----

----

| Delaware                                                       |   | 63-0833573                              |
|----------------------------------------------------------------|--------|-----------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification Number) |

| 200 East Nashville Avenue, Atmore, Alabama |   | 36502      |
|--------------------------------------------|--------|------------|
| (Address of principal executive offices)   |   | (Zip Code) |

| Large accelerated filer o              |   | Accelerated filer o |   | Non-accelerated filer o |
|----------------------------------------|--------|---------------------|--------|-------------------------|
|                                   |   |                |   |                    |
| Smaller Reporting Company  x |   |                |

----

----

----

UN

| PART I - FINANCIAL INFORMATION |   | PAGE                                                                                  |
|--------------------------------|--------|---------------------------------------------------------------------------------------|
|                           |   |                                                                                  |   |   |
| Item 1.                        |   | Financial Statements                                                                  |   |   |
|                           |   |                                                                                  |   |   |
|                           |   | Consolidated Balance Sheets                                                           |   | 3 |
|                           |   |                                                                                  |   |   |
|                           |   | Consolidated Statements of Operations and Comprehensive Income (Loss)                 |   | 4 |
|                           |   |                                                                                  |   |   |
|                           |   | Consolidated Statements of Cash Flows                                                 |   | 5 |
|                           |   |                                                                                  |   |   |
|                           |   | Notes to Consolidated Financial Statements                                            |   | 6 |
|                           |   |                                                                                  |   |   |
| Item 2.                        |   | Management's Discussion and Analysis of Financial Condition and Results of Operations |   | 23 |
|                           |   |                                                                                  |   |   |
| Item 4T.                       |   | Controls and Procedures                                                               |   | 35 |
|                           |   |                                                                                  |   |   |
| PART II - OTHER INFORMATION    |   |                                                                                  |
|                           |   |                                                                                  |   |   |
| Item 1A.                       |   | Risk Factors                                                                          |   | 36 |
|                           |   |                                                                                  |   |   |
| Item 6.                        |   | Exhibits                                                                              |   | 37 |

----

Index

PA

|                                                                                                                                                          |   | September 30,2010 |        |   | December 31,2009 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-------------|--------|-----------------------|--------|
|                                                                                                                                                          |   | (Unaudited)            |        |   |                  |   |
| Assets                                                                                                                                                        |   |                   |        |   |                  |   |
| Cash and due from banks                                                                                                                                       |   | $                      | 12,615,871  |   |                  | $      | 13,858,726 |   |
| Interest bearing deposits in banks                                                                                                                            |   |                   | 66,889,473  |   |                  |   | 40,809,385 |   |
| Cash and cash equivalents                                                                                                                                     |   |                   | 79,505,344  |   |                  |   | 54,668,111 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Securities available for sale (amortized cost of $68,435,428and $67,627,174 respectively)                                                                     |   |                   | 69,381,861  |   |                  |   | 68,212,662 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Securities held to maturity (market values of  $17,771,199and $15,715,993 respectively)                                                             |   |                   | 17,312,962  |   |                  |   | 15,659,330 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Loans                                                                                                                                                         |   |                   | 279,030,431 |   |                  |   | 283,346,171 |   |
| Less: Allowance for loan losses                                                                                                                               |   |                   | 5,515,201   |   |                  |   | 7,435,509 |   |
| Net loans                                                                                                                                                     |   |                   | 273,515,230 |   |                  |   | 275,910,662 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Premises and equipment, net                                                                                                                                   |   |                   | 16,775,284  |   |                  |   | 17,589,236 |   |
| Interest receivable                                                                                                                                           |   |                   | 2,408,642   |   |                  |   | 2,858,122 |   |
| Intangible assets                                                                                                                                             |   |                   | -           |   |                  |   | 934,763 |   |
| Other assets                                                                                                                                                  |   |                   | 23,162,367  |   |                  |   | 21,149,520 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Total assets                                                                                                                                                  |   |                   | 482,061,690 |   |                  |   | 456,982,406 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Liabilities and Stockholders' Equity                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Deposits:                                                                                                                                                     |   |                   |        |   |                  |   |   |   |
| Non-interest bearing                                                                                                                                          |   |                   | 151,312,255 |   |                  |   | 121,753,295 |   |
| Interest bearing                                                                                                                                              |   |                   | 279,657,312 |   |                  |   | 283,056,954 |   |
| Total deposits                                                                                                                                                |   |                   | 430,969,567 |   |                  |   | 404,810,249 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Advances from Federal Home Loan Bank of Atlanta                                                                                                               |   |                   | 1,305,250   |   |                  |   | 1,445,100 |   |
| Treasury, tax, and loan account                                                                                                                               |   |                   | 909,226     |   |                  |   | 624,143 |   |
| Interest payable                                                                                                                                              |   |                   | 411,798     |   |                  |   | 620,867 |   |
| Accrued expenses and other liabilities                                                                                                                        |   |                   | 1,894,891   |   |                  |   | 1,608,243 |   |
| Note payable to Trust                                                                                                                                         |   |                   | 10,310,000  |   |                  |   | 10,310,000 |   |
| Total liabilities                                                                                                                                             |   |                   | 445,800,732 |   |                  |   | 419,418,602 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Stockholders' equity                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Preferred stock of $.01 par value.  Authorized 250,000 shares; 10,300 shares, net of discount                                                       |   |                   | 10,063,564  |   |                  |   | 10,014,985 |   |
| Class A common stock, $0.01 par value. Authorized 5,000,000 shares; issued and outstanding,2,389,127 and  2,388,992 shares,  respectively |   |                   | 23,891      |   |                  |   | 23,890 |   |
| Class B common stock, $0.01 par value. Authorized 250,000 shares; no shares issued or outstanding                                                             |   |                   | -           |   |                  |   | - |   |
| Additional paid in capital                                                                                                                                    |   |                   | 6,808,076   |   |                  |   | 6,544,079 |   |
| Accumulated other comprehensive income net of tax                                                                                                             |   |                   | 567,854     |   |                  |   | 351,289 |   |
| Retained earnings                                                                                                                                             |   |                   | 19,493,223  |   |                  |   | 21,685,478 |   |
|                                                                                                                                                          |   |                   | 36,956,608  |   |                  |   | 38,619,721 |   |
|                                                                                                                                                          |   |                   |        |   |                  |   |   |   |
| Less:  86,757 and 131,678 treasury shares, at cost, respectively                                                                                    |   |                   | 695,650     |   |                  |   | 1,055,917 |   |
| Total stockholders' equity                                                                                                                                    |   |                   | 36,260,958  |   |                  |   | 37,563,804 |   |
| Total liabilities and stockholders' equity                                                                                                                    |   | $                      | 482,061,690 |   |                  | $      | 456,982,406 |   |

