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| Connecticut                                                    | 06-1559137                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
| 900 Bedford Street                                             |                                 |
| Stamford, Connecticut                                          | 06901                                |
| (Address of principal executive offices)                       | (Zip Code)                           |
|                                                           |                                 |
| Registrant’s telephone number, including area code:      | (203) 324-7500                       |

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| Item 1.  | Business                                                                  | 2      |
|----------|---------------------------------------------------------------------------|--------|
| Item 1A. | Risk Factors                                                              | 12     |
| Item 1B. | Unresolved Staff Comments                                                 | 19     |
| Item 2.  | Properties                                                                | 19     |
| Item 3.  | Legal Proceedings                                                         | 19     |
|     |                                                                      |   |
| Part II  |
|     |                                                                      |   |
| Item 5.  | Market for Common Equity, Related Shareholder Matters and Issuer          |   |
|     | Purchases of Equity Securities                                            | 21     |
| Item 6.  | Selected Financial Data                                                   | 24     |
| Item 7.  | Management’s Discussion and Analysis of Financial Condition and     |   |
|     | Results of Operation                                                      | 25     |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                | 49     |
| Item 8.  | Financial Statements and Supplementary Data                               | 52     |
| Item 9.  | Changes in and Disagreements with Accountants on Accounting and           |   |
|     | Financial Disclosure                                                      | 53     |
| Item 9A. | Controls and Procedures                                                   | 53     |
| Item 9B. | Other Information                                                         | 54     |
|     |                                                                      |   |
| Part III |
|     |                                                                      |   |
| Item 10. | Directors, Executive Officers and Corporate Governance                    | 57     |
| Item 11. | Executive Compensation                                                    | 57     |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and        |   |
|     | Related Shareholder Matters                                               | 57     |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 57     |
| Item 14. | Principal Accountant Fees and Services                                    | 57     |
|     |                                                                      |   |
| Part IV  |
|     |                                                                      |   |
| Item 15. | Exhibits and Financial Statement Schedules                                | 58     |

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|   | · | We expect to face increased regulation of our industry, including several proposals that would dramatically change how the Bank is regulated.  Compliance with such regulations may increase our costs and limit our ability to pursue business opportunities.  We cannot predict how large these costs will be or how expansive any such limitations will be. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Economic conditions may continue to affect market confidence levels and may cause adverse changes in payment patterns, causing increases in delinquencies, which could affect our charge-offs and provision for loan losses. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The ability to assess the creditworthiness of the Bank’s customers or to estimate the values of collateral for loans may be impaired if the models and approaches we use become less predictive of future behaviors, valuations, assumptions or estimates due to the unpredictable economic climate. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Increasing consolidation of financial services companies as a result of current market conditions could have unexpected adverse effects upon our ability to compete effectively. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We have been required, and may continue to be required to pay significantly higher FDIC premiums. |
|--------|--------|---------------------------------------------------------------------------------------------------|

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|          |   | 2009                                                                   |                                                                   | 2008                                                                            |
|---------------|--------|------------------------------------------------------------------------|------------------------------------------------------------------------|---------------------------------------------------------------------------------|
|          |   |                                                                   |                                                                   | Cash                                                                            |   |   |   | Cash |
|          |   | Sales Price                                                            | Dividends                                                              |                                                                            | Sales Price | Dividends |
| Quarter Ended |   | High                                                                   | Low                                                                    | Declared                                                                        |   | High | Low | Declared |
|          |   |                                                                   |                                                                   |                                                                            |   |   |   |   |
| March 31      |   |  $        7.74            |  $        2.13            |  $          -            |   |  $      16.55 |  $      14.01 |  $      0.045 |
| June 30       |   |            5.04 |            2.04 |              - |   |          16.16 |          13.75 |          0.045 |
| September 30  |   |            4.50 |            1.85 |              - |   |          15.50 |          11.50 |          0.045 |
| December 31   |   |            2.45 |            1.40 |              - |   |          13.50 |            6.80 |          0.045 |

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| Comparison of Five Year Cumulative Total Return Among                     |
|---------------------------------------------------------------------------|
| Patriot National Bancorp, Inc., S & P 500 Index and NASDAQ Bank Index |
|                           | Period Ending                              |
|--------------------------------|--------------------------------------------|
| Index                          | 12/31/04                                   | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 |
|                           |                                       |   |   |   |   |   |
| Patriot National Bancorp, Inc. |       100.00 |       113.59 |       143.75 |         86.79 |         37.23 |           8.42 |
| S & P 500                  |       100.00 |       103.00 |       117.03 |       121.16 |         74.53 |         92.01 |
| NASDAQ Bank Index              |       100.00 |         95.67 |       106.20 |         82.76 |         62.96 |         51.31 |

----

|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|                                 | At or for the year ended December 31,                                                                                                       |
|                                 | 2009                                                                                                                                        | 2008                                                                                                               | 2007                                                                                                                   | 2006                                                                                                                   | 2005                                                                                                                   |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
| Operating Data:                      |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
| Interest and dividend income         |  $      42,968,080                                                                                       |  $     55,750,246                                                                    |  $     51,862,157                                                                        |  $     38,009,526                                                                        |  $     25,148,701                                                                        |
| Interest expense                     |          24,359,828                                                                            |         28,539,067                                                         |         27,767,310                                                             |         18,069,648                                                             |         10,269,625                                                             |
| Net interest income                  |          18,608,252                                                                            |         27,211,179                                                         |         24,094,847                                                             |         19,939,878                                                             |         14,879,076                                                             |
| Provision for loan losses            |          13,089,000                                                                            |         11,289,772                                                         |                75,000                       |           1,040,000                                                  |           1,110,000                                                  |
| Noninterest income (loss)            |            2,946,480                                                                 |             (149,108)                                  |           2,233,915                                                  |           2,359,149                                                  |           3,229,037                                                  |
| Noninterest expense                  |          30,131,588                                                                            |         25,947,905                                                         |         22,038,836                                                             |         17,576,872                                                             |         14,634,487                                                             |
| Provision (benefit) for income taxes |            2,213,750                                                                 |          (3,064,000)                                                  |           1,537,000                                                  |           1,267,000                                                  |              957,000                                  |
| Net (loss) income                    |        (23,879,606)                                                                                      |          (7,111,606)                                                  |           2,677,926                                                  |           2,415,155                                                  |           1,406,626                                                  |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
| Per Share Data:                      |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
| Basic (loss) income per share        |                   (5.02)                          |                   (1.50) |                    0.56 |                    0.67 |                    0.52 |
| Diluted (loss) income per share      |                   (5.02)                          |                   (1.50) |                    0.56 |                    0.66 |                    0.51 |
| Dividends per share                  |                        - |                  0.180        |                  0.180            |                  0.175            |                  0.155            |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
| Balance Sheet Data:                  |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
|                                 |                                                                                                                                        |                                                                                                               |                                                                                                                   |                                                                                                                   |                                                                                                                   |
| Cash and due from banks              |          97,535,593                                                                            |           4,286,233                                              |           2,760,246                                                  |           3,868,670                                                  |           7,220,577                                                  |
| Federal funds sold                   |          10,000,000                                                                            |         20,000,000                                                         |         11,000,000                                                             |         27,000,000                                                             |           6,500,000                                                  |
| Short-term investments               |               263,839                                                 |              316,518                              |              251,668                                  |         24,605,869                                                             |           2,247,028                                                  |
| Investment securities                |          55,177,931                                                                            |         58,401,177                                                         |         71,857,840                                                             |         70,222,035                                                             |         80,991,068                                                             |
| Loans, net                           |        645,205,943                                                                                       |       788,568,687                                                                    |       685,885,990                                                                        |       506,884,155                                                                        |       364,243,777                                                                        |
| Total assets                         |        866,416,921                                                                                       |       913,358,978                                                                    |       807,530,254                                                                        |       645,982,795                                                                        |       470,641,162                                                                        |
| Total deposits                       |        761,334,292                                                                                       |       784,821,351                                                                    |       672,399,409                                                                        |       561,451,664                                                                        |       419,075,288                                                                        |
| Total borrowings                     |          65,248,000                                                                            |         65,248,000                                                         |         62,748,000                                                             |         16,248,000                                                             |         17,248,000                                                             |
| Total shareholders' equity           |          35,861,310                                                                            |         58,774,144                                                         |         66,835,367                                                             |         64,283,345                                                             |         31,374,615                                                             |

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|                                                     | 2009                                                | 2008                                                | 2007                                                |
|----------------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|
|                                                     |                                                |                                                |                                                |
| U. S. Government Agency obligations                      |  $    5,108,500            |  $  10,102,248                       |  $  16,924,648                       |
| U. S. Government Agency                                  |                                                |                                                |                                                |
|      mortgage-backed securities |      40,503,458            |      37,998,569            |      41,325,870            |
| Money market preferred equity securities                 |        3,218,023 |        3,878,860 |        9,039,522 |
| Federal Reserve Bank stock                               |        1,839,650 |        1,913,200 |        1,911,700 |
| Federal Home Loan Bank stock                             |        4,508,300 |        4,508,300 |        2,656,100 |
| Total Investments                                        |  $  55,177,931                       |  $  58,401,177                       |  $  71,857,840                       |

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|                                                     |                                                                                                                            | Over one                                                                                                                  | Over five                                                                                                           |                                                                                                                |                                                                                                                 |                                          | Weighted |
|----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|----------|
|                                                     | One year                                                                                                                        | through                                                                                                                   | through                                                                                                             | Over ten                                                                                                            |                                                                                                                 |                                          | Average  |
|                                                     | or less                                                                                                                         | five years                                                                                                                | ten years                                                                                                           | years                                                                                                               | No maturity                                                                                                          | Total                                         | Yield    |
|                                                     |                                                                                                                            |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                                                 |                                          |     |
| U. S. Government Agency                                  |                                                                                                                            |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                                                 |                                          |     |
|      obligations                |  $                  -            |  $                 -            |  $                -            |  $ 5,176,712                                                                                                   |  $                  - |  $   5,176,712            | 6.07%    |
| U. S. Government Agency                                  |                                                                                                                            |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                                                 |                                          |     |
|      mortgage-backed securities |                      - |                     - |                    - |                    - |     40,428,810                                                                                   |     40,428,810            | 3.88%    |
| Money market preferred                                   |                                                                                                                            |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                                                 |                                          |     |
|      equity securities          |                      - |                     - |                    - |                    - |       1,899,720                                                                        |       1,899,720 | 4.68%    |
| Total                                                    |  $                  -            |  $                 -            |  $                -            |  $ 5,176,712                                                                                                   |  $ 42,328,530                                                                                                   |  $ 47,505,242                            | 4.15%    |
| Weighted average yield                                   |                      - |                     - |                    - | 6.07%                                                                                                               | 3.92%                                                                                                                | 4.15%                                         |     |

|                                               | Amortized Cost                                                                                 | Fair Value                                                                                     |
|----------------------------------------------------|------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|
|                                               |                                                                                           |                                                                                           |
| Available for sale securities:                     |                                                                                           |                                                                                           |
| U. S. Government Agency obligations                |  $             5,176,712 |  $             5,108,500 |
| U. S. Government Agency mortgage-backed securities |               40,428,810 |               40,503,458 |

----

|                        |                                                              | 2009                                                                         | 2008                                                                         | 2007                                                                         | 2006                                                                         | 2005                                                                                                                                                                |
|-----------------------------|-------------------------------------------------------------------|------------------------------------------------------------------------------|------------------------------------------------------------------------------|------------------------------------------------------------------------------|------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                              |                                                                         |                                                                         |                                                                         |                                                                         |                                                                                                                                                                |
| Real Estate                 |                                                              |                                                                         |                                                                         |                                                                         |                                                                         |
|                        | Commercial                                                        |  $      230,225,306                       |  $      262,570,339                       |  $      233,121,685                       |  $      166,799,341                       |  $      129,178,889                                                                                                              |
|                        | Residential                                                       | 195,571,225                                                                  | 170,449,780                                                                  | 110,154,838                                                                  | 91,077,687                                                                   | 77,391,833                                                                                                                                                          |
|                        | Construction                                                      | 154,457,082                                                                  | 257,117,081                                                                  | 254,296,326                                                                  | 173,840,322                                                                  | 107,232,587                                                                                                                                                         |
|                        | Construction to permanent                                         |            15,989,976 |            35,625,992 |            37,701,509 |            29,988,131 |                            - |
| Commercial                  | 19,298,505                                                        | 33,860,527                                                                   | 27,494,531                                                                   | 23,997,640                                                                   | 15,591,818                                                                   |
| Consumer installment        | 1,155,059                                                         | 993,707                                                                      | 1,270,360                                                                    | 1,251,300                                                                    | 1,106,648                                                                    |
| Consumer home equity        | 44,309,265                                                        | 45,022,128                                                                   | 29,154,498                                                                   | 26,933,277                                                                   | 39,097,450                                                                   |
| Total loans                 |          661,006,418 |          805,639,554            |          693,193,747            |          513,887,698            |          369,599,225            |
| Premiums on purchased loans | 131,993                                                           | 158,072                                                                      | 195,805                                                                      | 292,543                                                                      | 367,491                                                                      |
| Net deferred fees           | (138,350)                                                         | (981,869)                                                                    | (1,830,942)                                                                  | (1,665,654)                                                                  | (1,134,604)                                                                  |
| Allowance for loan losses   | (15,794,118)                                                      | (16,247,070)                                                                 | (5,672,620)                                                                  | (5,630,432)                                                                  | (4,588,335)                                                                  |
| Loans, net                  |  $      645,205,943            |  $      788,568,687                       |  $      685,885,990                       |  $      506,884,155                       |  $      364,243,777                       |

----

|                                |                                                                                                                            | Due after                                                                                                                       |                                                                                                                            |                                                                                            |
|-------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                                | Due in                                                                                                                          | one year                                                                                                                        |                                                                                                                            |                                                                                            |
|                                | one year                                                                                                                        | through                                                                                                                         | Due after                                                                                                                       |                                                                                            |
| (thousands of dollars)              | or less                                                                                                                         | five years                                                                                                                      | five years                                                                                                                      | Total                                                                                           |
| Commercial real estate              |  $          31,578                                                       |  $          47,701                                                       |  $        150,946                                                                  |  $        230,225                                  |
| Residential real estate             |                6,073                                 |                5,738                                 |            183,760                                                       |            195,572                       |
| Construction loans                  |              97,863                                            |                3,985                                 |              52,609                                            |            154,457                       |
| Construction to permanent loans     |                      - |                      - |              15,990                                            |              15,990            |
| Commercial loans                    |                9,715                                 |                4,187                                 |                5,397                                 |              19,298            |
| Consumer installment                |                1,057                                 |                     98      |                      - |                1,155 |
| Consumer home equity                |                2,394                                 |                     84      |              41,831                                            |              44,309            |
|      Total |  $        148,680                                                                  |  $          61,793                                                       |  $        450,533                                                                  |  $        661,006                                  |
|                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                                            |
| Fixed rate loans                    |  $          19,112                                                       |  $          29,984                                                       |  $          15,093                                                       |  $          64,189                       |
| Variable rate loans                 |            129,568                                                       |              31,809                                            |            435,440                                                       |            596,817                       |
|      Total |  $        148,680                                                                  |  $          61,793                                                       |  $        450,533                                                                  |  $        661,006                                  |

