |   | $ |  384 |   |   |   | 3.29 | % |   |   | 37.80 | % |   | $ |  330 |   |   |   | 6.38 | % |   |   | 35.89 | % |
| Multifamily                              |   |                                                                      | 229          |   |   |   | 2.22 |   |   |   | 3.46 |   |   |   | 184 |   |   |   | 1.57 |   |   |   | 2.65 |   |   |   | 190 |   |   |   | 3.68 |   |   |   | 2.67 |   |
| Construction and Land Loans              |   |                                                                      | 2,155        |   |   |   | 20.88 |   |   |   | 6.85 |   |   |   | 2,113 |   |   |   | 18.09 |   |   |   | 9.64 |   |   |   | 958 |   |   |   | 18.53 |   |   |   | 13.42 |   |
| Commercial – Owner Occupied        |   |                                                                      | 504          |   |   |   | 4.88 |   |   |   | 17..35 |   |   |   | 3.863 |   |   |   | 33.07 |   |   |   | 17.63 |   |   |   | 851 |   |   |   | 16.46 |   |   |   | 16.49 |   |
| Commercial  Non Owner Occupied |   |                                                                      | 1,353        |   |   |   | 13.11 |   |   |   | 9.67 |   |   |   | 1,846 |   |   |   | 15.81 |   |   |   | 8.43 |   |   |   | 470 |   |   |   | 9.09 |   |   |   | 6.59 |   |
| Second Mortgages                         |   |                                                                      | 323          |   |   |   | 3.13 |   |   |   | 3.13 |   |   |   | 300 |   |   |   | 2.57 |   |   |   | 3.49 |   |   |   | 269 |   |   |   | 5.20 |   |   |   | 3.77 |   |
| Equity Line of Credit                    |   |                                                                      | 83           |   |   |   | .80 |   |   |   | 2.22 |   |   |   | 242 |   |   |   | 2.07 |   |   |   | 2.09 |   |   |   | 145 |   |   |   | 2.80 |   |   |   | 2.03 |   |
|  Farmland                           |   |                                                                      | 229          |   |   |   | 2.22 |   |   |   | 2.83 |   |   |   | 503 |   |   |   | 4.31 |   |   |   | 2.30 |   |   |   | 138 |   |   |   | 2.67 |   |   |   | 1.93 |   |
|                                     |   |                                                                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Personal                                 |   |                                                                      | 516          |   |   |   | 5.00 |   |   |   | 5.93 |   |   |   | 918 |   |   |   | 7.86 |   |   |   | 6.10 |   |   |   | 408 |   |   |   | 7.89 |   |   |   | 6.28 |   |
| Commercial                               |   |                                                                      | 2,119        |   |   |   | 20.53 |   |   |   | 8.97 |   |   |   | 814 |   |   |   | 6.97 |   |   |   | 9.21 |   |   |   | 262 |   |   |   | 5.07 |   |   |   | 9.82 |   |
| Agricultural                             |   |                                                                      | 66           |   |   |   | .64 |   |   |   | 0.63 |   |   |   | - |   |   |   | - |   |   |   | 0.63 |   |   |   | 74 |   |   |   | 1.43 |   |   |   | 1.06 |   |
|                                     |   |                                                                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Overdrafts                               |   |                                                                      | -            |   |   |   | 0.00 |   |   |   | .05 |   |   |   | 15 |   |   |   | 0.12 |   |   |   | 0.04 |   |   |   | 23 |   |   |   | 0.44 |   |   |   | 0.05 |   |
| Unallocated                              |   |                                                                      | 1,222        |   |   |   | 11.85 |   |   |   | - |   |   |   | 499 |   |   |   | 4.27 |   |   |   | - |   |   |   | 1,053 |   |   |   | 20.35 |   |   |   | - |   |
|                                     |   |                                                                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total                              |   | $                                                                         |  10,320 |   |   |   | 100.00 | % |   |   | 100.00 | % |   | $ |  11,681 |   |   |   | 100.00 | % |   |   | 100.00 | % |   | $ |  5,171 |   |   |   | 100.00 | % |   |   | 100.00 | % |