----

Index

Un

|                                                         |   | Three Months Ended |       |   | Nine Months Ended  |   |
|--------------------------------------------------------------|--------|--------------------|------------|--------|--------------------|--------|
|                                                         |   | September 30, |       |   | September 30, |   |
|                                                         |   | 2010               |       |   | 2009               |   |   | 2010 |   |   | 2009 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |
| Interest income:                                             |   |               |       |   |               |   |   |   |   |   |   |   |
| Interest and fees on loans                                   |   | $                  | 4,182,618  |   |               | $      | 4,264,037 |   |   | $ | 12,554,464 |   |   | $ | 12,677,927 |   |
| Interest on investment securities available for sale:        |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                      |   |               | 423,790    |   |               |   | 539,386 |   |   |   | 1,248,468 |   |   |   | 1,790,193 |   |
| Nontaxable                                                   |   |               | 156,898    |   |               |   | 299,750 |   |   |   | 652,548 |   |   |   | 935,223 |   |
| Total investment income                                      |   |               | 580,688    |   |               |   | 839,136 |   |   |   | 1,901,016 |   |   |   | 2,725,416 |   |
| Other interest income                                        |   |               | 44,347     |   |               |   | 50,970 |   |   |   | 116,352 |   |   |   | 217,881 |   |
| Total interest income                                        |   |               | 4,807,653  |   |               |   | 5,154,143 |   |   |   | 14,571,832 |   |   |   | 15,621,224 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                            |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                         |   |               | 1,055,202  |   |               |   | 1,648,308 |   |   |   | 3,501,133 |   |   |   | 5,308,732 |   |
| Interest on other borrowed funds                             |   |               | 77,878     |   |               |   | 82,100 |   |   |   | 219,027 |   |   |   | 285,150 |   |
| Total interest expense                                       |   |               | 1,133,080  |   |               |   | 1,730,408 |   |   |   | 3,720,160 |   |   |   | 5,593,882 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                          |   |               | 3,674,573  |   |               |   | 3,423,735 |   |   |   | 10,851,672 |   |   |   | 10,027,342 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses                                    |   |               | 3,100,000  |   |               |   | 1,900,000 |   |   |   | 4,138,000 |   |   |   | 4,500,000 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income after provision for loan losses          |   |               | 574,573    |   |               |   | 1,523,735 |   |   |   | 6,713,672 |   |   |   | 5,527,342 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest income:                                          |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Service charge on deposits                                   |   |               | 831,931    |   |               |   | 920,166 |   |   |   | 2,492,420 |   |   |   | 2,636,443 |   |
| Investment securities gains, net                             |   |               | 827,221    |   |               |   | 3,250 |   |   |   | 1,046,575 |   |   |   | 175,316 |   |
| Mortgage loan and related fees                               |   |               | 112,780    |   |               |   | 39,315 |   |   |   | 250,481 |   |   |   | 116,600 |   |
| Other                                                        |   |               | (25,613    | )      |               |   | 220,167 |   |   |   | 397,193 |   |   |   | 619,978 |   |
| Total noninterest income                                     |   |               | 1,746,319  |   |               |   | 1,182,898 |   |   |   | 4,186,669 |   |   |   | 3,548,337 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest expense:                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and benefits                                        |   |               | 2,159,326  |   |               |   | 2,108,779 |   |   |   | 6,481,307 |   |   |   | 6,468,604 |   |
| Net occupancy expense                                        |   |               | 568,779    |   |               |   | 624,273 |   |   |   | 1,665,045 |   |   |   | 1,801,185 |   |
| Other                                                        |   |               | 2,319,109  |   |               |   | 1,241,381 |   |   |   | 5,056,462 |   |   |   | 3,693,702 |   |
| Total noninterest expense                                    |   |               | 5,047,214  |   |               |   | 3,974,433 |   |   |   | 13,202,814 |   |   |   | 11,963,491 |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Losses before income tax benefits                            |   |               | (2,726,322 | )      |               |   | (1,267,800 | ) |   |   | (2,302,473 | ) |   |   | (2,887,812 | ) |
| Income tax benefits                                          |   |               | (1,099,000 | )      |               |   | (588,412 | ) |   |   | (1,176,309 | ) |   |   | (1,413,600 | ) |
| Net losses                                                   |   |               | (1,627,322 | )      |               |   | (679,388 | ) |   |   | (1,126,164 | ) |   |   | (1,474,212 | ) |
| Preferred stock dividends                                    |   |               | 154,500    |   |               |   | 128,750 |   |   |   | 412,000 |   |   |   | 331,890 |   |
| Accretion on preferred stock discount                        |   |               | 16,426     |   |               |   | 15,510 |   |   |   | 48,579 |   |   |   | 45,870 |   |
| Net losses available to common shareholders                  |   | $                  | (1,798,248 | )      |               | $      | (823,648 | ) |   | $ | (1,586,743 | ) |   | $ | (1,851,972 | ) |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Basic losses per share                                       |   | $                  | (0.78      | )      |               | $      | (0.37 | ) |   | $ | (0.69 | ) |   | $ | (0.83 | ) |
| Diluted losses per share                                     |   | $                  | (0.78      | )      |               | $      | (0.37 | ) |   | $ | (0.69 | ) |   | $ | (0.83 | ) |
| Basic weighted average shares outstanding                    |   |               | 2,296,709  |   |               |   | 2,253,942 |   |   |   | 2,284,265 |   |   |   | 2,240,982 |   |
| Diluted weighted average shares outstanding                  |   |               | 2,297,385  |   |               |   | 2,253,942 |   |   |   | 2,284,941 |   |   |   | 2,240,982 |   |
| Cash dividend per share                                      |   | $                  | -          |   |               | $      | - |   |   | $ | - |   |   | $ | - |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Statement of Comprehensive Income (Loss)                     |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Net losses                                                   |   | $                  | (1,627,322 | )      |               | $      | (679,388 | ) |   | $ | (1,126,164 | ) |   | $ | (1,474,212 | ) |
|                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss), net of tax:               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains (losses) arising during the period  |   |               | 328,083    |   |               |   | 962,744 |   |   |   | 844,510 |   |   |   | 471,073 |   |
| Reclassification adjustment for gains included in net losses |   |               | (496,333   | )      |               |   | (1,950 | ) |   |   | (627,945 | ) |   |   | (105,190 | ) |
| Comprehensive Income (Loss)                                  |   | $                  | (1,795,572 | )      |               | $      | 281,406 |   |   | $ | (909,599 | ) |   | $ | (1,108,329 | ) |