----

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|                                      | 2009                                                                         | 2008                                                                                              | 2007                                                                                              | 2006                                                                                              | 2005                                                                                              |
|-------------------------------------------|------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
|                                      | (thousands of dollars)                                                       |
|                                      |                                                                         |                                                                                              |                                                                                              |                                                                                              |                                                                                              |
| Balance at beginning of period            |  $    16,247                                        |  $      5,673                                                  |  $      5,630                                                  |  $      4,588                                                  |  $      3,481                                                  |
| Charge-offs:                              |                                                                         |                                                                                              |                                                                                              |                                                                                              |                                                                                              |
|    Commercial real estate  |        (2,380)                            | (708)                                                                                             | (32)                                                                                              | (1)                                                                                               |               (3)           |
|    Residential real estate |           (356)            |                 - |                 - |                 - |                 - |
|    Construction            |        (9,097)                            |                 - |                 - |                 - |                 - |
|    Commercial              |           (468)            |                 - |                 - |                 - |                 - |
|    Consumer home equity    |        (1,378)                            |                 - |                 - |                 - |                 - |
|    Consumer                |             (51) | (8)                                                                                               |                 - |                 - |                 - |
| Total charge-offs                         |      (13,730)                                       |           (716)                                 |             (32)                      |               (1)           |               (3)           |
| Recoveries                                |             188  |                 1 |                 - |                 3 |                 - |
| Net (charge-offs) recoveries              |      (13,542)                                       |           (715)                                 |             (32)                      |                 2 |               (3)           |
| Additions charged to operations           |        13,089                             |        11,289                                                  |               75            |          1,040                                       |          1,110                                       |
| Balance at end of period                  |  $    15,794                                        |  $    16,247                                                             |  $      5,673                                                  |  $      5,630                                                  |  $      4,588                                                  |
|                                      |                                                                         |                                                                                              |                                                                                              |                                                                                              |                                                                                              |
| Ratio of net (charge-offs) recoveries     |                                                                         |                                                                                              |                                                                                              |                                                                                              |                                                                                              |
| during the period to average loans        |                                                                         |                                                                                              |                                                                                              |                                                                                              |                                                                                              |
| outstanding during the period             | (1.81%)                                                                      | (0.09%)                                                                                           | (0.00%)                                                                                           | 0.00%                                                                                             | (0.00%)                                                                                           |
|                                      |                                                                         |                                                                                              |                                                                                              |                                                                                              |                                                                                              |
| Ratio of ALLL / Gross Loans               | 2.39%                                                                        | 2.02%                                                                                             | 0.82%                                                                                             | 1.10%                                                                                             | 1.24%                                                                                             |

----

|                                        |                                                                 |                                                                 |                                                                |                                                     |                                                                |   |   | Percent of loans in each |
|---------------------------------------------|----------------------------------------------------------------------|----------------------------------------------------------------------|---------------------------------------------------------------------|----------------------------------------------------------|---------------------------------------------------------------------|--------|--------|--------------------------|
| Balance at end of each                      | Amounts (thousands of dollars)                                       | category to total loans                                    |                                                                |
| period applicable to:                       | 2009                                                                 | 2008                                                                 | 2007                                                                | 2006                                                     | 2005                                                                |   |   | 2009                     | 2008 | 2007 | 2006 | 2005 |
| Real Estate:                                |                                                                 |                                                                 |                                                                |                                                     |                                                                |   |   |                     |   |   |   |   |
|    Commercial                |  $   5,752                                       |  $   4,843                                       |  $ 1,963                                                       |  $ 1,943                                            |  $ 1,607                                                       |   |   | 34.83%                   | 32.59% | 33.63% | 32.46% | 34.95% |
|    Residential               |       1,575                            |       1,417                            |        296                       |        245            |        511                       |   |   | 29.59%                   | 21.16% | 15.89% | 17.72% | 20.94% |
|    Construction              |       6,557                            |       8,654                            |     2,644                                       |     2,557                            |     1,963                                       |   |   | 23.37%                   | 31.91% | 36.68% | 33.83% | 29.01% |
|    Construction to permanent |            93 |          264            |        391                       |        441            |            - |   |   | 2.42%                    | 4.42% | 5.44% | 5.84% | 0.00% |
| Commercial                                  |          521            |          471            |        271                       |        290            |        164                       |   |   | 2.92%                    | 4.20% | 3.97% | 4.67% | 4.22% |
| Consumer installment                        |            47 |            28 |          30            |          31 |          10            |   |   | 0.17%                    | 0.12% | 0.18% | 0.24% | 0.30% |
| Consumer home equity                        |          703            |          336            |          77            |          72 |        260                       |   |   | 6.70%                    | 5.59% | 4.21% | 5.24% | 10.58% |
| Unallocated                                 |          546            |          234            |            1 |          51 |          73            |   |   | N/A                      | N/A | N/A | N/A | N/A |
| Total                                       |  $ 15,794                                                       |  $ 16,247                                                       |  $ 5,673                                                       |  $ 5,630                                            |  $ 4,588                                                       |   |   | 100.00%                  | 100.00% | 100.00% | 100.00% | 100.00% |

|                                                | 2009                                             | 2008                                                             | 2007                                                             | 2006                                                             | 2005                                                                                   |
|-----------------------------------------------------|--------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|----------------------------------------------------------------------------------------|
|                                                | (thousands of dollars)                           |
|                                                |                                             |                                                             |                                                             |                                                             |                                                                                   |
| Loans delinquent over 90                            |                                             |                                                             |                                                             |                                                             |                                                                                   |
|    days still accruing               |  $      3,571 |  $         337 |  $         112 |  $      1,897                 |  $         275                       |
| Non-accrual loans                                   |      113,537            |        80,156                 |          3,832      |          2,904      |          1,935                            |
|                                                |  $  117,108                       |  $    80,493                            |  $      3,944                 |  $      4,801                 |  $      2,210                                       |
|                                                |                                             |                                                             |                                                             |                                                             |                                                                                   |
| % of Total Loans                                    | 17.72%                                           | 10.21%                                                           | 0.57%                                                            | 0.93%                                                            | 0.60%                                                                                  |
| % of Total Assets                                   | 13.52%                                           | 8.81%                                                            | 0.49%                                                            | 0.74%                                                            | 0.47%                                                                                  |
|                                                |                                             |                                                             |                                                             |                                                             |                                                                                   |
| Additional income on non-accrual                    |                                             |                                                             |                                                             |                                                             |                                                                                   |
|    loans if recognized on an accrual |                                             |                                                             |                                                             |                                                             |                                                                                   |
|    basis                             |  $      5,312 |  $      2,854                 |  $         168 |  $         141 |  $             6 |

----

----

|                     | December 31,                                                              |   |
|--------------------------|---------------------------------------------------------------------------|--------|
|                     | 2009                                                                      |   |
|                     |                                                                      |   |
| Residential construction |  $   13,524,597                                       |   |
| Commercial               |         4,934,896                 |   |
| Land                     |            614,500 |   |
|                     |                                                                      |   |
| Other real estate owned  |  $   19,073,993                                       |   |
|                     |                                                                      |   |

----

|                                                    | 2009                                                                         | 2008                                                                         | 2007                                                                         |
|---------------------------------------------------------|------------------------------------------------------------------------------|------------------------------------------------------------------------------|------------------------------------------------------------------------------|
|                                                    |                                                                         |                                                                         |                                                                         |
| Non-interest bearing                                    |  $        49,755,521            |  $        50,194,400            |  $        51,925,991            |
|                                                    |                                                                         |                                                                         |                                                                         |
| Interest bearing                                        |                                                                         |                                                                         |                                                                         |
|    Time certificates, less than $100,000 |          305,719,484            |          405,298,436            |          300,502,281            |
|    Time certificates, $100,000 or more   |          202,493,307            |          195,502,087            |          231,366,788            |
|    Money markets                         |          112,017,987            |            68,241,790 |            34,880,837 |
|    Savings                               |            69,766,296 |            46,040,086 |            34,261,389 |
|    NOW                                   |            21,581,697 |            19,544,552 |            19,462,123 |
|    Total interest bearing                |          711,578,771            |          734,626,951            |          620,473,418            |
| Total deposits                                          |  $      761,334,292                       |  $      784,821,351                       |  $      672,399,409                       |

----

|   |                     | Less than                                                                                                          | $100,000 or                                                                                                        |                                                                                                               |
|--------|--------------------------|--------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
|   |                     | $100,000                                                                                                           | greater                                                                                                            | Totals                                                                                                             |
|   |                     | (thousands of dollars)                                                                                             |
|   |                     |                                                                                                               |                                                                                                               |                                                                                                               |
|   | Three months or less     |  $               88,485            |  $               56,841            |  $             145,326                       |
|   | Four to six months       |                   39,507 |                   22,941 |                   62,448 |
|   | Seven months to one year |                   79,889 |                   49,284 |                 129,173            |
|   | Over one year            |                   97,839 |                   73,427 |                 171,266            |
|   | Total                    |  $             305,720                       |  $             202,493                       |  $             508,213                       |

----

|                                                                                                                                                                                                                                                                           | Distribution of Assets, Liabilities and Shareholder's Equity                   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                           | Interest Rates and Interest Differential and Rate Volume Variance Analysis (1) |
|                                                                                                                                                                                                                                                                           | (thousands of dollars)                                                         |
|                                                                                                                                                                                                                                                                           | 2009                                                                           |   | 2008 |   | 2007 |   | 2009 vs. 2008 Fluctuations |   | 2008 vs. 2007 Fluctuations |
|                                                                                                                                                                                                                                                                           |                                                                           | Interest |   |   |   | Interest |   |   |   | Interest |   |   | Interest Income/Expense (3) |   | Interest Income/Expense (3) |
|                                                                                                                                                                                                                                                                           | Average                                                                        | Income/ | Average |   | Average | Income/ | Average |   | Average | Income/ | Average |   | Due to Change in: |   | Due to Change in: |
|                                                                                                                                                                                                                                                                           | Balance                                                                        | Expense | Rate |   | Balance | Expense | Rate |   | Balance | Expense | Rate |   | Volume | Rate | Total |   | Volume | Rate | Total |
| Interest earning assets:                                                                                                                                                                                                                                                       |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Loans (2)                                                                                                                                                                                                                                                    |  $   750,127                                               |  $    41,121 | 5.48% |   |  $   771,174 |  $   52,484 | 6.81% |   |  $   598,525 |  $   46,949 | 7.84% |   |  $   (1,393) |  $   (9,970) |  $ (11,363) |   |  $   12,275 |  $   (6,740) |  $     5,535 |
|    Federal funds sold and                                                                                                                                                                                                                                       |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      other cash equivalents                                                                                                                                                                                                                           |       104,668                                    |             218 | 0.21% |   |         12,435 |            325 | 2.61% |   |         40,000 |         2,058 | 5.15% |   |           435 |          (542) |          (107) |   |       (1,010) |          (723) |       (1,733) |
|    Investments (4)                                                                                                                                                                                                                                              |         44,070                         |          1,629 | 3.70% |   |         63,199 |         2,941 | 4.65% |   |         67,420 |         2,855 | 4.23% |   |          (783) |          (529) |       (1,312) |   |          (172) |            258 |              86 |
| Total interest earning assets                                                                                                                                                                                                                                                  |  $   898,865                                               |  $    42,968 | 4.78% |   |  $   846,808 |  $   55,750 | 6.58% |   |  $   705,945 |  $   51,862 | 7.35% |   |       (1,741) |     (11,041) |     (12,782) |   |       11,093 |       (7,205) |         3,888 |
|                                                                                                                                                                                                                                                                           |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and due from banks                                                                                                                                                                                                                                      |         22,639                         |   |   |   |           5,993 |   |   |   |           4,155 |   |   |   |   |   |   |   |   |   |   |
|    Allowance for loan losses                                                                                                                                                                                                                                    |       (16,689)                                   |   |   |   |         (7,575) |   |   |   |         (5,613) |   |   |   |   |   |   |   |   |   |   |
|    Other assets                                                                                                                                                                                                                                                 |         43,447                         |   |   |   |         37,209 |   |   |   |         19,813 |   |   |   |   |   |   |   |   |   |   |
|      Total Assets                                                                                                                                                                                                                                     |  $   948,262                                               |   |   |   |  $   882,435 |   |   |   |  $   724,300 |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                           |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                                                                                                                                                                                                                  |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Time certificates                                                                                                                                                                                                                                            |  $   592,724                                               |  $    18,828 | 3.18% |   |  $   568,717 |  $   23,561 | 4.14% |   |  $   483,918 |  $   24,811 | 5.13% |   |  $       953 |  $   (5,686) |  $   (4,733) |   |  $     3,965 |  $   (5,215) |  $   (1,250) |
|    Savings accounts                                                                                                                                                                                                                                             |         59,103                         |          1,120 | 1.89% |   |         40,252 |            992 | 2.46% |   |         30,657 |            747 | 2.44% |   |           392 |          (264) |            128 |   |            229 |              16 |            245 |
|    Money market accounts                                                                                                                                                                                                                                        |       106,091                                    |          1,917 | 1.81% |   |         54,321 |         1,229 | 2.26% |   |         38,526 |            699 | 1.81% |   |           973 |          (285) |            688 |   |            242 |            288 |            530 |
|    NOW accounts                                                                                                                                                                                                                                                 |         21,582                         |             156 | 0.72% |   |         21,044 |            186 | 0.88% |   |         26,612 |            267 | 1.00% |   |               5 |            (35) |            (30) |   |            (52) |            (29) |            (81) |
|    FHLB advances                                                                                                                                                                                                                                                |         50,003                         |          1,699 | 3.40% |   |         57,716 |         1,726 | 2.99% |   |         11,174 |            511 | 4.57% |   |          (215) |            188 |            (27) |   |         1,448 |          (233) |         1,215 |
|    Subordinated debt                                                                                                                                                                                                                                            |           8,248              |             331 | 4.01% |   |           8,248 |            536 | 6.50% |   |           8,248 |            691 | 8.38% |   |                - |          (205) |          (205) |   |                - |          (155) |          (155) |
|    Other borrowings                                                                                                                                                                                                                                             |           7,000              |             309 | 4.41% |   |           7,005 |            309 | 4.41% |   |              927 |              41 | 4.42% |   |                - |                - |                - |   |            268 |                - |            268 |
|    Total interest bearing liabilities                                                                                                                                                                                                                                |  $   844,751                                               |  $    24,360 | 2.88% |   |  $   757,304 |  $   28,539 | 3.77% |   |  $   600,062 |  $   27,767 | 4.63% |   |        2,108 |       (6,287) |       (4,179) |   |         6,100 |       (5,328) |            772 |
|                                                                                                                                                                                                                                                                           |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Demand deposits                                                                                                                                                                                                                                              |         47,810                         |   |   |   |         53,380 |   |   |   |         52,992 |   |   |   |   |   |   |   |   |   |   |
|    Accrued expenses and                                                                                                                                                                                                                                         |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         and other liabilities                                                                                                                                                                                                          |           3,810              |   |   |   |           4,502 |   |   |   |           5,441 |   |   |   |   |   |   |   |   |   |   |
|    Shareholder's equity                                                                                                                                                                                                                                         |         51,891                         |   |   |   |         67,250 |   |   |   |         65,805 |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and equity                                                                                                                                                                                                                                                   |  $   948,262                                               |   |   |   |  $   882,435 |   |   |   |  $   724,300 |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                           |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                                                                                                                                                                                            |                                                                           |  $    18,608 |   |   |   |  $   27,211 |   |   |   |  $   24,095 |   |   |  $   (3,849) |  $   (4,754) |  $   (8,603) |   |  $     4,993 |  $   (1,877) |  $     3,116 |
| Interest margin                                                                                                                                                                                                                                                                |                                                                           |   | 2.07% |   |   |   | 3.21% |   |   |   | 3.41% |   |   |   |   |   |   |   |   |
| Interest spread                                                                                                                                                                                                                                                                |                                                                           |   | 1.90% |   |   |   | 2.81% |   |   |   | 2.72% |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                           |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) The rate volume analysis reflects the changes in net interest income arising from changes in interest rates and from asset and liability volume, including mix.  The change in interest attributable to volume includes changes in interest attributable to mix. |
|                                                                                                                                                                                                                                                                           |
| (2) Includes non-accruing loans                                                                                                                                                                                                                                                |
| (3) Favorable/(unfavorable) fluctuations.                                                                                                                                                                                                                                      |
| (4) Yields are calculated at historical cost and excludes the effects of unrealized gains or losses on available-for-sale securities.                                                                                                                                          |