----

|                                     |   | December 31,Percent of Loans on each Category (Dollars in Thousands)  |
|------------------------------------------|--------|---------------------------------------------------------------------------------|
|                                     |   | 2007                                                                            |   |   | 2006 |   |
|                                     |   | Allowance forLoan Loss                                                          |   |   | Percentage of Total Allowance |   |   | Percentage ofTotal Loans |   |   | Allowance forLoan Loss |   |   | Percentage of Total Allowance |   |   | Percentage ofTotal Loans |   |
|  Residential 1-4 Family             |   | $                                                                               |  430 |   |   |   | 9.29 | % |   |   | 36.27 | % |   | $ |  278 |   |   |   | 6.10 | % |   |   | 35.95 | % |
| Multifamily                              |   |                                                                            | 56 |   |   |   | 1.22 |   |   |   | 2.08 |   |   |   | 17 |   |   |   | 0.37 |   |   |   | 2.41 |   |
| Construction and Land Loans              |   |                                                                            | 341 |   |   |   | 7.37 |   |   |   | 12.63 |   |   |   | 85 |   |   |   | 1.86 |   |   |   | 12.09 |   |
| Commercial – Owner Occupied        |   |                                                                            | 961 |   |   |   | 20.76 |   |   |   | 16.25 |   |   |   | 113 |   |   |   | 2.47 |   |   |   | 16.02 |   |
| Commercial  Non Owner Occupied |   |                                                                            | 175 |   |   |   | 3.78 |   |   |   | 6.48 |   |   |   | 45 |   |   |   | 0.98 |   |   |   | 6.38 |   |
| Second Mortgages                         |   |                                                                            | 107 |   |   |   | 2.32 |   |   |   | 3.97 |   |   |   | 25 |   |   |   | 0.54 |   |   |   | 3.51 |   |
| Equity Line of Credit                    |   |                                                                            | 58 |   |   |   | 1.26 |   |   |   | 2.16 |   |   |   | 15 |   |   |   | 0.34 |   |   |   | 2.18 |   |
|  Farmland                           |   |                                                                            | 57 |   |   |   | 1.22 |   |   |   | 2.10 |   |   |   | 15 |   |   |   | 0.33 |   |   |   | 2.14 |   |
|                                     |   |                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Personal                                 |   |                                                                            | 566 |   |   |   | 12.22 |   |   |   | 7.42 |   |   |   | 768 |   |   |   | 16.82 |   |   |   | 8.12 |   |
| Commercial                               |   |                                                                            | 1,005 |   |   |   | 21.71 |   |   |   | 9.46 |   |   |   | 1,691 |   |   |   | 37.04 |   |   |   | 9.80 |   |
| Agricultural                             |   |                                                                            | - |   |   |   | - |   |   |   | 1.09 |   |   |   | - |   |   |   | - |   |   |   | 1.34 |   |
|                                     |   |                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Overdrafts                               |   |                                                                            | 24 |   |   |   | 0.52 |   |   |   | 0.09 |   |   |   | - |   |   |   |   |   |   |   | 0.06 |   |
| Unallocated                              |   |                                                                            | 850 |   |   |   | 18.33 |   |   |   | - |   |   |   | 1,513 |   |   |   | 33.15 |   |   |   | - |   |
|                                     |   |                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total                              |   | $                                                                               |  4,630 |   |   |   | 100.00 | % |   |   | 100.00 | % |   | $ |  4,565 |   |   |   | 100.00 | % |   |   | 100.00 | % |