----

Index

Un

|                                                                                                  |   | Nine Months Ended |        |
|-------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|
|                                                                                                  |   | September 30 |        |
|                                                                                                  |   | 2010              |        |   | 2009 |   |
|                                                                                                  |   |              |        |   |   |   |
| Cash flows from operating activities                                                                  |   |              |        |   |   |   |
| Net losses                                                                                            |   | $                 | (1,126,164  | ) |   | $ | (1,474,212 | ) |
| Adjustments to reconcile net losses to net cash provided by operating activities                      |   |              |        |   |   |   |   |   |
| Provision for loan losses                                                                             |   |              | 4,138,000   |   |   |   | 4,500,000 |   |
| Depreciation of premises and equipment                                                                |   |              | 876,948     |   |   |   | 987,806 |   |
| Net amortization of premuim on investment securities available for sale                               |   |              | 216,555     |   |   |   | 98,221 |   |
| Net amortization of premium on investment securities held to maturity                                 |   |              | 41,552      |   |   |   | 164,338 |   |
| Gain on sales of investment securities available for sale, net                                        |   |              | (1,046,575  | ) |   |   | (175,316 | ) |
| (Gain) loss on sale of other real estate                                                              |   |              | 1,277       |   |   |   | (34,432 | ) |
| Writedown of other real estate                                                                        |   |              | 175,908     |   |   |   | 4,500 |   |
| Writeoff of intangible assets                                                                         |   |              | 934,763     |   |   |   | - |   |
| Stock-based compensation                                                                              |   |              | 21,501      |   |   |   | 24,694 |   |
| Loss on disposal of equipment                                                                         |   |              | -           |   |   |   | 9,790 |   |
| Decrease in interest receivable                                                                       |   |              | 449,480     |   |   |   | 330,922 |   |
| Increase in other assets                                                                              |   |              | (213,520    | ) |   |   | (3,225,259 | ) |
| Decrease in interest payable                                                                          |   |              | (209,069    | ) |   |   | (186,154 | ) |
| Increase in accrued expenses and other liabilities                                                    |   |              | 289,868     |   |   |   | 382,961 |   |
| Net cash provided by operating activities                                                             |   |              | 4,550,524   |   |   |   | 1,407,859 |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Cash flows from investing activities                                                                  |   |              |        |   |   |   |   |   |
| Proceeds from maturities, calls, and principal repayments of investment securities available for sale |   |              | 18,916,216  |   |   |   | 37,218,049 |   |
| Proceeds from maturities, calls, and principal repayments of investment securities held to maturity   |   |              | 5,235,926   |   |   |   | 7,050,000 |   |
| Proceeds from sales of investment securities available for sale                                       |   |              | 36,069,589  |   |   |   | 14,258,707 |   |
| Purchases of investment securities available for sale                                                 |   |              | (54,964,039 | ) |   |   | (35,187,842 | ) |
| Purchases of investment securities held to maturity                                                   |   |              | (6,931,110  | ) |   |   | (22,602,343 | ) |
| Net increase in loans                                                                                 |   |              | (4,959,168  | ) |   |   | (16,264,417 | ) |
| Purchases of premises and equipment, net                                                              |   |              | (62,996     | ) |   |   | (58,064 | ) |
| Proceeds from sale of premises and equipment                                                          |   |              | -           |   |   |   | 8,000 |   |
| Proceeds from sale of other real estate                                                               |   |              | 1,095,709   |   |   |   | 242,932 |   |
| Net cash used in investing activities                                                                 |   |              | (5,599,873  | ) |   |   | (15,334,978 | ) |
|                                                                                                  |   |              |        |   |   |   |   |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Cash flows from financing activities                                                                  |   |              |        |   |   |   |   |   |
| Net increase (decrease) in deposits                                                                   |   |              | 26,159,318  |   |   |   | (80,455,820 | ) |
| Net decrease in securities sold under agreements to repurchase                                        |   |              | -           |   |   |   | (1,861,237 | ) |
| Cash dividends - preferred stock                                                                      |   |              | (412,000    | ) |   |   | (331,890 | ) |
| Cash dividends - common stock                                                                         |   |              | (5,969      | ) |   |   | (173,046 | ) |
| Proceeds from sale of common stock                                                                    |   |              | -           |   |   |   | 5,130 |   |
| Proceeds from sale of treasury stock                                                                  |   |              | -           |   |   |   | 29,938 |   |
| Repayments of advances from FHLB Atlanta                                                              |   |              | (139,850    | ) |   |   | (139,850 | ) |
| Increase in other borrowed funds                                                                      |   |              | 285,083     |   |   |   | 451,811 |   |
| Net cash provided by (used in) financing activities                                                   |   |              | 25,886,582  |   |   |   | (82,474,964 | ) |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                  |   |              | 24,837,233  |   |   |   | (96,402,083 | ) |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                                        |   |              | 54,668,111  |   |   |   | 143,522,498 |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Cash and cash equivalents, end of period                                                              |   | $                 | 79,505,344  |   |   | $ | 47,120,415 |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Supplemental disclosures                                                                              |   |              |        |   |   |   |   |   |
| Cash paid during the period for:                                                                      |   |              |        |   |   |   |   |   |
| Interest                                                                                              |   | $                 | 3,929,229   |   |   | $ | 5,780,036 |   |
| Income taxes                                                                                          |   |              | 52,705      |   |   |   | 55,984 |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Noncash transactions                                                                                  |   |              |        |   |   |   |   |   |
| Transfer of loans to other real estate through foreclosure                                            |   | $                 | 3,216,600   |   |   | $ | 2,385,201 |   |