----

|                                      | 2009                                        | 2008                                        | 2007                                                  |
|-------------------------------------------|---------------------------------------------|---------------------------------------------|-------------------------------------------------------|
|                                      |                                        |                                        |                                                  |
| (Loss) return on average assets           | (2.52%)                                     | (0.81%)                                     | 0.37%                                                 |
| (Loss) return on average equity           | (46.02%)                                    | (10.62%)                                    | 4.07%                                                 |
| Dividend payout ratio                     | N / A                                       | N / A                                       | 32.14%                                                |
| Average equity to average assets          | 5.47%                                       | 7.59%                                       | 9.09%                                                 |
| Basic and diluted (loss) income per share |  $     (5.02) |  $     (1.50) |  $       0.56 |

----

----

----

----

|                             | 2008                                        | 2007                                                  | 2006                                                  |
|----------------------------------|---------------------------------------------|-------------------------------------------------------|-------------------------------------------------------|
|                             |                                        |                                                  |                                                  |
| (Loss) return on average assets  | (0.81)                                      | 0.37%                                                 | 0.44%                                                 |
| (Loss) return on average equity  | (10.62)                                     | 4.07%                                                 | 5.97%                                                 |
| Dividend payout ratio            | N / A                                       | 32.14%                                                | 26.12%                                                |
| Average equity to average assets | 7.59%                                       | 9.09%                                                 | 7.41%                                                 |
| Basic income per share           |  $     (1.50) |  $       0.56 |  $       0.67 |
| Diluted income per share         |  $     (1.50) |  $       0.56 |  $       0.66 |

----

----

----

|                                               |                                                                              | Less than                                                                                                                                                     | One to                                                                                                                                                                    | Three to                                                                                                                                                | Over five                                                                                                                                    |
|----------------------------------------------------|-----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                               | Total                                                                             | one year                                                                                                                                                      | three years                                                                                                                                                               | five years                                                                                                                                              | years                                                                                                                                        |
|                                               |                                                                              |                                                                                                                                                          |                                                                                                                                                                      |                                                                                                                                                    |                                                                                                                                         |
| Certificates of deposit                            |  $     508,212,791                                  |  $     336,946,484                                                                                                              |  $      107,218,035                                                                                                                    |  $     64,048,272                                                                                                         |  $                      - |
| Junior subordinated debt owed to                   |                                                                              |                                                                                                                                                          |                                                                                                                                                                      |                                                                                                                                                    |                                                                                                                                         |
|      unconsolidated trust |             8,248,000 |                           - |                             - |                          - |           8,248,000                                                                        |
| FHLB Advances                                      |           50,000,000            |                           - |            10,000,000                                                                                              |         20,000,000                                                                                              |         20,000,000                                                                                   |
| Securities sold under agreements                   |                                                                              |                                                                                                                                                          |                                                                                                                                                                      |                                                                                                                                                    |                                                                                                                                         |
|      to repurchase        |             7,000,000 |                           - |                             - |                          - |           7,000,000                                                                        |
| Operating lease obligations                        |           16,812,581            |             2,843,498                                                                             |              5,513,546                                                                                   |           4,362,620                                                                                   |           4,092,917                                                                        |
|                                               |                                                                              |                                                                                                                                                          |                                                                                                                                                                      |                                                                                                                                                    |                                                                                                                                         |
| Total contractual obligations                      |  $     590,273,372                                  |  $     339,789,982                                                                                                              |  $      122,731,581                                                                                                                    |  $     88,410,892                                                                                                         |  $     39,340,917                                                                                              |

----

|   | Future loan commitments             |  $     3,378,751            |   |
|--------|-------------------------------------|-----------------------------------------------------------|--------|
|   | Unused lines of credit              |       34,569,144            |   |
|   | Undisbursed construction loans      |       17,682,552            |   |
|   | Financial standby letters of credit |         1,112,600 |   |
|   |                                |                                                      |   |
|   | Total commitments                   |  $   56,743,047                       |   |

|   |                       | December 31, |
|--------|----------------------------|--------------|
|   |                       | 2009         | 2008 | 2007 |
|   |                       |         |   |   |
|   | Total Risk-Based Capital   | 8.58%        | 10.27% | 12.17% |
|   | Tier 1 Risk- Based Capital | 7.22%        | 9.01% | 11.30% |
|   | Leverage Capital           | 4.72%        | 7.23% | 9.42% |

|   |                       | December 31, |
|--------|----------------------------|--------------|
|   |                       | 2009         | 2008 | 2007 |
|   |                       |         |   |   |
|   | Total Risk-Based Capital   | 8.58%        | 10.22% | 12.03% |
|   | Tier 1 Risk- Based Capital | 7.22%        | 8.96% | 11.15% |
|   | Leverage Capital           | 4.72%        | 7.19% | 9.30% |

----

----

----

|                 | Basis     | Interest Rate   | December 31, |
|----------------------|-----------|-----------------|--------------|
|                 | Points    | Risk Guidelines | 2009         | 2008 |
|                 |      |            |         |   |
| Gap percentage total |      | +/- 10%         | 3.98%        | 2.51% |
|                 |      |            |         |   |
| Net interest income  |  200 | +/- 10%         | 4.67%        | -1.32% |
|                 | -200      | +/- 10%         | 5.12%        | -0.54% |
|                 |      |            |         |   |
| Net portfolio value  |  200 | +/- 20%         | -8.93%       | -12.48% |
|                 | -200      | +/- 20%         | -7.42%       | 5.40% |

----

| Net Interest Income and Economic Value |
|----------------------------------------|
| Summary Performance                    |
|                                   |   |   |   |   |   |   |   |
| December 31, 2009                      |
|                                   | Net Interest Income | Net Portfolio Value |
| Projected Interest                     | Estimated | $ Change | % Change |   | Estimated | $ Change | % Change |
| Rate Scenario                          | Value | from Base | from Base |   | Value | from Base | from Base |
| + 200                                  |         20,750 |              925 | 4.67% |   |         49,704 |          (4,872) | -8.93% |
| + 100                                  |         20,113 |              288 | 1.45% |   |         51,762 |          (2,814) | -5.16% |
| BASE                                   |         19,825 |                   - |                   - |   |         54,576 |                   - |                   - |
| - 100                                  |         20,557 |              732 | 3.69% |   |         54,945 |              369 | 0.68% |
| - 200                                  |         20,841 |           1,016 | 5.12% |   |         50,525 |          (4,051) | -7.42% |
|                                   |   |   |   |   |   |   |   |
| December 31, 2008                      |
|                                   | Net Interest Income | Net Portfolio Value |
| Projected Interest                     | Estimated | $ Change | % Change |   | Estimated | $ Change | % Change |
| Rate Scenario                          | Value | from Base | from Base |   | Value | from Base | from Base |
| + 200                                  |         22,609 |             (302) | -1.32% |   |         67,804 |          (9,668) | -12.48% |
| + 100                                  |         22,745 |             (166) | -0.73% |   |         72,462 |          (5,010) | -6.47% |
| BASE                                   |         22,911 |   |   |   |         77,472 |   |   |
| - 100                                  |         22,927 |                16 | 0.07% |   |         80,422 |           2,950 | 3.81% |
| - 200                                  |         22,788 |             (123) | -0.54% |   |         81,658 |           4,186 | 5.40% |

----

|                                                | First                                                                               | Second                                                                              | Third                                                                           | Fourth                                                                          |
|-----------------------------------------------------|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------|
|                                                | Quarter                                                                             | Quarter                                                                             | Quarter                                                                         | Quarter                                                                         |
|                                                |                                                                                |                                                                                |                                                                            |                                                                            |
| 2009:                                               |                                                                                |                                                                                |                                                                            |                                                                            |
| Interest income                                     |  $   12,359,234                                                 |  $   10,998,963                                                 |  $    9,983,932                                        |  $    9,625,951                                        |
| Interest expense                                    |        6,830,950                                 |        6,595,455                                 |        5,983,941                             |        4,949,482                             |
|    Net interest income               |        5,528,284                                 |        4,403,508                                 |        3,999,991                             |        4,676,469                             |
| Provision for loan losses                           |        1,600,000                                 |        5,956,000                                 |        1,453,000                             |        4,080,000                             |
| Noninterest income                                  |        1,022,654                                 |           666,597                 |           617,707             |           639,522             |
| Noninterest expenses                                |        6,305,899                                 |        7,446,962                                 |        7,535,346                             |        8,843,381                             |
|    (Loss) before income taxes        |       (1,354,961)                                     |       (8,332,857)                                     |       (4,370,648)                                 |       (7,607,390)                                 |
| Provision (benefit) for income taxes                |         (258,000)                           |       (3,696,000)                                     |        9,565,000                             |       (3,397,250)                                 |
| Net loss                                            |  $   (1,096,961)                                                |  $   (4,636,857)                                                |  $ (13,935,648)                                                            |  $   (4,210,140)                                            |
|                                                |                                                                                |                                                                                |                                                                            |                                                                            |
| Net income (loss) per common share:                 |                                                                                |                                                                                |                                                                            |                                                                            |
| Basic and diluted                                   |  $           (0.23)     |  $           (0.98)     |  $           (2.93) |  $           (0.88) |
|                                                |                                                                                |                                                                                |                                                                            |                                                                            |
|                                                |                                                                                |                                                                                |                                                                            |                                                                            |
| 2008:                                               |                                                                                |                                                                                |                                                                            |                                                                            |
| Interest income                                     |  $   14,298,676                                                 |  $   14,524,245                                                 |  $   13,473,165                                             |  $   13,454,160                                             |
| Interest expense                                    |        8,150,666                                 |        7,397,678                                 |        6,370,263                             |        6,620,460                             |
|    Net interest income               |        6,148,010                                 |        7,126,567                                 |        7,102,902                             |        6,833,700                             |
| Provision for loan losses                           |           477,000                 |        1,068,000                                 |        3,000,000                             |        6,744,772                             |
| Noninterest income                                  |           753,739                 |           761,014                 |         (303,564)                       |       (1,360,297)                                 |
| Noninterest expenses                                |        6,222,082                                 |        6,370,342                                 |        5,996,420                             |        7,359,061                             |
|    Income (loss) before income taxes |           202,667                 |           449,239                 |       (2,197,082)                                 |       (8,630,430)                                 |
| Provision (benefit) for income taxes                |             52,000      |             53,000      |         (288,000)                       |       (2,881,000)                                 |
| Net income (loss)                                   |  $       150,667                            |  $       396,239                            |  $   (1,909,082)                                            |  $   (5,749,430)                                            |
|                                                |                                                                                |                                                                                |                                                                            |                                                                            |
| Net income (loss) per common share:                 |                                                                                |                                                                                |                                                                            |                                                                            |
| Basic and diluted                                   |  $            0.03 |  $            0.08 |  $           (0.40) |  $           (1.21) |

----

----

----

| REPORT OF INDEPENDENT REGISTERED PUBLIC |
|-----------------------------------------|

| ACCOUNTING FIRM |
|-----------------|

| To the Shareholders and Board of Directors |
|--------------------------------------------|

| Patriot National Bancorp, Inc. and Subsidiary |
|-----------------------------------------------|

----

----

----

|        |                                                                                                                                                                                                                                                                                         |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)         | Exhibits                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                         |
| Exhibit No. | Description                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                         |
| 2           | Agreement and Plan of Reorganization dated as of June 28, 1999 between Bancorp and the Bank (incorporated by reference to Exhibit 2 to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).                                                   |
|        |                                                                                                                                                                                                                                                                                         |
| 2.1         | Securities Purchase Agreement by and among Patriot National Bancorp, Inc., Patriot National Bank and PNBK Holdings LLC dated as of December 16, 2009 (incorporated by reference to Exhibit 10.1 to Bancorp’s Current Report on Form 8-K dated December 17, 2009).                 |
|        |                                                                                                                                                                                                                                                                                         |
| 3(i)        | Certificate of Incorporation of Bancorp, (incorporated by reference to Exhibit 3(i) to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).                                                                                                   |
|        |                                                                                                                                                                                                                                                                                         |
| 3(i)(A)     | Certificate of Amendment of Certificate of Incorporation of Patriot National Bancorp, Inc. dated July 16, 2004 (incorporated by reference to Exhibit 3(i)(A) to Bancorp's Annual Report on Form 10-KSB for the year ended December 31, 2004 (Commission File No. 000-29599)).                |
|        |                                                                                                                                                                                                                                                                                         |
| 3(i)(B)     | Certificate of Amendment of Certificate of Incorporation of Patriot National Bancorp, Inc. dated June 15, 2006 (incorporated by reference to Exhibit 3(i)(B) to Bancorp's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (Commission File No. 000-29599)). |
|        |                                                                                                                                                                                                                                                                                         |
| 3(ii)       | Amended and Restated By-laws of Bancorp (incorporated by reference to Exhibit 3.2 to Bancorp’s Current Report on Form 8-K dated December 26, 2007 (Commission File No. 1-32007)).                                                                                                      |
|        |                                                                                                                                                                                                                                                                                         |
| 4           | Intentionally deleted                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                         |
| 10(a)(1)    | 2001 Stock Appreciation Rights Plan of Bancorp (incorporated by reference to Exhibit 10(a)(1) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2001 (Commission File No. 000-29599)).                                                               |