----

----

|                                                     |   | December 31,(Dollars in thousands)  |         |
|----------------------------------------------------------|--------|------------------------------------------|--------------|
|                                                     |   | 2010                                     |         |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                     |   | Amount                                   |         |   | Percentage |   |   | Amount |   |   | Percentage |   |   | Amount |   |   | Percentage |   |   | Amount |   |   | Percentage |   |   | Amount |   |   | Percentage |   |
| Real Estate Secured:                                     |   |                                     |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Residential 1-4 family                       |   | $                                        | 175,522      |   |   |   | 38.90 | % |   | $ | 183,983 |   |   |   | 37.80 | % |   | $ | 176,239 |   |   |   | 35.89 | % |   | $ | 163,918 |   |   |   | 36.27 | % |   | $ | 156,753 |   |   |   | 35.95 | % |
|   Multi-family                                 |   |                                     | 15,593       |   |   |   | 3.46 |   |   |   | 12,895 |   |   |   | 2.65 |   |   |   | 13,114 |   |   |   | 2.67 |   |   |   | 9,420 |   |   |   | 2.08 |   |   |   | 10,520 |   |   |   | 2.41 |   |
|  Construction and Land    Loans |   |                                     |  30,901 |   |   |   |  6.85 |   |   |   |  46,929 |   |   |   |  9.64 |   |   |   |  65,992 |   |   |   |  13.44 |   |   |   |  57,066 |   |   |   |  12.63 |   |   |   |  52,701 |   |   |   |  12.09 |   |
|   Commercial, Owner Occ.                       |   |                                     | 78,279       |   |   |   | 17.35 |   |   |   | 85,791 |   |   |   | 17.63 |   |   |   | 80,987 |   |   |   | 16.49 |   |   |   | 73,451 |   |   |   | 16.25 |   |   |   | 69,845 |   |   |   | 16.02 |   |
|   Commercial, Non Owner Occupied               |   |                                     | 43,652       |   |   |   | 9.67 |   |   |   | 41.032 |   |   |   | 8.43 |   |   |   | 32,360 |   |   |   | 6.59 |   |   |   | 29,277 |   |   |   | 6.48 |   |   |   | 27,840 |   |   |   | 6.38 |   |
|   Second Mortgages                             |   |                                     | 14,132       |   |   |   | 3.13 |   |   |   | 16,980 |   |   |   | 3.48 |   |   |   | 18,449 |   |   |   | 3.77 |   |   |   | 17,964 |   |   |   | 3.97 |   |   |   | 15,305 |   |   |   | 3.51 |   |
| Equity Lines of Credit                                   |   |                                     | 10,016       |   |   |   | 2.22 |   |   |   | 10,164 |   |   |   | 2.09 |   |   |   | 9.984 |   |   |   | 2.03 |   |   |   | 9,782 |   |   |   | 2.16 |   |   |   | 9,493 |   |   |   | 2.18 |   |
| Farmland                                                 |   |                                     | 12,790       |   |   |   | 2.83 |   |   |   | 11,176 |   |   |   | 2.30 |   |   |   | 9,501 |   |   |   | 1.93 |   |   |   | 9,475 |   |   |   | 2.10 |   |   |   | 9,343 |   |   |   | 2.14 |   |
|                                                     |   | $                                        | 380,885      |   |   |   | 84.41 | % |   | $ | 408,950 |   |   |   | 84.02 | % |   | $ | 406,676 |   |   |   | 82.81 | % |   | $ | 370,353 |   |   |   | 81.94 | % |   | $ | 351,800 |   |   |   | 80.68 | % |
|                                                     |   |                                     |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Secured, Other and Unsecured                       |   |                                     |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Personal                                     |   | $                                        | 26,773       |   |   |   | 5.94 | % |   | $ | 29,703 |   |   |   | 6.10 | % |   | $ | 30,843 |   |   |   | 6.28 | % |   | $ | 33,526 |   |   |   | 7.42 | % |   | $ | 35,394 |   |   |   | 8.12 | % |
|   Commercial                                   |   |                                     | 40,471       |   |   |   | 8.97 |   |   |   | 44,840 |   |   |   | 9.21 |   |   |   | 48,230 |   |   |   | 9.82 |   |   |   | 42,772 |   |   |   | 9.46 |   |   |   | 42,754 |   |   |   | 9.80 |   |
|   Agricultural                                 |   |                                     | 2,848        |   |   |   | 0.63 |   |   |   | 3,069 |   |   |   | 0.63 |   |   |   | 5,076 |   |   |   | 1.04 |   |   |   | 4,938 |   |   |   | 1.09 |   |   |   | 5,834 |   |   |   | 1.34 |   |
|                                                     |   | $                                        | 70,092       |   |   |   | 15.54 | % |   | $ | 77,612 |   |   |   | 15.94 | % |   | $ | 84,149 |   |   |   | 17.14 | % |   | $ | 81,236 |   |   |   | 17.97 | % |   | $ | 83,982 |   |   |   | 19.26 | % |
|                                                     |   |                                     |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Overdrafts                                               |   | $                                        | 214          |   |   |   | 0.05 | % |   | $ | 191 |   |   |   | 0.04 | % |   | $ | 246 |   |   |   | 0.05 | % |   | $ | 364 |   |   |   | 0.09 | % |   | $ | 280 |   |   |   | 0.06 | % |