----

Index

UN

----

Index

|                                                                                                          |   | Three Months Ended |      |   | Nine Months Ended  |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|--------------------|--------|
|                                                                                                          |   | September 30, |      |   | September 30, |   |
|                                                                                                          |   | 2010               |      |   | 2009               |   |   | 2010 |   |   | 2009 |   |
|                                                                                                          |   |               |      |   |               |   |   |   |   |   |   |   |
| Diluted earnings (losses) per share                                                                           |   | $                  | (0.78     | )      |               | $      | (0.37 | ) |   | $ | (0.69 | ) |   | $ | (0.83 | ) |
|                                                                                                          |   |               |      |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares outstanding                                                                    |   |               | 2,296,709 |   |               |   | 2,253,942 |   |   |   | 2,284,265 |   |   |   | 2,240,982 |   |
|                                                                                                          |   |               |      |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Effect of the assumed exercise of stock options based on the treasury stock method using average market price |   |               | 676       |   |               |   | - |   |   |   | 676 |   |   |   | - |   |
|                                                                                                          |   |               |      |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Total weighted average common shares and potential common stock outstanding                                   |   |               | 2,297,385 |   |               |   | 2,253,942 |   |   |   | 2,284,941 |   |   |   | 2,240,982 |   |

----

Index

|                               |   | Amortized cost |       |   | Gross unrealized gains |   |      | Gross unrealized losses |   |   | Fair value |   |
|------------------------------------|--------|----------------|------------|--------|------------------------|--------|-----------|-------------------------|--------|--------|------------|--------|
| September 30, 2010                 |   |           |       |   |                   |   |      |                    |   |   |       |   |
| U.S. Treasury securities           |   | $              | 19,229,742 |   |                   | $      | 262,757   |                    |   | $      | -          |   |   | $ | 19,492,499 |   |
| U.S. government sponsored agencies |   |           | 33,480,587 |   |                   |   | 634,000   |                    |   |   | (18,242    | )      |   |   | 34,096,345 |   |
| Mortgage backed securities         |   |           | 5,226,252  |   |                   |   | -         |                    |   |   | (22,085    | )      |   |   | 5,204,167 |   |
| State and political subdivisions   |   |           | 10,488,694 |   |                   |   | 204,732   |                    |   |   | (109,139   | )      |   |   | 10,584,287 |   |
| Equity securities                  |   |           | 10,153     |   |                   |   | -         |                    |   |   | (5,590     | )      |   |   | 4,563 |   |
|                               |   | $              | 68,435,428 |   |                   | $      | 1,101,489 |                    |   | $      | (155,056   | )      |   | $ | 69,381,861 |   |
| December 31, 2009                  |   |           |       |   |                   |   |      |                    |   |   |       |   |   |   |   |   |
| U.S. Treasury securities           |   | $              | 3,024,364  |   |                   | $      | 3,132     |                    |   | $      | (777       | )      |   | $ | 3,026,719 |   |
| U.S. government sponsored agencies |   |           | 36,040,571 |   |                   |   | 444,446   |                    |   |   | (16,504    | )      |   |   | 36,468,513 |   |
| Mortgage backed securities         |   |           | -          |   |                   |   | -         |                    |   |   | -          |   |   |   | - |   |
| State and political subdivisions   |   |           | 28,552,086 |   |                   |   | 517,459   |                    |   |   | (355,405   | )      |   |   | 28,714,140 |   |
| Equity securities                  |   |           | 10,153     |   |                   |   | -         |                    |   |   | (6,863     | )      |   |   | 3,290 |   |
|                               |   | $              | 67,627,174 |   |                   | $      | 965,037   |                    |   | $      | (379,549   | )      |   | $ | 68,212,662 |   |

|                     |   | Three Months Ended |    |   | Nine Months Ended  |   |
|--------------------------|--------|--------------------|---------|--------|--------------------|--------|
|                     |   | September 30, |    |   | September 30, |   |
|                     |   | 2010               |    |   | 2009               |   |   | 2010 |   |   | 2009 |   |
|                     |   |               |    |   |               |   |   |   |   |   |   |   |
| Gross gains realized     |   | $                  | 889,500 |   |               | $      | 3,250 |   |   | $ | 1,133,280 |   |   | $ | 192,603 |   |
| Gross losses realized    |   |               | (62,279 | )      |               |   | - |   |   |   | (86,705 | ) |   |   | (17,287 | ) |
| Net gain (loss) realized |   | $                  | 827,221 |   |               | $      | 3,250 |   |   | $ | 1,046,575 |   |   | $ | 175,316 |   |

----

Index

| September 30, 2010               |   |                |       |   |              |   |    |       |   |   |              |   |   |       |    |   |              |   |
|---------------------------------------|--------|---------------------|------------|--------|-------------------|--------|---------|------------|--------|--------|-------------------|--------|--------|------------|---------|--------|-------------------|--------|
|                                  |   | Less than 12 months |       |   | 12 months or more |   |    | Total      |   |
| Description of Securities             |   | Fair Value          |       |   | Unrealized losses |   |    | Fair Value |   |   | Unrealized losses |   |   | Fair Value |    |   | Unrealized losses |   |
| U.S. Treasury securities              |   | $                   | -          |   |              | $      | -       |       |   | $      | -                 |   |   | $          | -       |   |              | $      | - |   |   | $ | - |   |
| U.S. government sponsored agencies    |   |                | 4,495,847  |   |              |   | (18,242 | )          |   |   | -                 |   |   |       | -       |   |              |   | 4,495,847 |   |   |   | (18,242 | ) |
| Mortgage backed securities            |   |                | 5,204,167  |   |              |   | (22,085 | )          |   |   | -                 |   |   |       | -       |   |              |   | 5,204,167 |   |   |   | (22,085 | ) |
| State and political subdivisions      |   |                | 900,064    |   |              |   | (29,319 | )          |   |   | 715,581           |   |   |       | (79,820 | )      |              |   | 1,615,645 |   |   |   | (109,139 | ) |
| Equity securities                     |   |                | -          |   |              |   | -       |       |   |   | 4,562             |   |   |       | (5,590  | )      |              |   | 4,562 |   |   |   | (5,590 | ) |
| Total temporarily impaired securities |   | $                   | 10,600,078 |   |              | $      | (69,646 | )          |   | $      | 720,143           |   |   | $          | (85,410 | )      |              | $      | 11,320,221 |   |   | $ | (155,056 | ) |