----

| Exhibit No. | Description                                                                                                                                                                                                                                                                                                                 |
|-------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                        |
| 10(a)(3)    | Intentionally deleted.                                                                                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                                        |
| 10(a)(4)    | Change of Control Agreement, dated as of January 1, 2007 among Angelo De Caro, and Patriot National Bank and Bancorp  (incorporated by reference to Exhibit 10(a)(4) to Bancorp's Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).           |
|        |                                                                                                                                                                                                                                                                                                                        |
| 10(a)(5)    | Employment Agreement dated as of January 1, 2008 among Patriot National Bank, Bancorp and Robert F. O’Connell  (incorporated by reference to Exhibit 10(a)(5) to Bancorp's Annual Report on Form 10-K for the year ended December 31, 2007 (Commission File No. 000-29599)).                      |
|        |                                                                                                                                                                                                                                                                                                                        |
| 10(a)(6)    | Change of Control Agreement, dated as of January 1, 2007 among Robert F. O’Connell and Patriot National Bank and Bancorp  (incorporated by reference to Exhibit 10(a)(6) to Bancorp's Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)). |
|        |                                                                                                                                                                                                                                                                                                                        |
| 10(a)(9)    | License agreement dated July 1, 2003 between Patriot National Bank and L. Morris Glucksman (incorporated by reference to Exhibit 10(a)(9) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2003 (Commission File No. 000-29599)).                                             |
|        |                                                                                                                                                                                                                                                                                                                        |
| 10(a)(10)   | Employment Agreement dated as of January 1, 2007 among Patriot National Bank, Bancorp and Charles F. Howell  (incorporated by reference to Exhibit 10(a)(10) to Bancorp's Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).                             |
|        |                                                                                                                                                                                                                                                                                                                        |
| 10(a)(11)   | Change of Control Agreement, dated as of January 1, 2007 among Charles F. Howell, Patriot National Bank and Bancorp  (incorporated by reference to Exhibit 10(a)(11) to Bancorp's Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).           |

----

| Exhibit No. | Description                                                                                                                                                                                                                                                                                            |
|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                   |
| 10(a)(12)   | 2005 Director Stock Award Plan (incorporated by reference to Exhibit 10(a)(12) to Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (Commission File No. 000-295999)).                                                                                       |
|        |                                                                                                                                                                                                                                                                                                   |
| 10(a)(13)   | Change of Control Agreement, dated as of January 1, 2007 between Martin G. Noble and Patriot National Bank (incorporated by reference to Exhibit 10(a)(13) to Bancorp's Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).          |
|        |                                                                                                                                                                                                                                                                                                   |
| 10(a)(14)   | Change of Control Agreement, dated as of January 1, 2007 among Philip W. Wolford, Patriot National Bank and Bancorp (incorporated by reference to Exhibit 10(a)(14) to Bancorp's Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)). |
|        |                                                                                                                                                                                                                                                                                                   |
| 10(a)(15)   | Formal Written Agreement between Patriot National Bank and the Office of the Comptroller of the Currency (incorporated by reference to Exhibit 10(a)(15) to Bancorp’s Current Report on Form 8-K dated February 9, 2009 (Commission File No. 000-29599)).                                        |
|        |                                                                                                                                                                                                                                                                                                   |
| 10(c)       | 1999 Stock Option Plan of the Bank (incorporated by reference to Exhibit 10(c) to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                   |
| 14          | Code of Conduct for Senior Financial Officers (incorporated by reference to Exhibit 14 to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2004 (Commission File No. 000-29599)).                                                                                          |
|        |                                                                                                                                                                                                                                                                                                   |
| 21          | Subsidiaries of Bancorp (Incorporated by reference to Exhibit 21 to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 1999 (Commission File No. 000-29599)).                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                   |
| 23          | Consent of McGladrey & Pullen, LLP.                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                   |
| 31(1)       | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                   |
| 31(2)       | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                   |
| 32          | Section 1350 Certification                                                                                                                                                                                                                                                                             |

----

|   | Patriot National Bancorp, Inc.                     |
|--------|----------------------------------------------------|
|   | (Registrant)                                       |
|   |                                               |
|   |                                               |
|   | By:  /s/   Angelo De Caro |
|   | Name: Angelo De Caro                               |
|   | Title: Chairman & Chief Executive Officer      |

|    /s/  Angelo De Caro                                                                                                  | March 15, 2010 |
|--------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
| Angelo De Caro, Chairman, Chief Executive                                                                                                        | Date           |
| Officer and Director                                                                                                                             |           |
|                                                                                                                                             |           |
|                                                                                                                                             |           |
|   /s/   Robert F. O’Connell                                                                                       | March 15, 2010 |
| Robert F. O’Connell                                                                                                                        | Date           |
| Senior Executive Vice President,                                                                                                                 |           |
| Chief Financial Officer and Director                                                                                                             |           |
|                                                                                                                                             |           |
|                                                                                                                                             |           |
|   /s/   Todd C. Scaccia                 | March 15, 2010 |
| Todd C. Scaccia                                                                                                                                  | Date           |
| Vice President & Controller                                                                                                                  |           |
|                                                                                                                                             |           |
|                                                                                                                                             |           |
|   /s/  John J. Ferguson                                                                                                      | March 15, 2010 |
| John J. Ferguson                                                                                                                                 | Date           |
| Director                                                                                                                                         |           |
|                                                                                                                                             |           |
|                                                                                                                                             |           |
|    /s/   John A. Geoghegan                                                                                         | March 15, 2010 |
| John A. Geoghegan                                                                                                                                | Date           |
| Director                                                                                                                                         |           |

----

|   /s/   L. Morris Glucksman | March 15, 2010 |
|------------------------------------------------------|----------------|
| L. Morris Glucksman                                  | Date           |
| Director                                             |           |
|                                                 |           |
|                                                 |           |
|   /s/   Charles F. Howell   | March 15, 2010 |
| Charles F. Howell                                    | Date           |
| Director                                             |           |
|                                                 |           |
|                                                 |           |
|   /s/   Michael F. Intrieri | March 15, 2010 |
| Michael F. Intrieri                                  | Date           |
| Director                                             |           |
|                                                 |           |
|                                                 |           |
|   /s/   Raymond B. Smyth    | March 15, 2010 |
| Raymond B. Smyth                                     | Date           |
| Director                                             |           |
|                                                 |           |
|                                                 |           |
|   /s/   Philip W. Wolford   | March 15, 2010 |
| Philip W. Wolford                                    | Date           |
| Director                                             |           |

----

----

| CONTENTS                                                |   |
|---------------------------------------------------------|--------|
|                                                    |   |
|                                                    |   |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 1      |
|                                                    |   |
|                                                    |   |
| CONSOLIDATED FINANCIAL STATEMENTS                       |   |
| Consolidated balance sheets                             | 2      |
| Consolidated statements of operations                   | 3      |
| Consolidated statements of shareholders’ equity   | 4      |
| Consolidated statements of cash flows                   | 5 - 6  |
| Notes to consolidated financial statements              | 7 - 52 |

----

| REPORT OF INDEPENDENT REGISTERED PUBLIC |
|-----------------------------------------|

| ACCOUNTING FIRM |
|-----------------|

| To the Shareholders and Board of Directors |
|--------------------------------------------|

| Patriot National Bancorp, Inc. and Subsidiary |
|-----------------------------------------------|

----

| PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY                                    |                                                                                                                                                                |                                                                                                                                                                |
|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| CONSOLIDATED BALANCE SHEETS                                                      |                                                                                                                                                                |                                                                                                                                                                |
| December 31, 2009 and 2008                                                       |                                                                                                                                                                |                                                                                                                                                                |
|                                                                             | 2009                                                                                                                                                                | 2008                                                                                                                                                                |
| ASSETS                                                                           |                                                                                                                                                                |                                                                                                                                                                |
| Cash and due from banks (Note 2):                                                |                                                                                                                                                                |                                                                                                                                                                |
| Noninterest bearing deposits and cash                                            |  $          19,465,521                                                                                       |  $           3,045,708                                                                                  |
| Interest bearing deposits                                                        |             78,070,072                                                                                  |               1,240,525                                                                       |
| Federal funds sold                                                               |             10,000,000                                                                                  |             20,000,000                                                                                  |
| Short-term investments                                                           |                  263,839                                                       |                  316,518                                                       |
| Cash and cash equivalents                                                        |            107,799,432                                                                                       |             24,602,751                                                                                  |
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| Available for sale securities (at fair value) (Note 3)                           |             48,829,981                                                                                  |             51,979,677                                                                                  |
| Federal Reserve Bank stock                                                       |               1,839,650                                                                       |               1,913,200                                                                       |
| Federal Home Loan Bank stock (Note 8)                                            |               4,508,300                                                                       |               4,508,300                                                                       |
| Loans receivable (net of allowance for loan losses: 2009:  $15,794,118 |                                                                                                                                                                |                                                                                                                                                                |
|       2008: $16,247,070) (Notes 4 and 17)          |            645,205,943                                                                                       |            788,568,687                                                                                       |
| Accrued interest and dividends receivable                                        |               3,236,252                                                                       |               4,556,755                                                                       |
| Premises and equipment, net (Notes 5 and 9)                                      |               6,595,727                                                                       |               7,948,501                                                                       |
| Deferred tax asset, net (Note 10)                                                |                            - |               8,680,075                                                                       |
| Goodwill and other intangible assets (Note 11)                                   |                   69,108                                                  |                   85,896                                                  |
| Cash surrender value of life insurance (Note 12)                                 |             19,859,732                                                                                  |             19,135,105                                                                                  |
| Other real estate owned (Note 6)                                                 |             19,073,993                                                                                  |                            - |
| Other assets                                                                     |               9,398,803                                                                       |               1,380,031                                                                       |
| Total assets                                                                     |  $        866,416,921                                                                                                  |  $        913,358,978                                                                                                  |
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                             |                                                                                                                                                                |                                                                                                                                                                |
| Liabilities                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| Deposits (Notes 7 and 17):                                                       |                                                                                                                                                                |                                                                                                                                                                |
| Noninterest bearing deposits                                                     |  $          49,755,521                                                                                       |  $          50,194,400                                                                                       |
| Interest bearing deposits                                                        |            711,578,771                                                                                       |            734,626,951                                                                                       |
| Total deposits                                                                   |            761,334,292                                                                                       |            784,821,351                                                                                       |
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| Repurchase agreements (Note 8)                                                   |               7,000,000                                                                       |               7,000,000                                                                       |
| Federal Home Loan Bank borrowings (Note 8)                                       |             50,000,000                                                                                  |             50,000,000                                                                                  |
| Junior subordinated debt owed to unconsolidated trust (Note 8)                   |               8,248,000                                                                       |               8,248,000                                                                       |
| Accrued expenses and other liabilities                                           |               3,973,319                                                                       |               4,515,483                                                                       |
| Total liabilities                                                                |            830,555,611                                                                                       |            854,584,834                                                                                       |
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| Commitments and Contingencies (Notes 8, 9 and 15)                                |                                                                                                                                                                |                                                                                                                                                                |
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| Shareholders' equity (Notes 13 and 16)                                           |                                                                                                                                                                |                                                                                                                                                                |
| Preferred stock, no par value; 1,000,000 shares authorized,                      |                                                                                                                                                                |                                                                                                                                                                |
| no shares issued                                                                 |                            - |                            - |
| Common stock, $2 par value: 60,000,000 shares authorized; 2009 shares            |                                                                                                                                                                |                                                                                                                                                                |
| issued 4,774,432; outstanding 4,762,727; 2008 shares issued 4,755,114;           |               9,548,864                                                                       |               9,510,228                                                                       |
| outstanding 4,743,409                                                            |                                                                                                                                                                |                                                                                                                                                                |
| Additional paid-in capital                                                       |             49,651,534                                                                                  |             49,634,337                                                                                  |
| Accumulated deficit                                                              |            (24,000,400)                                                                                      |                 (119,886)                                                           |
| Less: Treasury stock at cost:  2009 and 2008 11,705 shares             |                 (160,025)                                                           |                 (160,025)                                                           |
| Accumulated other comprehensive income (loss) - net unrealized gain (loss)       |                                                                                                                                                                |                                                                                                                                                                |
| on available for sale securities, net of taxes                                   |                  821,337                                                       |                  (90,510)                                                      |
| Total shareholders' equity                                                       |             35,861,310                                                                                  |             58,774,144                                                                                  |
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| Total liabilities and shareholders' equity                                       |  $        866,416,921                                                                                                  |  $        913,358,978                                                                                                  |
|                                                                             |                                                                                                                                                                |                                                                                                                                                                |
| See Notes to Consolidated Financial Statements.                                  |                                                                                                                                                                |                                                                                                                                                                |