|                                                     |   |                                     |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, gross                                             |   | $                                        | 451,191      |   |   |   | 100.00 | % |   | $ | 486,753 |   |   |   | 100.00 | % |   | $ | 491,071 |   |   |   | 100.00 | % |   | $ | 451,953 |   |   |   | 100.00 | % |   | $ | 436,062 |   |   |   | 100.00 | % |
|                                                     |   |                                     |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                |   | December 31, 2010(Amounts in Thousands) |         |
|-------------------------------------|--------|-----------------------------------------|--------------|
|                                |   | Within One Year                         |         |   | After One Year But Within Five Years |   |   | After Five Years |   |   |   |   |
|                                |   | Fixed                                   |         |   | Floating |   |   | Fixed |   |   | Floating |   |   | Fixed |   |   | Floating |   |   | Total |   |
|                                |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real Estate Secured:                |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential 1-4 Family              |   | $                                       |  38,086 |   |   | $ |  21,882 |   |   | $ |  60,971 |   |   | $ |  40,320 |   |   | $ |  1,680 |   |   | $ |  12,584 |   |   | $ | 175,522 |   |
| Multi-family                        |   |                                    | 4,671        |   |   |   | 0 |   |   |   | 7,632 |   |   |   | 0 |   |   |   | 3,290 |   |   |   | - |   |   |   | 15,593 |   |
| Construction and Land Loans         |   |                                    | 11,038       |   |   |   | 5,988 |   |   |   | 10,724 |   |   |   | 751 |   |   |   | 1,491 |   |   |   | 909 |   |   |   | 30,901 |   |
| Commercial , Owner Occupied         |   |                                    | 22,909       |   |   |   | 4,369 |   |   |   | 38,623 |   |   |   | 2,950 |   |   |   | 5,858 |   |   |   | 3,571 |   |   |   | 78,280 |   |
| Commercial, Non Owner Occupied |   |                                    | 10,943       |   |   |   | 2,561 |   |   |   | 23,172 |   |   |   | 1,663 |   |   |   | 3,301 |   |   |   | 2,013 |   |   |   | 43,653 |   |
| Second Mortgages                    |   |                                    | 5,438        |   |   |   | 3,261 |   |   |   | 4,896 |   |   |   | 525 |   |   |   | - |   |   |   | 11 |   |   |   | 14,131 |   |
| Equity Line of Credit               |   |                                    | -            |   |   |   | 2,351 |   |   |   | - |   |   |   | 6,488 |   |   |   | - |   |   |   | 1,176 |   |   |   | 10,015 |   |
| Farmland                            |   |                                    | 5,451        |   |   |   | 1,482 |   |   |   | 5,038 |   |   |   | 394, |   |   |   | - |   |   |   | 425 |   |   |   | 12,790 |   |
| Secured, Other and Unsecured        |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Personal                            |   |                                    | 9,198        |   |   |   | 5,662 |   |   |   | 9,299 |   |   |   | 2,009 |   |   |   | - |   |   |   | 603 |   |   |   | 26,773 |   |
| Commercial                          |   |                                    | 13,903       |   |   |   | 7,536 |   |   |   | 18,786 |   |   |   | 233 |   |   |   | - |   |   |   | 12 |   |   |   | 40,470 |   |
| Agricultural                        |   |                                    | 960          |   |   |   | 520 |   |   |   | 1,352 |   |   |   | 16 |   |   |   | - |   |   |   | 1 |   |   |   | 2,849 |   |
| Overdrafts                          |   |                                    | 215          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 215 |   |
|                                |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, Gross                        |   | $                                       | 122,812      |   |   | $ | 55,612 |   |   | $ | 180,493 |   |   | $ | 55,349 |   |   | $ | 15,620 |   |   | $ | 21,305 |   |   | $ | 451,191 |   |
|                                |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| OREO Property at 12/31/10                 |         |                       |   |   |   |
|-------------------------------------------|--------------|----------------------------|--------|--------|--------|
|                                      |         |                       |   |   |   |
| OREO Description                          |  Number |  Balance at 12/31/10  |
|                                      |         |   (in thousands) |
| Land Development  - Vacant Land |  9      |                       |   |   | $      | 4,250 |   |
| 1-4 Family                                |  17     |                       |   |   |   | 5,650 |   |
| Multifamily                               |  1      |                       |   |   |   | 3,100 |   |
| Commercial – Owner Occupied         |  5      |                       |   |   |   | 2,320 |   |
|                                      |         |                       |   |   |   |   |   |
| Total                                     |  32     |                       |   |   | $      | 15,320 |   |
|                                      |         |                       |   |   |   |   |   |