| December 31, 2009                |   |                |       |   |              |   |    |       |   |
|---------------------------------------|--------|---------------------|------------|--------|-------------------|--------|---------|------------|--------|
|                                  |   | Less than 12 months |       |   | 12 months or more |   |    | Total      |   |
| Description of Securities             |   | Fair Value          |       |   | Unrealized losses |   |    | Fair Value |   |   | Unrealized losses |   |   | Fair Value |   |   | Unrealized losses |   |
| U.S. Treasury securities              |   | $                   | 2,025,312  |   |              | $      | (777    | )          |   | $ | - |   |   | $ | - |   |   | $ | 2,025,312 |   |   | $ | (777 | ) |
| U.S. government sponsored agencies    |   |                | 5,035,326  |   |              |   | (16,504 | )          |   |   | - |   |   |   | - |   |   |   | 5,035,326 |   |   |   | (16,504 | ) |
| Mortgage backed securities            |   |                | -          |   |              |   | -       |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| State and political subdivdisions     |   |                | 4,412,702  |   |              |   | (75,555 | )          |   |   | 2,204,792 |   |   |   | (279,850 | ) |   |   | 6,617,494 |   |   |   | (355,405 | ) |
| Equity securities                     |   |                | 3,290      |   |              |   | (6,863  | )          |   |   |   |   |   |   |   |   |   |   | 3,290 |   |   |   | (6,863 | ) |
| Total temporarily impaired securities |   | $                   | 11,476,630 |   |              | $      | (99,699 | )          |   | $ | 2,204,792 |   |   | $ | (279,850 | ) |   | $ | 13,681,422 |   |   | $ | (379,549 | ) |

----

Index

|                                |   | Within 1 Year |      |   | 1 to 5 Years |   |       | 5 to 10 Years |   |   | Over 10 Years |   |   | Total  |       |
|-------------------------------------|--------|---------------|-----------|--------|--------------|--------|------------|---------------|--------|--------|---------------|--------|--------|--------|------------|
| Amortized Cost                      |   |          |      |   |         |   |       |          |   |   |          |   |   |   |       |
| U.S. Treasury securities            |   | $             | 999,091   |   |         | $      | 14,136,996 |          |   | $      | 4,093,655     |   |   | $      | -          |   |   | $ | 19,229,742 |   |
| U.S. governement sponsored agencies |   |          | -         |   |         |   | 15,085,710 |          |   |   | 18,394,877    |   |   |   | -          |   |   |   | 33,480,587 |   |
| Mortgage-backed securities          |   |          | -         |   |         |   | -          |          |   |   | -             |   |   |   | 5,226,252  |   |   |   | 5,226,252 |   |
| State and political subdivisions    |   |          | 489,989   |   |         |   | 803,665    |          |   |   | 2,241,957     |   |   |   | 6,953,083  |   |   |   | 10,488,694 |   |
| Equity securities                   |   |          | 10,153    |   |         |   | -          |          |   |   | -             |   |   |   | -          |   |   |   | 10,153 |   |
| Total                               |   | $             | 1,499,233 |   |         | $      | 30,026,371 |          |   | $      | 24,730,489    |   |   | $      | 12,179,335 |   |   | $ | 68,435,428 |   |
|                                |   |          |      |   |         |   |       |          |   |   |          |   |   |   |       |   |   |   |   |   |
| Fair Value                          |   |          |      |   |         |   |       |          |   |   |          |   |   |   |       |   |   |   |   |   |
| U.S. Treasury securities            |   | $             | 1,005,938 |   |         | $      | 14,345,936 |          |   | $      | 4,140,625     |   |   | $      | -          |   |   | $ | 19,492,499 |   |
| U.S. governement sponsored agencies |   |          | -         |   |         |   | 15,312,395 |          |   |   | 18,783,950    |   |   |   | -          |   |   |   | 34,096,345 |   |
| Mortgage-backed securities          |   |          | -         |   |         |   | -          |          |   |   | -             |   |   |   | 5,204,167  |   |   |   | 5,204,167 |   |
| State and political subdivisions    |   |          | 490,831   |   |         |   | 832,565    |          |   |   | 2,309,886     |   |   |   | 6,951,005  |   |   |   | 10,584,287 |   |
| Equity securities                   |   |          | 4,563     |   |         |   | -          |          |   |   | -             |   |   |   | -          |   |   |   | 4,563 |   |
| Total                               |   | $             | 1,501,332 |   |         | $      | 30,490,896 |          |   | $      | 25,234,461    |   |   | $      | 12,155,172 |   |   | $ | 69,381,861 |   |
|                                |   |          |      |   |         |   |       |          |   |   |          |   |   |   |       |   |   |   |   |   |
| Total Average Yield                 |   |          | 1.96      | %      |         |   | 1.91       | %             |   |   | 2.66          | %      |   |   | 3.97       | % |   |   | 2.55 | % |

----

Index

|                               |   | Amortized cost |       |   | Gross unrealized gains |   |    | Gross unrealized losses |   |   | Fair value |   |
|------------------------------------|--------|----------------|------------|--------|------------------------|--------|---------|-------------------------|--------|--------|------------|--------|
| September 30, 2010            |   |           |       |   |                   |   |    |                    |   |   |       |   |
| U.S. government sponsored agencies |   | $              | 17,312,962 |   |                   | $      | 463,861 |                    |   | $      | (5,624     | )      |   | $ | 17,771,199 |   |
| Other domestic debt securities     |   |           | -          |   |                   |   | -       |                    |   |   | -          |   |   |   | - |   |
|                               |   | $              | 17,312,962 |   |                   | $      | 463,861 |                    |   | $      | (5,624     | )      |   | $ | 17,771,199 |   |
| December 31, 2009             |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| U.S. government sponsored agencies |   | $              | 15,424,330 |   |                   | $      | 105,554 |                    |   | $      | (48,891    | )      |   | $ | 15,480,993 |   |
| Other domestic debt securities     |   |           | 235,000    |   |                   |   | -       |                    |   |   | -          |   |   |   | 235,000 |   |
|                               |   | $              | 15,659,330 |   |                   | $      | 105,554 |                    |   | $      | (48,891    | )      |   | $ | 15,715,993 |   |