----

| PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY       |                                                                                                                            |                                                                                                                            |                                                                                                                            |
|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| CONSOLIDATED STATEMENTS OF OPERATIONS               |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Years Ended December 31, 2009, 2008 and 2007        |                                                                                                                            |                                                                                                                            |                                                                                                                            |
|                                                | 2009                                                                                                                            | 2008                                                                                                                            | 2007                                                                                                                            |
| Interest and Dividend Income                        |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Interest and fees on loans                          |  $    41,121,342                                                                                       |  $    52,484,054                                                                                       |  $    46,948,772                                                                                       |
| Interest on investment securities                   |         1,335,283                                                                       |         2,324,817                                                                       |         2,153,886                                                                       |
| Dividends on investment securities                  |            293,735                                                       |            803,704                                                       |         1,667,587                                                                       |
| Interest on federal funds sold                      |              37,546                                            |            129,475                                                       |         1,079,233                                                                       |
| Other interest income                               |            180,174                                                       |               8,196                                       |              12,679                                            |
| Total interest and dividend income                  |        42,968,080                                                                            |        55,750,246                                                                            |        51,862,157                                                                            |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Interest Expense                                    |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Interest on deposits                                |        22,021,255                                                                            |        25,968,124                                                                            |        26,524,400                                                                            |
| Interest on Federal Home Loan Bank borrowings       |         1,698,712                                                                       |         1,725,699                                                                       |            511,027                                                       |
| Interest on subordinated debt                       |            331,309                                                       |            535,659                                                       |            690,696                                                       |
| Interest on other borrowings                        |            308,552                                                       |            309,585                                                       |              41,187                                            |
| Total interest expense                              |        24,359,828                                                                            |        28,539,067                                                                            |        27,767,310                                                                            |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Net interest income                                 |        18,608,252                                                                            |        27,211,179                                                                            |        24,094,847                                                                            |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Provision for Loan Losses (Note 4)                  |        13,089,000                                                                            |        11,289,772                                                                            |              75,000                                            |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Net interest income after provision for loan losses |         5,519,252                                                                       |        15,921,407                                                                            |        24,019,847                                                                            |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Noninterest Income (Loss)                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Mortgage brokerage referral fees                    |            167,854                                                       |            237,933                                                       |            736,195                                                       |
| Loan application, inspection and processing fees    |            214,334                                                       |            355,526                                                       |            212,896                                                       |
| Fees and service charges                            |         1,025,258                                                                       |            990,843                                                       |            839,311                                                       |
| Loss on impaired investment securities              |                      - |        (3,167,285)                                                                           |                      - |
| Gain on sale of investment securities               |            434,334                                                       |                      - |                      - |
| Gain on redemption of investment securities         |              16,880                                            |                      - |               5,000                                       |
| Earnings on cash surrender value of life insurance  |            724,627                                                       |            941,421                                                       |            193,684                                                       |
| Other income                                        |            363,193                                                       |            492,454                                                       |            246,829                                                       |
| Total noninterest income (loss)                     |         2,946,480                                                                       |           (149,108)                                                           |         2,233,915                                                                       |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Noninterest Expenses                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Salaries and benefits (Notes 9 and 14)              |        11,879,544                                                                            |        12,092,917                                                                            |        11,851,598                                                                            |
| Occupancy and equipment expense, net                |         5,657,908                                                                       |         5,526,910                                                                       |         4,457,770                                                                       |
| Data processing                                     |         1,373,489                                                                       |         1,285,989                                                                       |         1,113,276                                                                       |
| Advertising and promotional expenses                |            280,567                                                       |            814,374                                                       |            713,246                                                       |
| Professional and other outside services             |         4,021,330                                                                       |         1,755,896                                                                       |         1,401,290                                                                       |
| Loan administration and processing expenses         |            519,412                                                       |            303,338                                                       |            195,408                                                       |
| Regulatory assessments                              |         3,165,722                                                                       |            725,613                                                       |            582,897                                                       |
| Insurance expense                                   |            762,766                                                       |            144,946                                                       |            126,164                                                       |
| Other real estate operations (Note 6)               |            793,781                                                       |                      - |           (152,009)                                                           |
| Other operating expenses                            |         1,677,069                                                                       |         1,932,431                                                                       |         1,749,196                                                                       |
| Goodwill impairment (Note 11)                       |                      - |         1,365,491                                                                       |                      - |
| Total noninterest expenses                          |        30,131,588                                                                            |        25,947,905                                                                            |        22,038,836                                                                            |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| (Loss) income before income taxes                   |       (21,665,856)                                                                                |       (10,175,606)                                                                                |         4,214,926                                                                       |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| (Provision) benefit for Income Taxes (Note 10)      |        (2,213,750)                                                                           |         3,064,000                                                                       |        (1,537,000)                                                                           |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Net (loss) income                                   |  $   (23,879,606)                                                                                           |  $     (7,111,606)                                                                                |  $      2,677,926                                                                            |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Basic and diluted (loss) income per share (Note 13) |  $            (5.02)                                           |  $            (1.50)                                           |  $             0.56                                       |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Dividends per share                                 |  $                 -                  |  $              0.180                                |  $              0.180                                |
|                                                |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| See Notes to Consolidated Financial Statements.     |                                                                                                                            |                                                                                                                            |                                                                                                                            |

----

| PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY   |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |
|-------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY |
| Years Ended December 31, 2009, 2008 and 2007    |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                | Accumulated |   |
|                                            |  Number of                                                                                         |                                                                                                          | Additional                                                                                                          | Retained                                                                                                                                                                  |                                                                                                                | Other |   |
|                                            |  Outstanding                                                                                       | Common                                                                                                        | Paid-in                                                                                                             | Earnings                                                                                                                                                                  | Treasury                                                                                                            | Comprehensive |   |
|                                            |  Shares                                                                                            | Stock                                                                                                         | Capital                                                                                                             | (Accumulated Deficit)                                                                                                                                                     | Stock                                                                                                               | Income (Loss) | Total |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Balance at December 31, 2006                    |     4,739,494                                                                       |  $  9,478,988                                                                                  |  $  49,463,307                                                                                       |  $             6,022,012                                                                            |  $                 -      |  $      (680,962) |  $   64,283,345 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Comprehensive income                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Net income                                      |                  - |                   - |                    - |                 2,677,926                                                                 |                                                                                                                |                    - |         2,677,926 |
| Unrealized holding gain on available for        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| sale securities, net of taxes (Note 18)         |                  - |                   - |                    - |                             - |                                                                                                                |          627,462 |           627,462 |
| Total comprehensive income                      |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |         3,305,388 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Dividends ($0.180 per share)                    |                  - |                   - |                    - |                  (853,878)                                                           |                                                                                                                |                    - |          (853,878) |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Issuance of capital stock (Note 13)             |           7,350                                       |          14,700                                                  |            85,812                                            |                             - |                                                                                                                |                    - |           100,512 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Balance, December 31, 2007                      |     4,746,844                                                                       |      9,493,688                                                                       |      49,549,119                                                                            |                 7,846,060                                                                 |                    - |           (53,500) |       66,835,367 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Comprehensive loss                              |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Net loss                                        |                  - |                   - |                    - |                (7,111,606)                                                                     |                                                                                                                |                    - |        (7,111,606) |
| Unrealized holding loss on available for        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| sale securities, net of taxes (Note 18)         |                  - |                   - |                    - |                             - |                                                                                                                |           (37,010) |            (37,010) |
| Total comprehensive loss                        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |        (7,148,616) |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Dividends ($0.180 per share)                    |                  - |                   - |                    - |                  (854,340)                                                           |                                                                                                                |                    - |          (854,340) |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Treasury Stock                                  |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Stock purchased under buyback                   |         (11,705)                                                |                                                                                                          |                                                                                                                |                                                                                                                                                                      |         (160,025)                                                           |   |          (160,025) |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Issuance of capital stock (Note 13)             |           8,270                                       |          16,540                                                  |            83,943                                            |                                                                                                                                                                      |                                                                                                                |   |           100,483 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Other                                           |                                                                                                    |                                                                                                          |             1,275                                       |                                                                                                                                                                      |                                                                                                                |   |               1,275 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Balance, December 31, 2008                      |     4,743,409                                                                       |      9,510,228                                                                       |      49,634,337                                                                            |                  (119,886)                                                           |         (160,025)                                                           |           (90,510) |       58,774,144 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Comprehensive loss                              |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Net loss                                        |                  - |                   - |                    - |              (23,879,606)                                                                                |                                                                                                                |                    - |      (23,879,606) |
| Unrealized holding gain on available for        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| sale securities, net of taxes (Note 18)         |                  - |                   - |                    - |                             - |                                                                                                                |          911,847 |           911,847 |
| Total comprehensive loss                        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |      (22,967,759) |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Issuance of capital stock (Note 13)             |          19,318                                            |          38,636                                                  |            17,197                                            |                                                                                                                                                                      |                                                                                                                |   |             55,833 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Other                                           |                                                                                                    |                                                                                                          |                    - |                        (908)                           |                                                                                                                |   |                (908) |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| Balance, December 31, 2009                      |     4,762,727                                                                       |  $  9,548,864                                                                                  |  $  49,651,534                                                                                       |  $          (24,000,400)                                                                                           |  $      (160,025)                                                                |  $       821,337 |  $   35,861,310 |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |
| See Notes to Consolidated Financial Statements. |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                                                                      |                                                                                                                |   |   |

----

| PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY                                                     |                                                                                                                                        |                                                                                                                                        |
|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                              |                                                                                                                                        |                                                                                                                                        |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                                             |                                                                                                                                        |                                                                                                                                        |   |
| Years Ended December 31, 2009, 2008 and 2007                                                      |                                                                                                                                        |                                                                                                                                        |   |
|                                                                                              |                                                                                                                                        |                                                                                                                                        |   |
|                                                                                              | 2009                                                                                                                                        | 2008                                                                                                                                        | 2007 |
| Cash Flows from Operating Activities                                                              |                                                                                                                                        |                                                                                                                                        |   |
| Net (loss) income                                                                                 |  $     (23,879,606)                                                                                           |  $       (7,111,606)                                                                                |  $      2,677,926 |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities |
| Amortization and accretion of investment premiums and discounts, net                              |              157,727                                                       |              131,456                                                       |            181,727 |
| Amortization and accretion of purchase loan premiums and discounts, net                           |                26,079                                            |                37,732                                            |              96,738 |
| Amortization of core deposit intangible                                                           |                16,788                                            |                17,688                                            |              18,576 |
| Provision for loan losses                                                                         |          13,089,000                                                                            |          11,289,772                                                                            |              75,000 |
| Gain on sale of  investment securities                                                  |             (434,334)                                                           |                        - |                      - |
| Loss on impaired investment securities                                                            |                        - |            3,167,285                                                                 |                      - |
| Impairment of goodwill                                                                            |                        - |            1,365,491                                                                 |                      - |
| Gain on sale of other real estate owned                                                           |                        - |                        - |             (86,473) |
| Gain on redemption of investment security                                                         |               (16,880)                                                |                        - |               (5,000) |
| Depreciation and amortization of premises and equipment                                           |            1,660,803                                                                 |            1,632,985                                                                 |          1,211,775 |
| Payment of fees to directors in common stock                                                      |                55,833                                            |                49,932                                            |              49,961 |
| Earnings on cash surrender value of life insurance                                                |             (724,627)                                                           |             (941,421)                                                           |           (193,684) |
| Loss on disposal of bank premises and equipment                                                   |                    156                       |                      46            |                3,035 |
| Deferred income taxes                                                                             |            8,624,602                                                                 |           (5,869,368)                                                                     |           (258,035) |
| Change in assets and liabilities:                                                                 |                                                                                                                                        |                                                                                                                                        |   |
| (Decrease) increase in deferred loan fees                                                         |             (843,519)                                                           |             (849,073)                                                           |            165,288 |
| Decrease (increase) in accrued interest and dividends receivable                                  |            1,320,503                                                                 |                19,263                                            |         (1,033,845) |
| Increase in other assets                                                                          |           (8,018,772)                                                                     |             (437,887)                                                           |               (9,667) |
| (Decrease) increase in accrued expenses and other liabilities                                     |             (832,112)                                                           |           (1,031,841)                                                                     |          1,547,361 |
| Net cash (used in) provided by operating activities                                               |           (9,798,359)                                                                     |            1,470,454                                                                 |          4,440,683 |
|                                                                                              |                                                                                                                                        |                                                                                                                                        |   |
| Cash Flows from Investing Activities                                                              |                                                                                                                                        |                                                                                                                                        |   |
| Purchases of available for sale securities                                                        |         (34,265,081)                                                                                |         (18,366,036)                                                                                |       (14,947,542) |
| Proceeds from sale of available for sale securities                                               |          19,852,541                                                                            |                        - |                      - |
| Proceeds from redemptions of available for sale securities                                        |          12,000,000                                                                            |          19,000,000                                                                            |          3,005,000 |
| Principal repayments on available for sale securities                                             |            7,326,444                                                                 |          11,317,968                                                                            |        12,580,945 |
| Cash received in conjunction with branch acquisition                                              |                        - |                        - |                      - |
| Purchase of Federal Reserve Bank stock                                                            |                 (1,500)                                     |                 (1,500)                                     |                      - |
| Purchase of Federal Home Loan Bank stock                                                          |                        - |           (1,852,200)                                                                     |         (1,438,900) |
| Proceeds from repurchase of excess stock by the Federal Reserve Bank                              |                75,050                                            |                        - |                      - |
| Net decrease (increase) in loans                                                                  |        112,017,191                                                                                       |       (113,161,128)                                                                                           |     (179,338,861) |
| Capital improvements to other real estate owned                                                   |                        - |                        - |           (156,700) |
| Proceeds from sale of other real estate owned                                                     |                        - |                        - |          1,077,515 |
| Purchase of life insurance                                                                        |                        - |                        - |       (18,000,000) |
| Purchases of premises and equipment                                                               |             (308,185)                                                           |           (1,775,967)                                                                     |         (5,329,514) |
| Net cash provided by (used in) investing activities                                               |        116,696,460                                                                                       |       (104,838,863)                                                                                           |     (202,548,057) |
|                                                                                              |                                                                                                                                        |                                                                                                                                        |   |
| Cash Flows from Financing Activities                                                              |                                                                                                                                        |                                                                                                                                        |   |
| Net increase (decrease) in demand, savings and money market deposits                              |          69,100,673                                                                            |          43,490,488                                                                            |         (9,960,503) |
| Net (decrease) increase in time certificates of deposit                                           |         (92,587,732)                                                                                |          68,931,454                                                                            |      120,908,248 |
| Net increase in FHLB borrowings                                                                   |                        - |            2,500,000                                                                 |        39,500,000 |
| Increase in borrowings under repurchase agreements                                                |                        - |                        - |          7,000,000 |
| Proceeds from issuance of common stock                                                            |                        - |                50,551                                            |              50,551 |
| Other                                                                                             |                   (908)                           |                  1,275                                 |                      - |
| Payment under stock buyback program                                                               |                        - |             (160,025)                                                           |                      - |
| Dividends paid on common stock                                                                    |             (213,453)                                                           |             (854,497)                                                           |           (853,547) |
| Net cash (used in) provided by financing activities                                               |         (23,701,420)                                                                                |        113,959,246                                                                                       |      156,644,749 |
|                                                                                              |                                                                                                                                        |                                                                                                                                        |   |
| Net increase (decrease) in cash and cash equivalents                                              |          83,196,681                                                                            |          10,590,837                                                                            |       (41,462,625) |

----

| PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY                      |                                                                                                                                   |                                                                                                                                   |
|--------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued                   |                                                                                                                                   |                                                                                                                                   |
| Years Ended December 31, 2009, 2008 and 2007                       |                                                                                                                                   |                                                                                                                                   |   |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
|                                                               | 2009                                                                                                                                   | 2008                                                                                                                                   | 2007 |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| Cash and cash equivalents                                          |                                                                                                                                   |                                                                                                                                   |   |
| Beginning                                                          |          24,602,751                                                                       |          14,011,914                                                                       |        55,474,539 |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| Ending                                                             |  $     107,799,432                                                                                       |  $      24,602,751                                                                                  |  $    14,011,914 |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| Supplemental Disclosures of Cash Flow Information                  |                                                                                                                                   |                                                                                                                                   |   |
| Cash paid for:                                                     |                                                                                                                                   |                                                                                                                                   |   |
| Interest                                                           |  $      24,348,048                                                                                  |  $      28,340,521                                                                                  |  $    27,654,868 |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| Income taxes                                                       |  $        1,216,134                                                                       |  $        1,816,392                                                                       |  $      1,607,055 |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| Supplemental Disclosure of Noncash Investing and Financing         |                                                                                                                                   |                                                                                                                                   |
| Activities                                                         |                                                                                                                                   |                                                                                                                                   |   |
| Unrealized holding gains (losses) on available for sale securities |                                                                                                                                   |                                                                                                                                   |
| arising during the period                                          |  $        1,470,721                                                                       |  $           (59,692)                                                      |  $      1,012,035 |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| Accrued dividends declared on common stock                         |  $                     - |  $           213,453                                                       |  $         213,608 |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| Transfer of loans to other real estate owned                       |  $      19,073,993                                                                                  |  $                     - |  $                   - |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
|                                                               |                                                                                                                                   |                                                                                                                                   |   |
| See Notes to Consolidated Financial Statements.                    |                                                                                                                                   |                                                                                                                                   |   |