----

|   |   |   | (Dollars in Thousands) |
|--------|--------|--------|------------------------|

|                                                        |   Within OneYear |  One YearThroughFive Years |   |   |   Five YearsThroughTen Years | After TenYears |   |   |   Yield |   | MarketValue |   |   |  AmortizedCost |
|-------------------------------------------------------------|-----------------------|---------------------------------|--------|--------|----------------------------------------|----------------|--------|--------|-------------------|--------|-------------|--------|--------|---------------------|
| Mortgage-backed Sec – fixed rate                      |                  | $                               | 38     |   |                                   | $              | 34     |   |              | $      | 23          |   |   | $                   | 25,021 |   |   |  3.03 | %  | $ | 25,116 |   |   | $ | 25,227 |   |
| Mtg.-backed Sec – variable rate                       |                  |                            | -      |   |                                   |           | 17     |   |              |   | 15          |   |   |                | 4,294 |   |   |  3.41 |   |   | 4,326 |   |   |   | 4,188 |
| State & Municipal’s –  tax exempt |                  |                            | -      |   |                                   |           | -      |   |              |   | 283         |   |   |                | 16,208 |   |   |  6.20 |   |   | 16,491 |   |   |   | 18,107 |
| State & Municipal’s –  taxable    |                  |                            | -      |   |                                   |           | 323    |   |              |   | 464         |   |   |                | 1,013 |   |   |  5.36 |   |   | 1,800 |   |   |   | 1,778 |   |
| Pooled Trust Preferred                                      |                  |                            | -      |   |                                   |           | -      |   |              |   | -           |   |   |                | 173 |   |   |  0.00 |   |   | 173 |   |   |   | 4,339 |   |
| Single Issue Trust Preferred                                |                  |                            | -      |   |                                   |           | -      |   |              |   | -           |   |   |                | 1,804 |   |   |  6.10 |   |   | 1,804 |   |   |   | 1,926 |   |
| SBA bonds – fixed rate                                |                  | 2,099                           |   |   |                                   |  3,793    |   |   |  3.02        |   |        | 5,892  |   |                |   | 5,936 |   |
| SBA bonds – variable rate                             |                  |                            | -      |   |                                   |           | -      |   |              |   | -           |   |   |                | 42 |   |   |  0.81 |   |   | 42 |   |   |   | 42 |   |
| SLMA                                                        |                  |                            | -      |   |                                   |           | 452    |   |              |   | -           |   |   |                |   |   |   |  3.50 |   |   | 452 |   |   |   | 500 |   |
|  TOTAL                                                 |                  |                            | 38     |   |                                   | $              | 826    |   |              | $      | 2,884       |   |   | $                   | 52,348 |   |   |   |   |  $ | 56,096  |   |   | $ | 62,093 |   |
| Total fixed rate securities                                 |                  | $                               | 38     |   |                                   | $              | 357    |   |              | $      | 2,869       |   |   | $                   | 47,839 |   |   |   |   |  $ | 51,103  |   |   | $ | 53,024 |   |
|  Total variable rate securities                        |                  | $                               | -      |   |                                   | $              | 469    |   |              | $      | 15          |   |   | $                   | 4,509 |   |   |   |   |  $ | 4,993  |   |   | $ | 9,069 |   |

----

|   |                                                                                                                                                                                                                                                                               |  Credit Rating |   | Fair Value |   |   | Amortized Cost |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|--------|------------|--------|--------|----------------|--------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | AA+            |   | $          | 4,341  |   |           | $      | 4,481 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | AA             |   | $          | 323    |   |           | $      | 310 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  AA-           |   | $          | 1,567  |   |           | $      | 1,784 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  Aa2           |   | $          | 1,117  |   |           | $      | 1,252 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  Aa3           |   | $          | 1,481  |   |           | $      | 1,551 |   |
|   |                                                                                                                                             | A2             |   | $          | 791    |   |           | $      | 910 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  Aaa           |   | $          | 518    |   |           | $      | 505 |   |
|   |                                                                                                                              |  A+            |   | $          | 1,217  |   |           | $      | 1,320 |   |
|   |                                                                                                          |  A             |   | $          | 2,164  |   |           | $      | 2,235 |   |
|   |                                                                                                          |  A1            |   | $          | 242    |   |           | $      | 244 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  Baa1          |   | $          | 229    |   |           | $      | 255 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  BBB+          |   | $          | 620    |   |           | $      | 609 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  NR            |   | $          | 3,681  |   |           | $      | 4,429 |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  TOTAL         |   | $          | 18,291 |   |           | $      | 19,885 |   |