| September 30, 2010               |   |                |      |   |              |   |   |       |   |   |              |   |   |       |   |   |              |   |
|---------------------------------------|--------|---------------------|-----------|--------|-------------------|--------|--------|------------|--------|--------|-------------------|--------|--------|------------|--------|--------|-------------------|--------|
|                                  |   | Less than 12 months |      |   | 12 months or more |   |   | Total      |   |
| Description of Securities             |   | Fair Value          |      |   | Unrealized losses |   |   | Fair Value |   |   | Unrealized losses |   |   | Fair Value |   |   | Unrealized losses |   |
|                                  |   |                |      |   |              |   |   |       |   |   |              |   |   |       |   |   |              |   |
| U.S. government sponsored agencies    |   | $                   | 3,484,401 |   |              | $      | (5,624 | )          |   | $      | -                 |   |   | $          | -      |   |              | $      | 3,484,401 |   |   | $ | (5,624 | ) |
| Other domestic debt securities        |   |                | -         |   |              |   | -      |       |   |   | -                 |   |   |       | -      |   |              |   | - |   |   |   | - |   |
| Total temporarily impaired securities |   | $                   | 3,484,401 |   |              | $      | (5,624 | )          |   | $      | -                 |   |   | $          | -      |   |              | $      | 3,484,401 |   |   | $ | (5,624 | ) |

----

Index

| December 31, 2009                     |   |                |      |   |              |   |    |       |   |   |              |   |   |       |   |   |              |   |
|---------------------------------------|--------|---------------------|-----------|--------|-------------------|--------|---------|------------|--------|--------|-------------------|--------|--------|------------|--------|--------|-------------------|--------|
|                                  |   | Less than 12 months |      |   | 12 months or more |   |    | Total      |   |
| Description of Securities             |   | Fair Value          |      |   | Unrealized losses |   |    | Fair Value |   |   | Unrealized losses |   |   | Fair Value |   |   | Unrealized losses |   |
|                                  |   |                |      |   |              |   |    |       |   |   |              |   |   |       |   |   |              |   |
| U.S. government sponsored agencies    |   | $                   | 2,967,310 |   |              | $      | (48,891 | )          |   | $      | -                 |   |   | $          | -      |   |              | $      | 2,967,310 |   |   | $ | (48,891 | ) |
| Other domestic debt securities        |   |                | -         |   |              |   | -       |       |   |   | -                 |   |   |       | -      |   |              |   | - |   |   |   | - |   |
| Total temporarily impaired securities |   | $                   | 2,967,310 |   |              | $      | (48,891 | )          |   | $      | -                 |   |   | $          | -      |   |              | $      | 2,967,310 |   |   | $ | (48,891 | ) |

|                                |   | Within 1 Year |   |   | 1 to 5 Years |   |      | 5 to 10 Years |   |   | Over 10 Years |   |   | Total  |   |
|-------------------------------------|--------|---------------|--------|--------|--------------|--------|-----------|---------------|--------|--------|---------------|--------|--------|--------|--------|
| Amortized Cost                      |   |          |   |   |         |   |      |          |   |   |          |   |   |   |   |
| U.S. governement sponsored agencies |   | $             | -      |   |         | $      | 7,358,898 |          |   | $      | 9,954,064     |   |   | $      | -      |   |   | $ | 17,312,962 |   |
| Total                               |   | $             | -      |   |         | $      | 7,358,898 |          |   | $      | 9,954,064     |   |   | $      | -      |   |   | $ | 17,312,962 |   |
|                                |   |          |   |   |         |   |      |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Fair Value                          |   |          |   |   |         |   |      |          |   |   |          |   |   |   |   |   |   |   |   |   |
| U.S. governement sponsored agencies |   | $             | -      |   |         | $      | 7,531,368 |          |   | $      | 10,239,831    |   |   | $      | -      |   |   | $ | 17,771,199 |   |
| Total                               |   | $             | -      |   |         | $      | 7,531,368 |          |   | $      | 10,239,831    |   |   | $      | -      |   |   | $ | 17,771,199 |   |
|                                |   |          |   |   |         |   |      |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Total Average Yield                 |   | n/a           |   |   |         | 2.66   | %         |          |   | 2.53   | %             |   | n/a    |   |   |   | 2.58 | % |

----

Index

|                         |   | September 30 |   |
|------------------------------|--------|-------------------|--------|
|                         |   | 2010              |   |   | 2009 |   |
|                         |   |              |   |   |   |   |
| Balance at beginning of year |   |              | 7,436  |   |   |   | 3,592 |   |
|                         |   |              |   |   |   |   |   |   |
| Provision charged to expense |   |              | 4,138  |   |   |   | 4,500 |   |
|                         |   |              |   |   |   |   |   |   |
| Loans charged off            |   |              | (6,150 | ) |   |   | (2,708 | ) |
|                         |   |              |   |   |   |   |   |   |
| Recoveries                   |   |              | 91     |   |   |   | 42 |   |
|                         |   |              |   |   |   |   |   |   |
| Balance at end of period     |   |              | 5,515  |   |   |   | 5,426 |   |

----

Index

|                                     |   | Shares under option |    |   | Weighted average exercise price per share |   |    | Weighted average remaining contractual life |   |
|------------------------------------------|--------|---------------------|---------|--------|-------------------------------------------|--------|---------|---------------------------------------------|--------|
| Options outstanding, beginning of period |   |                | 30,646  |   |                                      |   | 16.02   |                                        |   |   |   |
| Granted                                  |   |                | — |   |                                      |   | — |                                        |   |   |   |
| Surrendered                              |   |                | — |   |                                      |   | — |                                        |   |   |   |
| Exercised                                |   |                | — |   |                                      |   | — |                                        |   |   |   |
| Options outstanding, end of period       |   |                | 30,646  |   |                                      |   | 16.02   |                                        |   |   | 1.8 |   |
| Exercisable, end of period               |   |                | 30,646  |   |                                      |   | 16.02   |                                        |   |   | 1.8 |   |