----

----

|   | Note 1. | Nature of Operations and Summary of Significant Accounting Policies |
|--------|---------|---------------------------------------------------------------------|

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

|   | o | Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | o | Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | Separate disclosure of the significant transfers in and out of Level 1 and Level 2 fair value measurements, and a description of the reasons for the transfers. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | In the rollforward of activity for Level 3 fair value measurements (significant unobservable inputs), purchases, sales, issuances, and settlements should be presented separately (on a gross basis rather than as one net number). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | Fair value measurements and disclosures should be presented for each class of assets and liabilities within a line item in the statement of financial position. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | Reporting entities should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|   | Note 2. | Restrictions on Cash and Due From Banks |
|--------|---------|-----------------------------------------|

|   | Note 3. | Available-for-Sale Securities |
|--------|---------|-------------------------------|

|   | 2009                                              | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | FairValue           |
|--------|---------------------------------------------------|---------------|----------------------|-----------------------|---------------------|
|   |                                              |          |                 |                  |                |   |   |   |   |
|   | U.S. Government agency obligations                | $             | 5,176,712            | $                     |    - | $ |      (68,212) | $ | 5,108,500 |
|   | U.S. Government agency mortgage-backed securities |          | 40,428,810           |                  | 241,520             |   | (166,872) |   | 40,503,458 |
|   |                                              |          | 45,605,522           |                  | 241,520             |   | (235,084) |   | 45,611,958 |
|   | Money market preferred equity securities          |          | 1,899,720            |                  | 1,318,303           |   | -      |   | 3,218,023 |
|   |                                              | $             | 47,505,242           | $                     | 1,559,823           | $ | (235,084) | $ | 48,829,981 |

|   | 2008                                               | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | FairValue                                                                                               |
|--------|----------------------------------------------------|---------------|----------------------|-----------------------|---------------------------------------------------------------------------------------------------------|
|   |                                               |          |                 |                  |                                                                                                    |   |   |   |   |
|   | U.S. Government agency obligations                 | $             | 10,000,000           | $                     |                 102,248 | $ |    - | $ | 10,102,248 |
|   | U. S. Government agency mortgage-backed securities |          | 38,246,799           |                  | 231,766                                                                                                 |   | (479,996) |   | 37,998,569 |
|   |                                               |          | 48,246,799           |                  | 334,014                                                                                                 |   | (479,996) |   | 48,100,817 |
|   | Money market preferred equity securities           |          | 3,878,860            |                  | -                                                                              |   | -      |   | 3,878,860 |
|   |                                               | $             | 52,125,659           | $                     | 334,014                                                                                                 | $ | (479,996) | $ | 51,979,677 |

----

----

|   | 2009   | Less Than 12 Months |           | 12 Months or More |      | Total          |
|--------|--------|---------------------|----------------|-------------------|-----------|----------------|
|   |   | FairValue           | UnrealizedLoss |              | FairValue | UnrealizedLoss |   | FairValue | UnrealizedLoss |

|   | U.S. Government agency                                                         |   |                  |   |                                                      |   |   |    |   |    |   |   |                        |   |                 |
|--------|--------------------------------------------------------------------------------|--------|-----------------------|--------|-----------------------------------------------------------|--------|--------|---------|--------|---------|--------|--------|-----------------------------|--------|----------------------|
|   |    obligations                                                  | $      |   5,108,500 | $      |   (68,212)                                      |   | $      | -       | $      | -       |   | $      |    5,108,500 | $      |   (68,212) |
|   | U.S. Government agency     mortgage-backed securities |   | 19,548,726            |   |         (159,918) |   |   | 759,207 |   | (6,954) |   |   | 20,307,933                  |   |  (166,872)      |
|   | Totals                                                                         | $      | 24,657,226            | $      |   (228,130)                                     |   | $      | 759,207 | $      | (6,954) |   | $      | 25,416,433                  | $      | (235,084)            |

|   | 2008   | Less Than 12 Months |           | 12 Months or More |      | Total          |
|--------|--------|---------------------|----------------|-------------------|-----------|----------------|
|   |   | FairValue           | UnrealizedLoss |              | FairValue | UnrealizedLoss |   | FairValue | UnrealizedLoss |

|   | U.S. Government agency    obligations |   |       |   |                  |   |   |      |   |      |   |   |       |   |      |
|--------|------------------------------------------------------|--------|------------|--------|-----------------------|--------|--------|-----------|--------|-----------|--------|--------|------------|--------|-----------|
|   |   U.S. Government agency                   | $      | -          | $      | -                     |   | $      | -         | $      | -         |   | $      | -          | $      | -         |
|   |     mortgage-backed securities   |   | 14,593,894 |   |  (317,703)       |   |   | 5,527,631 |   | (162,293) |   |   | 20,125,525 |   | (479,996) |
|   | Totals                                               | $      | 14,593,894 | $      |   (317,703) |   | $      | 5,527,631 | $      | (162,293) |   | $      | 20,125,525 | $      | (479,996) |

|   | · | Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”) – $1,050,000.  As a result of actions taken on September 7, 2008 by the United States Treasury Department and the Federal Housing Finance Agency with respect to placing Freddie Mac into receivership, the Company’s investment in FHLMC preferred equity securities was deemed to be other-than-temporarily impaired and a write-down of $1,050,000 was recorded during the third quarter of 2008. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | · | Other Auction Rate Preferred Securities – $2,100,000.  The Company had investments in six auction rate preferred securities of companies primarily in the financial services sector.  The illiquidity in the auction rate market during 2008 resulted in significant declines in market value for these investments.  As management was unable to predict near term prospects for recovery of these securities, impairment charges totaling $2,100,000 were recorded during the fourth quarter of 2008. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                       |   | Amortized  |   | Fair       |
|--------|----------------------------|--------|------------|--------|------------|
|   |                       |   | Cost       |   | Value      |
|   | Maturity:                  |   |       |   |       |
|   | Over 10 years              | $      | 5,176,712  | $      | 5,108,500  |
|   | Mortgage-backed securities |   | 40,428,810 |   | 40,503,458 |
|   | Total                      | $      | 45,605,522 | $      | 45,611,958 |

----

----

|   | Note 4. | Loans Receivable and Allowance for Loan Losses |
|--------|---------|------------------------------------------------|

|   |                        |   | 2009         |   | 2008         |
|--------|-----------------------------|--------|--------------|--------|--------------|
|   |                        |   |         |   |         |
|   | Real estate:                |   |         |   |         |
|   | Commercial                  | $      | 230,225,306  | $      | 262,570,339  |
|   | Residential                 |   | 195,571,225  |   | 170,449,780  |
|   | Construction                |   | 154,457,082  |   | 257,117,081  |
|   | Construction to permanent   |   | 15,989,976   |   | 35,625,992   |
|   | Commercial                  |   | 19,298,505   |   | 33,860,527   |
|   | Consumer installment        |   | 1,155,059    |   | 993,707      |
|   | Consumer home equity        |   | 44,309,265   |   | 45,022,128   |
|   | Total loans                 |   | 661,006,418  |   | 805,639,554  |
|   |                        |   |         |   |         |
|   | Premiums on purchased loans |   | 131,993      |   | 158,072      |
|   | Net deferred loan fees      |   | (138,350)    |   | (981,869)    |
|   | Allowance for loan losses   |   | (15,794,118) |   | (16,247,070) |
|   | Loans receivable, net       | $      | 645,205,943  | $      | 788,568,687  |

|   |                       |   | 2009         |   | 2008       |   | 2007                            |
|--------|----------------------------|--------|--------------|--------|------------|--------|---------------------------------|
|   |                       |   |         |   |       |   |                            |
|   | Balance, beginning of year | $      | 16,247,070   | $      | 5,672,620  | $      | 5,630,432                       |
|   | Provision for loan losses  |   | 13,089,000   |   | 11,289,772 |   | 75,000                          |
|   | Recoveries of loans        |   |         |   |       |   |                            |
|   | previously charged-off     |   | 187,647      |   | 904        |   | -      |
|   | Loans charged-off          |   | (13,729,598) |   | (716,226)  |   | (32,812)                        |
|   | Balance, end of year       | $      | 15,794,118   | $      | 16,247,070 | $      | 5,672,620                       |

----

----

|   |                                                                                                            |   | 2009       |   | 2008       |
|--------|-----------------------------------------------------------------------------------------------------------------|--------|------------|--------|------------|
|   |                                                                                                            |   |       |   |       |
|   | Impaired loans receivable for which there is a related     allowance for credit losses | $      | 30,968,602 | $      | 42,535,777 |
|   |                                                                                                            |   |       |   |       |
|   | Impaired loans receivable for which there is no related allowance for credit losses                             | $      | 82,568,512 | $      | 37,620,136 |
|   |                                                                                                            |   |       |   |       |
|   | Allowance for credit losses related to impaired loans                                                           | $      | 3,942,012  | $      | 4,211,954  |

----

----

|   | Note 5. | Premises and Equipment |
|--------|---------|------------------------|

|   |                                            |   | 2009        |   | 2008        |
|--------|-------------------------------------------------|--------|-------------|--------|-------------|
|   |                                            |   |        |   |        |
|   | Construction in progress                        | $      | -           | $      | 614,393     |
|   | Leasehold improvements                          |   | 7,984,334   |   | 7,413,636   |
|   | Furniture, equipment and software               |   | 6,100,927   |   | 5,772,969   |
|   |                                            |   | 14,085,261  |   | 13,800,998  |
|   | Less: accumulated depreciation and amortization |   | (7,489,534) |   | (5,852,497) |
|   |                                            | $      | 6,595,727   | $      | 7,948,501   |

----

----

|   | Note 6. | Other Real Estate Operations |
|--------|---------|------------------------------|

|                                               | 2009                                                                                                                                              | 2008                                                                                                                                              | 2007                                                                                         |
|----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                               |                                                                                                                                              |                                                                                                                                              |                                                                                         |
| Expenses of holding other real estate owned        |  $           837,781                                                                  |  $                     -            |  $            26,395        |
| Gain on sale of other real estate owned            |                         - |                         - |               (86,473) |
| Rental income from other real estate owned         |               (44,000)                                                      |                         - |               (91,931) |
| Expense (income) from other real estate operations |  $           793,781                                                                  |  $                     -            |  $          (152,009)                 |

|   | Note 7. | Deposits |
|--------|---------|----------|

|   |                                  |   | 2009        |   | 2008        |
|--------|---------------------------------------|--------|-------------|--------|-------------|
|   |                                  |   |        |   |        |
|   | Noninterest bearing                   | $      | 49,755,521  | $      | 50,194,400  |
|   | Interest bearing:                     |   |        |   |        |
|   | Time certificates, less than $100,000 |   | 305,719,484 |   | 405,298,436 |
|   | Time certificates, $100,000 or more   |   | 202,493,307 |   | 195,502,087 |
|   | Money market                          |   | 112,017,987 |   | 68,241,790  |
|   | Savings                               |   | 69,766,296  |   | 46,040,086  |
|   | NOW                                   |   | 21,581,697  |   | 19,544,552  |
|   | Total interest bearing                |   | 711,578,771 |   | 734,626,951 |
|   | Total deposits                        | $      | 761,334,292 | $      | 784,821,351 |

----

----

|   | Due within: |   |        |   |
|--------|-------------|--------|-------------|--------|
|   | 1 year      | $      | 336,946,484 |   |
|   | 1-2 years   |   | 95,938,632  |   |
|   | 2-3 years   |   | 11,279,403  |   |
|   | 3-4 years   |   | 29,248,008  |   |
|   | 4-5 years   |   | 34,800,264  |   |
|   |        | $      | 508,212,791 |   |

|   | Note 8. | Borrowings |
|--------|---------|------------|

----

----

----

|   |             | Fixed                                                                                                                                                         | Floating                                                                                                                                                      |                                                                                                                                                          |   |
|--------|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |             | Rate                                                                                                                                                          | Rate                                                                                                                                                          | Total                                                                                                                                                         |   |
|   |             |                                                                                                                                                          |                                                                                                                                                          |                                                                                                                                                          |   |
|   | 2010             |  $                    -               |  $                    -               |  $                    -               |   |
|   | 2011             |                        -    |                        -    |                        -    |   |
|   | 2012             |        10,000,000                                                                                           |                        -    |        10,000,000                                                                                           |   |
|   | 2013             |        20,000,000                                                                                           |                        -    |        20,000,000                                                                                           |   |
|   | 2014             |                        -    |                        -    |                        -    |   |
|   | Thereafter       |        27,000,000                                                                                           |          8,248,000                                                                                |        35,248,000                                                                                           |   |
|   | Total borrowings |  $    57,000,000                                                                                                      |  $      8,248,000                                                                                           |  $    65,248,000                                                                                                      |   |

| Note 9. | Commitments and Contingencies |
|---------|-------------------------------|

|   | Years EndingDecember 31, |   | Amount     |   |
|--------|--------------------------|--------|------------|--------|
|   |                     |   |       |   |
|   | 2010                     | $      | 2,843,498  |   |
|   | 2011                     |   | 2,854,588  |   |
|   | 2012                     |   | 2,658,958  |   |
|   | 2013                     |   | 2,317,882  |   |
|   | 2014                     |   | 2,044,738  |   |
|   | Thereafter               |   | 4,092,917  |   |
|   |                     | $      | 16,812,581 |   |