|                                                                            | Fair Value |   |   Amortized Cost |   |
|---------------------------------------------------------------------------------|------------|--------|----------------------------|--------|
| Pooled Trust Preferred Securities (TRUPS) –(rated below investment grade) |       | $      | 173                        |   |   |  $ | 4,339 |   |
| Single Issue Trust Preferred                                                    |       |   | 1,804                      |   |   |   | 1,926 |   |
| SLMA (rated BBB)                                                                |       |   | 452                        |   |   |   | 500 |   |
| SBA Pools                                                                       |       |   | 5,934                      |   |   |   | 5,978 |   |

----

|                                 |   | December 31,           |          |
|--------------------------------------|--------|------------------------|---------------|
|                                 |   | (Amounts in Thousands) |          |
|                                 |   | 2010                   |          |   | 2009 |   |
|                                 |   |                   |          |   |   |   |
| Non-interest bearing demand deposits |   | $                      | 85,923        |   |   | $ | 84,073 |   |
| Interest bearing demand deposits     |   |                   | 94,084        |   |   |   | 75,560 |   |
| Savings deposits                     |   |                   | 59,788        |   |   |   | 55,745 |   |
| Time deposits                        |   |                   | 296,977       |   |   |   | 304,526 |   |
|  Total Deposits                 |   | $                      |  536,772 |   |   | $ |  519,904 |   |

|                                                  |   | Year Ended December 31,(Dollars in Thousands) |         |
|-------------------------------------------------------|--------|-----------------------------------------------|--------------|
|                                                  |   | 2010                                          |         |   | 2009 |   |   | 2008 |   |
|                                                  |   | Amount                                        |         |   | Rate |   |   | Amount |   |   | Rate |   |   | Amount |   |   | Rate |   |
|  Non-interest bearing  demand deposits |   | $                                             |  84,361 |   |   |   | 0.00 | % |   | $ |  83,760 |   |   |   | 0.00 | % |   | $ |  85,719 |   |   |   | 0.00 | % |
| Interest-bearing demand  deposits           |   |                                          |  79,288 |   |   |   |  0.89 |   |   |   |  68,059 |   |   |   |  0.93 |   |   |   |  62,300 |   |   |   |  1.53 |   |
| Savings deposits                                      |   |                                          | 58,835       |   |   |   | 0.52 |   |   |   | 55,187 |   |   |   | 0.69 |   |   |   | 50,389 |   |   |   | 0.98 |   |
| Time deposits                                         |   |                                          | 302,624      |   |   |   | 2.66 |   |   |   | 312,735 |   |   |   | 3.27 |   |   |   | 317,656 |   |   |   | 4.21 |   |
|  Total                                           |   | $                                             | 525,108      |   |   |   |   |   |   | $ |  519,741 |   |   |   |   |   |   | $ |  516,064 |   |   |   |   |   |

| Maturity                        |   | Amount |   |
|---------------------------------|--------|--------|--------|
| 3 months or less                |   | $      | 15,630 |   |
| Over 3 months through 6 months  |   |   | 12,148 |   |
| Over 6 months through 12 months |   |   | 16,375 |   |
| Over 12 months                  |   |   | 55,613 |   |
| Total                           |   | $      | 99,766 |   |

----

----

----

----

| Plan Category                                              |   | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights |    |   | Weighted AverageExercise Price of Outstanding Options, Warrants and Rights |   |   | Number of Securities Remaining Availablefor Future IssuanceUnder EquityCompensation Plans (a) |   |
|------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------|--------|
|                                                       |   |                                                                                        |    |   |                                                                       |   |   |                                                                                          |   |
| Equity Compensation Plans Approved by Shareholders         |   |                                                                                        | 234,929 |   |                                                                       | $      | 13.72  |                                                                                          |   |   | -- |   |
|                                                       |   |                                                                                        |    |   |                                                                       |   |   |                                                                                          |   |   |   |   |
| Equity Compensation Plans Not Approved by Shareholders (b) |   |                                                                                        |    |   | $                                                                          | -      |   |                                                                                          |   | 200,000 |   |
|                                                       |   |                                                                                        |    |   |                                                                       |   |   |                                                                                          |   |   |   |   |
| Total                                                      |   |                                                                                        | 234,929 |   |                                                                       | $      | 13.72  |                                                                                          |   |   | 200,000 |   |