----

Index

|                                     |   | Shares under option |    |   | Weighted average exercise price per share |   |    | Weighted average remaining contractual life |   |
|------------------------------------------|--------|---------------------|---------|--------|-------------------------------------------|--------|---------|---------------------------------------------|--------|
| Options outstanding, beginning of period |   |                | 4,000   |   |                                      |   | 14.85   |                                        |   |   |   |
| Granted                                  |   |                | — |   |                                      |   | — |                                        |   |   |   |
| Surrendered                              |   |                | — |   |                                      |   | — |                                        |   |   |   |
| Exercised                                |   |                | — |   |                                      |   | — |                                        |   |   |   |
| Options outstanding, end of period       |   |                | 4,000   |   |                                      |   | 14.85   |                                        |   |   | 8.7 |   |
| Exercisable, end of period               |   |                | 1,600   |   |                                      |   | 14.85   |                                        |   |   | 8.7 |   |

|                                                             |   | 2010   |   |   | 2009   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Weighted-average expected life (in years)                        |   |   | N/A    |   |   |   | 10 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Expected Volatility                                              |   |   | N/A    |   |   |   | 20.00 | % |
| Risk-free interest rate                                          |   |   | N/A    |   |   |   | 3.86 | % |
| Expected dividend yield                                          |   |   | N/A    |   |   |   | 2.02 | % |
| Weighted-average fair value of options granted during the period |   |   | N/A    |   |   | $      | 3.88 |   |

----

Index

|                                      |   | Restricted stock activity |    |   | Weighted average fair value |   |
|-------------------------------------------|--------|---------------------------|---------|--------|-----------------------------|--------|
| Shares under grant at beginning of period |   |                      | 10,022  |   |                        |   | 17.20 |   |
| Granted                                   |   |                      | 135     |   |                        |   | 13.00 |   |
| Surrendered                               |   |                      | — |   |                        |   | — |   |
| Vested                                    |   |                      | — |   |                        |   | — |   |
| Shares under grant at end of period       |   |                      | 10,157  |   |                        |   | 17.14 |   |

----

Index

----

Index

|           |   |                           |       |   | Fair Value Measurements at September 30, 2010 Using |   |
|----------------|--------|--------------------------------|------------|--------|----------------------------------------------------------|--------|
|           |   | Assets/Liabilities Measured at |       |   | Quoted Prices in Active Markets for Identical Assets     |   |   | Significant Other Observable Inputs |   |   | Significant Unobservable Inputs |   |
|           |   | Fair Value                |       |   | (Level 1)                                                |   |   | Level (2) |   |   | (Level 3) |   |
|           |   |                           |       |   |                                                     |   |   |   |   |   |   |   |
| AFS Securities |   | $                              | 69,381,861 |   |                                                     | $      | 23,587,109 |   |   | $ | 45,794,752 |   |   | $ | - |   |

|           |   |                           |       |   | Fair Value Measurements at December 31, 2009 Using |   |
|----------------|--------|--------------------------------|------------|--------|---------------------------------------------------------|--------|
|           |   | Assets/Liabilities Measured at |       |   | Quoted Prices in Active Markets for Identical Assets    |   |   | Significant Other Observable Inputs |   |   | Significant Unobservable Inputs |   |
|           |   | Fair Value                |       |   | (Level 1)                                               |   |   | Level (2) |   |   | (Level 3) |   |
|           |   |                           |       |   |                                                    |   |   |   |   |   |   |   |
| AFS Securities |   | $                              | 68,212,662 |   |                                                    | $      | 3,030,009 |   |   | $ | 65,182,653 |   |   | $ | - |   |

----

Index

|               |   | Carrying Value at September 30, 2010 |       |   | Nine Months Ended |   |
|--------------------|--------|-------------------------------------------|------------|--------|-------------------|--------|
|               |   |                                      |       |   |              |   |   |   |   |   |   |   |   | September 30, 2010 |   |
|               |   |                                      |       |   |              |   |   |   |   |   |   |   |   |   |   |
|               |   | Total                                     |       |   | Level 1           |   |   | Level 2 |   |   | Level3 |   |   | Total gains (losses) |   |
|               |   |                                      |       |   |              |   |   |   |   |   |   |   |   |   |   |
| Impaired loans (1) |   | $                                         | 39,007,698 |   |              | $      | - |   |   | $ | - |   |   | $ | 39,007,698 |   |   | $ | (2,998,316 | ) |
| Foreclosed assets  |   |                                      | 9,176,220  |   |              |   | - |   |   |   | - |   |   |   | 9,176,220 |   |   |   | (177,185 | ) |

|              |   | Carrying Value at December 31, 2009 |       |   | Year Ended |   |
|-------------------|--------|------------------------------------------|------------|--------|------------|--------|
|              |   |                                     |       |   |       |   |   |   |   |   |   |   |   | December 31, 2009 |   |
|              |   |                                     |       |   |       |   |   |   |   |   |   |   |   |   |   |
|              |   | Total                                    |       |   | Level 1    |   |   | Level 2 |   |   | Level3 |   |   | Total losses |   |
|              |   |                                     |       |   |       |   |   |   |   |   |   |   |   |   |   |
| Impaired loans    |   | $                                        | 43,577,517 |   |       | $      | - |   |   | $ | - |   |   | $ | 43,577,517 |   |   | $ | (7,952,833 | ) |
| Other real estate |   |                                     | 7,610,690  |   |       |   | - |   |   |   | - |   |   |   | 7,610,690 |   |   |   | (1,027,703 | ) |

----

Index

|   | (a) | Cash and Short-term Investments |
|--------|-----|---------------------------------|

|   | (b) | Investment Securities and Other Securities |
|--------|-----|--------------------------------------------|

|   | (c) | Loans |
|--------|-----|-------|

|   | (d) | Bank Owned Life Insurance |
|--------|-----|---------------------------|

|   | (e) | Deposits |
|--------|-----|----------|

|   | (f) | FHLB, Other Borrowed Funds and Subordinated Debt |
|--------|-----|--------------------------------------------------|

|   | (g) | Accrued Interest |
|--------|-----|------------------|

----

Index

|   | (h) | Commitments to Extend Credit and Standby Letters of Credit |
|--------|-----|------------------------------------------------------------|