----

----

----

----

----

----

| Note 10. | Income Taxes |
|----------|--------------|

|     |                                 |                                    | 2009                                                                                                                | 2008                                                    | 2007                                                           |
|----------|--------------------------------------|-----------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------|----------------------------------------------------------------|
|     |                                 |                                    |                                                                                                                |                                                    |                                                           |
| Current  |                                 |                                    |                                                                                                                |                                                    |
|     | Federal                              |  $  (6,410,852)          |  $   1,954,300                                                                                  |  $   1,335,303                      |
|     | State                                |                                    |                    - |         851,478 |         459,732        |
|     |                                 | Total                                   |     (6,410,852)                                                                                 |      2,805,778                 |      1,795,035                        |
|     |                                 |                                    |                                                                                                                |                                                    |                                                           |
| Deferred |                                 |                                    |                                                                                                                |                                                    |
|     | Federal                              |      6,333,524 |     (4,739,525)                                                                                 |        (208,350)     |
|     | State                                |                                    |      2,291,078                                                                             |     (1,130,253)                     |          (49,685) |
|     |                                 | Total                                   |      8,624,602                                                                             |     (5,869,778)                     |        (258,035)            |
|     |                                 |                                    |                                                                                                                |                                                    |                                                           |
|     | Provision (benefit) for income taxes |  $   2,213,750      |  $  (3,064,000)                                                                                      |  $   1,537,000                      |

|                                    |                                                                                                                |                                                               | 2009                                                                                                                | 2008                                                               | 2007   |
|-----------------------------------------|---------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|--------|
|                                    |                                                                                                                |                                                               |                                                                                                                |                                                               |   |
| (Benefit) provision for income taxes at |                                                                                                                |                                                               |                                                                                                                |
|                                    | statutory Federal rate                                                                                              |  $  (7,366,400)                                     |  $  (3,459,700)                                                                                      |  $   1,433,100                                 |
| State taxes, net of Federal benefit     |     (1,072,500)                                                                                 |        (522,300)                |         231,800                                                             |
| Dividends received deduction            |          (70,100)                                                      |        (118,000)                |        (122,600)                                                                 |
| Nondeductible expenses                  |           26,700                                                  |           40,700 |           56,300                                                  |
| Amortization of goodwill                |                    - |          (11,300)     |          (11,100)                                                      |
| Goodwill impairment                     |                    - |         397,600            |                    - |
| Change in cash surrender value          |                                                                                                                |                                                               |                                                                                                                |
|                                    | of life insurance                                                                                                   |        (282,200)                |        (366,700)                                                                 |          (77,400)     |
| Increase in valuation allowance         |     11,386,236                                                                                  |         824,000            |                    - |
| Other                                   |                                                                                                                |        (407,986)                |         151,700                                                             |           26,900 |
|                                    | Total provision (benefit) for income taxes                                                                          |  $   2,213,750                                 |  $  (3,064,000)                                                                                      |  $   1,537,000                                 |

----

----

|                     |                                       |                                                                                                                |                                                                                                                | 2009                                                                                                                | 2008                               |
|--------------------------|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|------------------------------------|
|                     |                                       |                                                                                                                |                                                                                                                |                                                                                                                |                               |
| Deferred tax assets:     |                                       |                                                                                                                |
|                     | Allowance for loan losses                  |  $   6,151,809                                                                                  |  $   6,328,234                                                                                  |
|                     | Nonaccrual interest                        |      2,069,151                                                                             |      1,188,953                                                                             |
|                     | Investment impairment charges              |      1,227,083                                                                             |      1,233,658                                                                             |
|                     | Investment securities                      |                    - |           55,473                                                  |
|                     | Premises and equipment                     |         635,261                                                             |         553,232                                                             |
|                     | Accrued expenses                           |         201,825                                                             |         139,913                                                             |
|                     | State NOL carry forward benefit estimate   |         970,567                                                             |                    - |
|                     | Federal NOL carry forward benefit estimate |         387,522                                                             |                    - |
|                     | Federal AMT benefit estimate               |         408,662                                                             |                    - |
|                     | Other                                      |                                                                                                                |         145,760                                                             |           32,944                                                  |
|                     |                                       | Gross deferred tax assets                                                                                           |     12,197,640                                                                                  |      9,532,407                                                                             |
|                     | Valuation allowance                        |    (12,210,236)                                                                                      |        (824,000)                                                                 |
|                     |                                       | Deferred tax assets, net of                                                                                         |                                                                                                                |                                                                                                                |
|                     |                                       | valuation allowance                                                                                                 |          (12,596)                                                      |      8,708,407                                                                             |
|                     |                                       |                                                                                                                |                                                                                                                |                                                                                                                |                               |
| Deferred tax liabilities |                                       |                                                                                                                |
|                     | Tax bad debt recapture                     |                    - |           28,332                                                  |
|                     | Investment securities                      |        (503,401)                                                                 |                    - |
|                     | Other                                      |                                                                                                                |          (12,596)                                                      |                    - |
|                     |                                       | Gross deferred tax liabilities                                                                                      |        (515,997)                                                                 |           28,332                                                  |
|                     |                                       |                                                                                                                | Deferred tax (liability) asset, net                                                                                 |  $    (503,401)                                                                            |  $   8,680,075 |

----

----

|                                                     |                                         |                                                |                                                | 2009                           | 2008                                         | 2007   |
|----------------------------------------------------------|----------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|--------------------------------|----------------------------------------------|--------|
|                                                     |                                         |                                                |                                                |                           |                                         |   |
| Deferred tax provision (benefit) allocated to equity     |  $     558,874 |  $      (22,683) |  $     384,573        |
|                                                     |                                         |                                                |                                                |                           |                                         |   |
| Deferred tax provision (benefit) allocated to operations |      8,624,602      |     (5,869,368)                 |        (258,035) |
|                                                     |                                         |                                                |                                                |                           |                                         |   |
|                                                     |                                         | Total deferred tax provision (benefit)              |  $   9,183,476                  |  $  (5,892,051) |  $     126,538 |

----

----

| Note 11. | Goodwill and other intangible assets |
|----------|--------------------------------------|

|                                       |                                                                                                                                                          |                                                                                                                                                          |                                                                                                                                                          |
|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       | 2009                                                                                                                                                          | 2008                                                                                                                                                          | 2007                                                                                                                                                          |
| Goodwill:                                  |                                                                                                                                                          |                                                                                                                                                          |                                                                                                                                                          |
| Balance as of January 1,                   |  $                       -            |  $          1,365,491                                                                                  |  $          1,365,491                                                                                  |
| Goodwill Impairment                        |                           - |             1,365,491                                                                             |                           - |
| Balance as of December 31,                 |                           - |                           - |             1,365,491                                                                             |
|                                       |                                                                                                                                                          |                                                                                                                                                          |                                                                                                                                                          |
| Core Deposit Intangible:                   |                                                                                                                                                          |                                                                                                                                                          |                                                                                                                                                          |
| Balance as of January 1,                   |                  85,896                                                  |                103,584                                                             |                122,160                                                             |
| Amortization expense                       |                  16,788                                                  |                  17,688                                                  |                  18,576                                                  |
| Balance as of December 31,                 |                  69,108                                                  |                  85,896                                                  |                103,584                                                             |
|                                       |                                                                                                                                                          |                                                                                                                                                          |                                                                                                                                                          |
| Total goodwill and other intangible assets |  $              69,108                                                             |  $              85,896                                                             |  $          1,469,075                                                                                  |

|   | Years EndingDecember 31, |   |  Amount |   |
|--------|--------------------------|--------|--------------|--------|
|   |                     |   |         |   |
|   | 2010                     | $      | 15,903       |   |
|   | 2011                     |   | 15,012       |   |
|   | 2012                     |   | 14,122       |   |
|   | 2013                     |   | 13,231       |   |
|   | 2014                     |   | 10,840       |   |
|   |                     | $      | 69,108       |   |

----

----

| Note 12. | Cash Surrender Value of Life Insurance |
|----------|----------------------------------------|

| Note 13. | Shareholders’ Equity |
|----------|----------------------------|

----

----

|   |                                     | 2009    |
|--------|------------------------------------------|---------|
|   |                                     | NetLoss | Shares | Per ShareAmount |
|   | Basic and Diluted Loss Per Share         |    |   |   |   |   |
|   | Loss attributable to common shareholders | $       | (23,879,606) | 4,753,783 | $ | (5.02) |

|   |                                     | 2008    |
|--------|------------------------------------------|---------|
|   |                                     | NetLoss | Shares | Per ShareAmount |
|   | Basic and Diluted Loss Per Share         |    |   |   |   |   |
|   | Loss attributable to common shareholders | $       | (7,111,606) | 4,748,873 | $ | (1.50) |

|   |                                    |      |                            |            |   |                            |
|--------|-----------------------------------------|-----------|---------------------------------|-----------------|--------|---------------------------------|
|   |                                    |      |                            |            |   |                            |
|   |                                    | 2008      |
|   |                                    | NetIncome | Shares                          | Per ShareAmount |
|   | Basic Income Per Share                  |      |                            |            |   |                            |
|   | Income available to common shareholders | $         | 2,677,926                       | 4,742,609       | $      | 0.56                            |
|   |                                    |      |                            |            |   |                            |
|   | Effect of Dilutive Securities           |      |                            |            |   |                            |
|   | Stock options outstanding               |      | -      | 32,652          |   | -      |
|   |                                    |      |                            |            |   |                            |
|   | Diluted Income Per Share                |      |                            |            |   |                            |
|   | Income available to common shareholders |      |                            |            |   |                            |
|   | plus assumed conversions                | $         | 2,677,926                       | 4,775,261       | $      | 0.56                            |

----

----

|   | 2009 |   | 2008 |   | 2007 |
|--------|------|--------|------|--------|------|

|   | Number of Shares |   | Weighted-Average Exercise Price |   | Number of Shares |   | Weighted-Average Exercise Price |   | Number of Shares |   | Weighted-Average Exercise Price |
|--------|------------------|--------|---------------------------------|--------|------------------|--------|---------------------------------|--------|------------------|--------|---------------------------------|

| Outstanding at beginning   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| of year                    | 55,000 | $      | 10.13  |   | 60,000 | $      | 10.13  |   | 65,000 | $      | 10.13  |
| Exercised                  | -      |   |   |   | 5,000  |   | 10.11  |   | 5,000  |   | 10.11  |
| Expired                    | 55,000 |   | 10.13  |   | -      |   |   |   | -      |   |   |
| Outstanding at end of year | -      |   |   |   | 55,000 |   | 10.13  |   | 60,000 |   | 10.13  |
|                       |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable at end of year | -      |   |   |   | 55,000 |   | 10.13  |   | 60,000 |   | 10.13  |

----

----

----

----

| Note 14. | 401(k) Savings Plan |
|----------|---------------------|

| Note 15. | Financial Instruments With Off-Balance-Sheet Risk |
|----------|---------------------------------------------------|

----

----

|   |                                |   | 2009       |   | 2008        |   |
|--------|-------------------------------------|--------|------------|--------|-------------|--------|
|   |                                |   |       |   |        |   |
|   | Commitments to extend credit:       |   |       |   |        |   |
|   | Future loan commitments             | $      | 3,378,751  | $      | 9,237,000   |   |
|   | Unused lines of credit              |   | 34,569,144 |   | 56,640,392  |   |
|   | Undisbursed construction loans      |   | 17,682,552 |   | 72,694,600  |   |
|   | Financial standby letters of credit |   | 1,112,600  |   | 1,481,600   |   |
|   |                                | $      | 56,743,047 | $      | 140,053,592 |   |

| Note 16. | Regulatory and Operational Matters |
|----------|------------------------------------|

----

----

|   | Actual | For CapitalAdequacy Purposes | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |
|--------|--------|------------------------------|---------------------------------------------------------------|

|   | 2009                                     |   | Amount | Ratio  |   | Amount | Ratio  |   | Amount | Ratio  |
|--------|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|   |                                     |   |   |   |   |   |   |   |   |   |
|   | The Company:                             |   |   |   |   |   |   |   |   |   |
|   |                                     |   |   |   |   |   |   |   |   |   |
|   | Total Capital (to Risk Weighted Assets)  | $      | 51,072 | 8.58%  | $      | 47,620 | 8.00%  | $      | N/A    | N/A    |
|   | Tier I Capital (to Risk Weighted Assets) |   | 42,971 | 7.22%  |   | 23,807 | 4.00%  |   | N/A    | N/A    |
|   | Tier I Capital (to Average Assets)       |   | 42,971 | 4.72%  |   | 36,416 | 4.00%  |   | N/A    | N/A    |

|   | The Bank:                                |   |   |   |   |   |   |   |   |   |
|--------|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|   |                                     |   |   |   |   |   |   |   |   |   |
|   | Total Capital (to Risk Weighted Assets)  | $      | 51,056 | 8.58%  | $      | 47,605 | 8.00%  | $      | 59,506 | 10.00% |
|   | Tier I Capital (to Risk Weighted Assets) |   | 42,960 | 7.22%  |   | 23,801 | 4.00%  |   | 35,701 | 6.00%  |
|   | Tier I Capital (to Average Assets)       |   | 42,960 | 4.72%  |   | 36,407 | 4.00%  |   | 45,508 | 5.00%  |

----

----

|   | Actual | For CapitalAdequacy Purposes | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |
|--------|--------|------------------------------|---------------------------------------------------------------|

|   | 2008                                     |   | Amount | Ratio  |   | Amount | Ratio  |   | Amount | Ratio  |
|--------|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|   |                                     |   |   |   |   |   |   |   |   |   |
|   | The Company:                             |   |   |   |   |   |   |   |   |   |
|   |                                     |   |   |   |   |   |   |   |   |   |
|   | Total Capital (to Risk Weighted Assets)  | $      | 74,289 | 10.27% | $      | 58,143 | 8.00%  | $      | N/A    | N/A    |
|   | Tier I Capital (to Risk Weighted Assets) |   | 65,161 | 9.01%  |   | 29,066 | 4.00%  |   | N/A    | N/A    |
|   | Tier I Capital (to Average Assets)       |   | 65,161 | 7.23%  |   | 36,146 | 4.00%  |   | N/A    | N/A    |

|   | The Bank:                                |   |   |   |   |   |   |   |   |   |
|--------|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|   |                                     |   |   |   |   |   |   |   |   |   |
|   | Total Capital (to Risk Weighted Assets)  | $      | 73,913 | 10.22% | $      | 58,074 | 8.00%  | $      | 72,593 | 10.00% |
|   | Tier I Capital (to Risk Weighted Assets) |   | 64,787 | 8.96%  |   | 29,030 | 4.00%  |   | 43,544 | 6.00%  |
|   | Tier I Capital (to Average Assets)       |   | 64,787 | 7.19%  |   | 36,090 | 4.00%  |   | 45,112 | 5.00%  |

----

----

----

----

| Note 17. | Related Party Transactions |
|----------|----------------------------|

|   |                       |   | 2009      |   | 2008        |   |
|--------|----------------------------|--------|-----------|--------|-------------|--------|
|   |                       |   |      |   |        |   |
|   | Balance, beginning of year | $      | 3,446,683 | $      | 891,605     |   |
|   | Additional loans           |   | 226,062   |   | 7,623,555   |   |
|   | Repayments                 |   | (132,152) |   | (5,068,477) |   |
|   | Balance, end of year       | $      | 3,540,593 | $      | 3,446,683   |   |