| (a) | Amounts exclude any securities to be issued upon exercise of outstanding options, warrants and rights. |
|-----|--------------------------------------------------------------------------------------------------------|

| (b) | On September 13, 2006, the Board of Directors of the Company approved the Highlands Bankshares, Inc. 2006 Equity Compensation Plan (the Plan).  The Plan authorizes the Personnel and Compensation Committee (the Committee) of the Board of Directors to grant options, stock appreciation rights, stock awards and stock units to directors, officers, key employees, consultants and advisors to the Company and its subsidiaries who are designated by the Committee.  The Company is authorized to issue under the Plan up to 200,000 shares of its Common Stock.  Generally, if an award is forfeited, expires or terminates, the shares allocated to that award under the Plan may be reallocated to new awards under the Plan.  Shares surrendered pursuant to the exercise of a stock option or other award or in satisfaction of tax withholding requirements under the Plan may also be reallocated to other awards. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | All applicable financial statement schedules required by Regulation S-X are included in the Notes to the 2010 Consolidated Financial Statements. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (3) | Exhibits: |
|--------|-----|-----------|

|   | 3.1 | Amended and Restated Articles of Incorporation of Highlands Bankshares, Inc., filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q for the period ended March 31, 2009. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2 | Bylaws of Highlands Bankshares, Inc. attached as Exhibit 3.2 to the Registration Statement on Form 8-A, File No. 000-27622, filed with the Commission on January 24, 1996, incorporated herein by reference. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.1 | Highlands Union Bank 1995 Stock Option Plan, attached as Exhibit 10.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2002, File No. 000-27622, incorporated herein by reference. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | Highlands Bankshares, Inc. 2006 Equity Compensation Plan, filed as Exhibit 3.1 to the Current Report on Form 8-K, File No. 000-27622, filed with the Commission on September 20, 2006, incorporated herein by reference. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.3 | Written Agreement, dated October 13, 2010, between Highlands Bankshares, Inc., Highlands Union Bank and the Federal Reserve Bank of Richmond, attached as Exhibit 10.1 to the Current Report on Form 8-K,File No. 000-27622, filed with the Commission on October 19, 2010, incorporated herein by reference. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 13.1 | Annual Report to Shareholders – Financial Statements |
|--------|------|------------------------------------------------------------|

|   | 21 | Subsidiaries of the Corporation. |
|--------|----|----------------------------------|

|   | 23.1 | Consent of Brown, Edwards & Company, L.L.P. |
|--------|------|-------------------------------------------------|

|   | 31.1 | Section 302 Certification of Chief Executive Officer. |
|--------|------|-------------------------------------------------------|

|   | 31.2 | Section 302 Certification of Chief Financial Officer of the Corporation |
|--------|------|-------------------------------------------------------------------------|

|   | 31.3 | Section 302 Certification of Vice President of Accounting |
|--------|------|-----------------------------------------------------------|

|   | 32.1 | Statement of Chief Executive Officer Pursuant to 18 U.S.C. § 1350. |
|--------|------|-------------------------------------------------------------------------|

|   | 32.2 | Statement of Chief Financial Officer of the Corporation Pursuant to 18 U.S.C. § 1350. |
|--------|------|--------------------------------------------------------------------------------------------|

|   | 32.3 | Statement of Vice President of Accounting Pursuant to 18 U.S.C. § 1350. |
|--------|------|------------------------------------------------------------------------------|

|  (b) |   |  Exhibits. |
|-----------|--------|-----------------|

|   | The response to this portion of Item 15 as listed in Item 15(a)(3) above is submitted  as a separate section of this report. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|      (c) |   | Financial Statement Schedules.The response to this portion of Item 15 is submitted as a separate section of this report. |
|------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|