|                                        |   | September 30, 2010 |    |   | December 31, 2009 |   |
|---------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
|                                        |   | Carrying amount         |    |   | Estimated fair value   |   |   | Carrying amount |   |   | Estimated fair value |   |
| Financial assets:                           |   | (Dollars in Thousands)  |    |
| Cash and short–term investments       |   | $                       | 79,505  |   |                   | $      | 79,505 |   |   | $ | 54,668 |   |   | $ | 54,668 |   |
| Investment securities                       |   |                    | 86,695  |   |                   |   | 87,153 |   |   |   | 83,872 |   |   |   | 83,929 |   |
| Loans, net of the allowance for loan losses |   |                    | 273,515 |   |                   |   | 279,994 |   |   |   | 275,911 |   |   |   | 276,090 |   |
| Bank owned life insurance                   |   |                    | 2,816   |   |                   |   | 2,816 |   |   |   | 2,729 |   |   |   | 2,729 |   |
| Correspondent bank stock                    |   |                    | 1,905   |   |                   |   | 1,905 |   |   |   | 1,889 |   |   |   | 1,889 |   |
| Accrued interest receivable                 |   |                    | 2,409   |   |                   |   | 2,409 |   |   |   | 2,858 |   |   |   | 2,858 |   |
|                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                      |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                    |   |                    | 430,970 |   |                   |   | 434,577 |   |   |   | 404,810 |   |   |   | 405,504 |   |
| Other borrowed funds                        |   |                    | 909     |   |                   |   | 909 |   |   |   | 624 |   |   |   | 624 |   |
| FHLB advances                               |   |                    | 1,305   |   |                   |   | 1,470 |   |   |   | 1,445 |   |   |   | 1,539 |   |
| Subordinated Debt                           |   |                    | 10,310  |   |                   |   | 10,310 |   |   |   | 10,310 |   |   |   | 10,310 |   |
| Accrued interest payable                    |   |                    | 412     |   |                   |   | 412 |   |   |   | 621 |   |   |   | 621 |   |

----

Index

----

Index

IT

----

Index

----

Index

----

Index

----

Index

----

Index

----

Index

----

Index

|                                                        |   | As of the nine months ended |       |
|-------------------------------------------------------------|--------|-----------------------------|------------|
|                                                        |   | September 30,          |       |
|                                                        |   | 2010                        |       |   | 2009 |   |
|                                                        |   |                        |       |   |   |   |
| Impaired loans with a valuation allowance                   |   | $                           | 14,503,698 |   |   | $ | 16,830,865 |   |
| Impaired loans without a valuation allowance                |   |                        | 24,504,000 |   |   |   | 3,852,298 |   |
| Total impaired loans                                        |   | $                           | 39,007,698 |   |   | $ | 20,683,163 |   |
| Valuation allowance related to impaired loans               |   | $                           | 2,084,765  |   |   | $ | 3,218,044 |   |
| Total nonaccrual loans                                      |   |                        | 17,931,257 |   |   |   | 18,612,640 |   |
| Total loans past due ninety days or more and still accruing |   |                        | -          |   |   |   | 36,102 |   |
| Troubled debt restructured loans                            |   |                        | 905,891    |   |   |   | 2,164,521 |   |

----

Index

|   |   |                                                                                                                                                                               |   | September 30,2010 |   |   | December 31,2009 |   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|-----------------------|--------|
|   |   |                                                                                                                                                                               |   | (Dollars in Thousands) |   |
|   |   | Description                                                                                                                                                                        |   |                   |   |   |                  |   |
|   |   |                                                                                                                                                                               |   |                   |   |   |                  |   |
| A      |   | Loans accounted for on a nonaccrual basis                                                                                                                                          |   | $                      | 17,931 |   |                  | $      | 18,993 |   |
|   |   |                                                                                                                                                                               |   |                   |   |   |                  |   |   |   |
| B      |   | Loans which are contractually past due ninety days or more as to interest or principal payments (excluding balances included in (A) above)                                         |   |                   | 23     |   |                  |   | 210 |   |
|   |   |                                                                                                                                                                               |   |                   |   |   |                  |   |   |   |
| C      |   | Loans, the terms of which have been renegotiated to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower. |   |                   | 906    |   |                  |   | 1,657 |   |
|   |   |                                                                                                                                                                               |   |                   |   |   |                  |   |   |   |
| D      |   | Other non-performing assets                                                                                                                                                        |   |                   | 9,176  |   |                  |   | 7,611 |   |
|   |   |                                                                                                                                                                               |   |                   |   |   |                  |   |   |   |
|   |   | Total                                                                                                                                                                              |   | $                      | 28,036 |   |                  | $      | 28,471 |   |

----

Index

----

Index

|                                   |   | September 30,2010 |   |   | Well Capitalized Treatment |   |
|----------------------------------------|--------|------------------------|--------|--------|----------------------------|--------|
| United Bancorporation of Alabama, Inc. |   |                   |   |   |                       |   |
| Total risk-based capital               |   |                   | 14.68  | %      |                       |   | N/A |   |
| Tier 1 risk-based capital              |   |                   | 13.42  |   |                       |   | N/A |   |
| Leverage Ratio                         |   |                   | 8.47   |   |                       |   | N/A |   |
|                                   |   |                   |   |   |                       |   |   |   |
| United Bank                            |   |                   |   |   |                       |   |   |   |
| Total risk-based capital               |   |                   | 14.65  | %      |                       |   | 10.00 | % |
| Tier 1 risk-based capital              |   |                   | 13.39  |   |                       |   | 6.00 |   |
| Leverage ratio                         |   |                   | 8.45   |   |                       |   | 5.00 |   |

----

Index

|                         |   | September 30,2010 |            |
|------------------------------|--------|------------------------|-----------------|
|                         |   |                   |            |
| Commitments to extend credit |   | $                      | 26,987,272      |   |
| Standby letters of credit    |   |                   | 1,361,922  |   |

----

Index

It

----

Index

It

----

Index

It

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

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

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

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

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

----

Index

|                    | UNITED BANCORPORATION OF ALABAMA, INC. |
|-------------------------|----------------------------------------|
|                    |                                   |
| Date: November 12, 2010 |                                   |
|                    |                                   |
|                    | /s/ Robert R. Jones, III               |
|                    | Robert R. Jones, III                   |
|                    | President and CEO                      |
|                    |                                   |
|                    |                                   |
|                    | /s/ Allen O. Jones, Jr.                |
|                    | Allen O. Jones, Jr.                    |
|                    | Senior Vice President and CFO          |

----

Index

| EXHIBIT NUMBER |   | DESCRIPTION                                                                                                                     |
|----------------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                            |
|           |   |                                                                                                                            |
| 31.1           |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley     Act of 2002 |
| 31.2           |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                              |
| 32.1           |   | Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to section  906 of the Sarbanes-Oxley Act of 2002  |
| 32.2           |   | Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to section  906 of the Sarbanes-Oxley Act of 2002  |

----