----

----

| Note 18. | Other Comprehensive Income |
|----------|----------------------------|

|   |   | 2009 |
|--------|--------|------|

|   |   | Before-TaxAmount | Tax Effect | Net-of-TaxAmount |
|--------|--------|------------------|------------|------------------|

|   | Unrealized holding gain arising during period | $      | 1,921,935             | $      | (730,335) | $      | 1,191,600 |
|--------|-----------------------------------------------|--------|-----------------------|--------|-----------|--------|-----------|
|   |                                          |   |                  |   |      |   |      |
|   | Less reclassification adjustment for gains    |   |                  |   |      |   |      |
|   | recognized in net income                      | $      |   (451,214) | $      | 171,461   | $      | (279,753) |
|   |                                          |   |                  |   |      |   |      |
|   | Unrealized holding gain on available for sale |   |                  |   |      |   |      |
|   | securities, net of taxes                      | $      | 1,470,721             | $      | (558,874) | $      | 911,847   |

|   |   | 2008 |
|--------|--------|------|

|   |   | Before-TaxAmount | Tax Effect | Net-of-TaxAmount |
|--------|--------|------------------|------------|------------------|

|   | Unrealized holding losses arising during period | $      | (3,226,977)                            | $      | 1,256,341                            | $      | (1,970,636)                                        |
|--------|-------------------------------------------------|--------|----------------------------------------|--------|--------------------------------------|--------|----------------------------------------------------|
|   |                                            |   |                                   |   |                                 |   |                                               |
|   | Add reclassification adjustment for losses      |   |                                   |   |                                 |   |                                               |
|   | recognized in net income                        |   |  3,167,285                        | $      | (1,233,659)                          | $      |    1,933,626                        |
|   |                                            |   |                                   |   |                                 |   |                                               |
|   | Unrealized holding loss on available for sale   |   |                                   |   |                                 |   |                                               |
|   | securities, net of taxes                        | $      |      (59,692) | $      |      22,682 | $      |        (37,010) |

|   |   | 2007 |
|--------|--------|------|

|   |   | Before-TaxAmount | Tax Effect | Net-of-TaxAmount |
|--------|--------|------------------|------------|------------------|

|   | Unrealized holding gains arising during period      | $      | 1,012,035 | $      | (384,573) | $      | 627,462 |
|--------|-----------------------------------------------------|--------|-----------|--------|-----------|--------|---------|
|   |                                                |   |      |   |      |   |    |
|   |     Reclassification adjustment |   | -         |   | -         |   | -       |
|   |                                                |   |      |   |      |   |    |
|   | Unrealized holding gain on available for sale       |   |      |   |      |   |    |
|   | securities, net of taxes                            | $      | 1,012,035 | $      | (384,573) | $      | 627,462 |

----

----

| Note 19. | Fair Value and Interest Rate Risk |
|----------|-----------------------------------|

----

----

|                          |  Quoted Prices in                                                                                                                                                                 | Significant                                     | Significant                                                                                                                      |                                                                                |
|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|
|                          |  Active Markets                                                                                                                                                                   | Observable                                      | Unobservable                                                                                                                     | Balance                                                                             |
|                          |  for Identical Assets                                                                                                                                                             | Inputs                                          | Inputs                                                                                                                           | as of                                                                               |
| December 31, 2009             | (Level 1)                                                                                                                                                                              | (Level 2)                                       | (Level 3)                                                                                                                        | December 31, 2009                                                                   |
|                          |                                                                                                                                                                                   |                                            |                                                                                                                             |                                                                                |
| Securities available for sale |  $                             - |  $     48,829,981 |  $                    - |  $           48,829,981 |
|                          |                                                                                                                                                                                   |                                            |                                                                                                                             |                                                                                |
|                          |                                                                                                                                                                                   |                                            |                                                                                                                             |                                                                                |
|                          |                                                                                                                                                                                   |                                            |                                                                                                                             |                                                                                |
|                          |                                                                                                                                                                                   |                                            |                                                                                                                             |                                                                                |
| December 31, 2008             |                                                                                                                                                                                   |                                            |                                                                                                                             |                                                                                |
|                          |                                                                                                                                                                                   |                                            |                                                                                                                             |                                                                                |
| Securities available for sale |  $                             - |  $     51,979,677 |  $                    - |  $           51,979,677 |

----

----

|               |  Quoted Prices in                                                                                                                                                                 | Significant                                                                                                                      | Significant                                                       |                                                                                |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|-------------------------------------------------------------------------------------|
|               |  Active Markets                                                                                                                                                                   | Observable                                                                                                                       | Unobservable                                                      | Balance                                                                             |
|               |  for Identical Assets                                                                                                                                                             | Inputs                                                                                                                           | Inputs                                                            | as of                                                                               |
| December 31, 2009  | (Level 1)                                                                                                                                                                              | (Level 2)                                                                                                                        | (Level 3)                                                         | December 31, 2009                                                                   |
|               |                                                                                                                                                                                   |                                                                                                                             |                                                              |                                                                                |
| Impaired Loans (1) |  $                             - |  $                    - |  $        49,322,844 |  $           49,322,844 |
|               |                                                                                                                                                                                   |                                                                                                                             |                                                              |                                                                                |
|               |                                                                                                                                                                                   |                                                                                                                             |                                                              |                                                                                |
|               |                                                                                                                                                                                   |                                                                                                                             |                                                              |                                                                                |
| December 31, 2008  |                                                                                                                                                                                   |                                                                                                                             |                                                              |                                                                                |
|               |                                                                                                                                                                                   |                                                                                                                             |                                                              |                                                                                |
| Impaired Loans (1) |  $                             - |  $                    - |  $        57,233,190 |  $           57,233,190 |

|                    |  Quoted Prices in                                                                                                                                                           | Significant                                                                                                                      | Significant                         |                                                                    |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|-------------------------------------------------------------------------|
|                    |  Active Markets                                                                                                                                                             | Observable                                                                                                                       | Unobservable                        | Balance                                                                 |
|                    |  for Identical Assets                                                                                                                                                       | Inputs                                                                                                                           | Inputs                              | as of                                                                   |
| December 31, 2009       | (Level 1)                                                                                                                                                                        | (Level 2)                                                                                                                        | (Level 3)                           | December 31, 2009                                                       |
|                    |                                                                                                                                                                             |                                                                                                                             |                                |                                                                    |
| Other real estate owned |  $                            - |  $                    - |  $   19,073,993 |  $         19,073,993 |

----

----

|   |                                              |                                                                                                                                                                 |              |   |
|--------|---------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|--------|
|   |                                              |                                                                                                                                                                 | Year Ended        |   |
|   |                                              |                                                                                                                                                                 | December 31, 2009 |   |
|   |                                              |                                                                                                                                                                 |              |   |
|   | Level 3 non-financial assets, beginning of period |  $                          - |              |
|   |                                              |                                                                                                                                                                 |              |   |
|   | Transfers into Level 3 during the period          |             19,073,993                                                                                   |              |
|   |                                              |                                                                                                                                                                 |              |   |
|   | Level 3 non-financial assets, end of period       |  $         19,073,993                                                                                              |              |

----

----

|   |                                                 | 2009                                                                              |                                                                              | 2008   |
|--------|------------------------------------------------------|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|--------|
|   |                                                 | Recorded                                                                          |                                                                              |   | Recorded |   |
|   |                                                 | Book                                                                              |                                                                              |   | Book |   |
|   |                                                 | Balance                                                                           | Fair Value                                                                        |   | Balance | Fair Value |
|   | Financial Assets:                                    |                                                                              |                                                                              |   |   |   |
|   | Cash and noninterest bearing deposits due from banks |  $    19,466                                             |  $    19,466                                             |   |  $      3,046 |  $      3,046 |
|   | Interest-bearing deposits due from banks             |        78,070                                  |        78,070                                  |   |           1,241 |           1,241 |
|   | Federal funds sold                                   |        10,000                                  |        10,000                                  |   |        20,000 |        20,000 |
|   | Short-term investments                               |              264 |              264 |   |              317 |              317 |
|   | Available-for-sale securities                        |        48,830                                  |        48,830                                  |   |        51,980 |        51,980 |
|   | Federal Reserve Bank stock                           |           1,840                 |           1,840                 |   |           1,913 |           1,913 |
|   | Federal Home Loan Bank stock                         |           4,508                 |           4,508                 |   |           4,508 |           4,508 |
|   | Loans receivable, net                                |      645,206                                             |      644,977                                             |   |      788,569 |      795,938 |
|   | Accrued interest receivable                          |           3,236                 |           3,236                 |   |           4,557 |           4,557 |
|   |                                                 |                                                                              |                                                                              |   |   |   |
|   | Financial Liabilities:                               |                                                                              |                                                                              |   |   |   |
|   | Demand deposits                                      |  $    49,756                                             |  $    49,756                                             |   |  $    50,194 |  $    50,194 |
|   | Savings deposits                                     |        69,766                                  |        69,766                                  |   |        46,040 |        46,040 |
|   | Money market deposits                                |      112,018                                             |      112,018                                             |   |        68,242 |        68,242 |
|   | NOW accounts                                         |        21,582                                  |        21,582                                  |   |        19,545 |        19,545 |
|   | Time deposits                                        |      508,213                                             |      512,524                                             |   |      600,801 |      601,357 |
|   | FHLB borrowings                                      |        50,000                                  |        50,270                                  |   |        50,000 |        50,106 |
|   | Securities sold under repurchase agreements          |           7,000                 |           7,778                 |   |           7,000 |           8,365 |
|   | Subordinated debt                                    |           8,248                 |           8,248                 |   |           8,248 |           8,248 |
|   | Accrued interest payable                             |              505 |              505 |   |              493 |              493 |

----

----

| Note 20. | Parent Company Statements |
|----------|---------------------------|

| BALANCE SHEETS                             |                                                                                                                                  |                                                                                                                                  |
|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
| December 31, 2009 and 2008                 |                                                                                                                                  |                                                                                                                                  |
|                                       |                                                                                                                                  |                                                                                                                                  |
|                                       | 2009                                                                                                                                  | 2008                                                                                                                                  |
| ASSETS                                     |                                                                                                                                  |                                                                                                                                  |
| Cash and due from banks                    |  $                    21,275 |  $                    99,099 |
| Investment in subsidiaries                 |                 44,202,870                            |                 66,742,626                            |
| Other assets                               |                   1,258,385                 |                      447,033 |
| Total assets                               |  $             45,482,530                                       |  $             67,288,758                                       |
|                                       |                                                                                                                                  |                                                                                                                                  |
| LIABILITIES AND SHAREHOLDERS' EQUITY       |                                                                                                                                  |                                                                                                                                  |
| Borrowings                                 |                   8,248,000                 |                   8,248,000                 |
| Accrued expenses and other liabilities     |                   1,373,220                 |                      266,614 |
| Shareholders' equity                       |                 35,861,310                            |                 58,774,144                            |
| Total liabilities and shareholders' equity |  $             45,482,530                                       |  $             67,288,758                                       |
|                                       |                                                                                                                                  |                                                                                                                                  |
|                                       |                                                                                                                                  |                                                                                                                                  |

----

----

|                                                      | 2009                                                                                                                                                          | 2008                                                                                                   | 2007                                                                                                   |
|-----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|
| Revenues                                                  |                                                                                                                                                          |                                                                                                   |                                                                                                   |
| Dividends from subsidiary bank                            |  $                       -            |  $           920,838                       |  $           897,381                       |
| Total revenue                                             |                           - |               920,838            |               897,381            |
|                                                      |                                                                                                                                                          |                                                                                                   |                                                                                                   |
| Expenses                                                  |                                                                                                                                                          |                                                                                                   |                                                                                                   |
| Interest on subordinated debt                             |               341,426                                                                   |               552,118            |               711,967            |
| Other expenses                                            |                 30,745                                                        |                 30,531 |                 30,000 |
| Total expenses                                            |               372,171                                                                   |               582,649            |               741,967            |
|                                                      |                                                                                                                                                          |                                                                                                   |                                                                                                   |
| (Loss) income before equity in undistributed              |                                                                                                                                                          |                                                                                                   |                                                                                                   |
|     net (loss) income of subsidiaries |             (372,171)                                                                             |               338,189            |               155,414            |
|                                                      |                                                                                                                                                          |                                                                                                   |                                                                                                   |
| Equity in undistributed net (loss) income of subsidiaries |        (23,507,435)                                                                                                        |          (7,449,795)                                      |            2,522,512                            |
|                                                      |                                                                                                                                                          |                                                                                                   |                                                                                                   |
| Net (loss) income                                         |  $    (23,879,606)                                                                                                                   |  $      (7,111,606)                                                 |  $        2,677,926                                       |
|                                                      |                                                                                                                                                          |                                                                                                   |                                                                                                   |

----

----

|                                                          | 2009                                                                                                                                        | 2008                                                                                                                                        | 2007                                                                                                                                        |
|---------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Cash Flows from Operating Activities                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Net (loss) income                                             |  $  (23,879,606)                                                                                                             |  $    (7,111,606)                                                                                                  |  $      2,677,926                                                                                        |
| Adjustments to reconcile net income to net cash provided by   |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| operating activities:                                         |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Equity in undistributed loss (income) of subsidiaries         |        23,507,435                                                                                        |          7,449,795                                                                             |        (2,522,512)                                                                                       |
| Payment of fees to directors in common stock                  |               55,833                                                  |               49,932                                                  |               49,961                                                  |
| Change in assets and liabilities:                             |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| (Increase) decrease in other assets                           |           (811,352)                                                                       |                 3,293                                       |                 4,403                                       |
| Increase (decrease) in accrued expenses and other liabilities |          1,320,059                                                                             |               (5,566)                                                 |                  (700)                                 |
| Net cash provided by operating activities                     |             192,370                                                             |             385,848                                                             |             209,078                                                             |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Cash Flows from Investing Activities                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Net investment in bank subsidiary                             |             (55,833)                                                            |             (49,932)                                                            |             (49,961)                                                            |
| Net cash used in investing activities                         |             (55,833)                                                            |             (49,932)                                                            |             (49,961)                                                            |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Cash Flows from Financing Activities                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Proceeds from issuance of common stock                        |                        - |               51,826                                                  |               50,551                                                  |
| Payment to repurchase common stock                            |                        - |           (160,025)                                                                       |                        - |
| Dividends paid on common stock                                |           (213,453)                                                                       |           (854,497)                                                                       |           (853,547)                                                                       |
| Other                                                         |                  (908)                                 |                        - |                        - |
| Net cash used in financing activities                         |           (214,361)                                                                       |           (962,696)                                                                       |           (802,996)                                                                       |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Net decrease in cash and cash equivalents                     |             (77,824)                                                            |           (626,780)                                                                       |           (643,879)                                                                       |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Cash and cash equivalents                                     |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Beginning                                                     |               99,099                                                  |             725,879                                                             |          1,369,758                                                                             |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Ending                                                        |  $           21,275                                                             |  $           99,099                                                             |  $         725,879                                                                        |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Supplemental Disclosures of Cash Flow Information             |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Cash paid for interest                                        |  $         346,086                                                                        |  $         557,476                                                                        |  $         712,665                                                                        |
|                                                          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Accrued dividends declared on common stock                    |  $                    -            |  $         212,546                                                                        |  $         213,608                                                                        |

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