----

|                         | HIGHLANDS BANKSHARES, INC. |                                 |
|------------------------------|----------------------------|--------------------------------------|
|                         |                       |                                 |   |
| Date:  March 30th, 2011 | By:                        | /s/Samuel L. Neese                   |   |
|                         |                       | Samuel L. Neese                 |   |
|                         |                       | Executive Vice President and         |   |
|                         |                       |    Chief Executive Officer |   |

|                        |   |   |                         |   |
|-----------------------------|--------|--------|------------------------------|--------|
| /s/Robert M. Little, Jr.    |   |   | /s/James R. Edmondson        |   |
| Robert M. Little, Jr.       |   |   | James R. Edmondson           |   |
| Chief Financial Officer     |   |   | Vice President of Accounting |   |
| Principal Financial Officer |   |   | Principal Accounting Officer |   |

| Signature                                                                                                                                                                                                                                                                     | Title                                                                                                 | Date           |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|----------------|
| /s/ James D. Morefield                                    James D. Morefield                             | Chairman of the Board, and Director                                                    | March 30, 2011 |
| /s/ Dr. James D. Moore, Jr.                                      Dr. James D. Moore, Jr.       | President                                                                              | March 30, 2011 |
| /s/ J. Carter Lambert                                        J. Carter Lambert  | Vice Chairman                                                                          | March 30, 2011 |
| /s/ Samuel L. Neese                                        Samuel L. Neese      | Executive Vice President, and Chief Executive Officer (principal executive officer)    | March 30, 2011 |

----

|                                                                                                                                                                                                                                                                                                                                                 |                             |                       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|----------------------------|
|  Signature                                                                                                                                                                                                                                                                                                                                 |  Title                      |  Date                 |
|   /s/ William E. Chaffin                                        William E. Chaffin                                            |   Director                  |  March 30, 2011  |
| /s/ E. Craig Kendrick                                      E. Craig Kendrick                                                                 | Director                    | March 30, 2011             |
| /s/ Clydes B. Kiser                                          Clydes B. Kiser                                                  | Direc­tor    | March 30, 2011             |
| /s/ Charles P. Olinger                                    Charles P. Olinger                                                                           | Direc­tor    | March 30, 2011             |
| /s/ William J. Singleton                                          William J. Singleton                                   | Direc­tor    | March 30, 2011             |
| /s/ Dr. H. Ramsey White, Jr.                                              Dr. H. Ramsey White, Jr.   | Direc­tor    | March 30, 2011             |
|                                                                                                                                                                                                                                                                                                                                                 |                             |                       |

----

|   | 3.1 | Amended and Restated Articles of Incorporation of Highlands Bankshares, Inc., filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q for the period ended March 31, 2009. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2 | Bylaws of Highlands Bankshares, Inc. attached as Exhibit 3.2 to the Registration Statement on Form 8-A, File No. 000-27622, filed with the Commission on January 24, 1996, incorporated herein by reference. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.1 | Highlands Union Bank 1995 Stock Option Plan, attached as Exhibit 10.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2002, File No. 000-27622, incorporated herein by reference. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | Highlands Bankshares, Inc. 2006 Equity Compensation Plan, filed as Exhibit 3.1 to the Current Report on Form 8-K, File No. 000-27622, filed with the Commission on September 20, 2006, incorporated herein by reference. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.3 | Written Agreement, dated October 13, 2010, between Highlands Bankshares, Inc., Highlands Union Bank and the Federal Reserve Bank of Richmond, attached as Exhibit 10.1 to the Current Report on Form 8-K,File No. 000-27622, filed with the Commission on October 19, 2010, incorporated herein by reference. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 13.1 | Annual Report to Shareholders – Financial Statements |
|--------|------|------------------------------------------------------------|

|   | 21 | Subsidiaries of the Corporation. |
|--------|----|----------------------------------|

|   | 23.1 | Consent of Brown, Edwards & Company, L.L.P. |
|--------|------|-------------------------------------------------|

|   | 31.1 | Section 302 Certification of Chief Executive Officer. |
|--------|------|-------------------------------------------------------|

|   | 31.2 | Section 302 Certification of Chief Financial Officer of the Corporation |
|--------|------|-------------------------------------------------------------------------|

|   | 31.3 | Section 302 Certification of Vice President of Accounting of the Bank. |
|--------|------|------------------------------------------------------------------------|

|   | 32.1 | Statement of Chief Executive Officer Pursuant to 18 U.S.C. § 1350. |
|--------|------|-------------------------------------------------------------------------|

|   | 32.2 | Statement of Chief Financial Officer of the Corporation Pursuant to 18 U.S.C. § 1350. |
|--------|------|--------------------------------------------------------------------------------------------|

|   | 32.3 | Statement of Vice President of Accounting Pursuant to 18 U.S.C. § 1350. |
|--------|------|------------------------------------------------------------------------------|

----