----

----

| x | ANNUAL      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE      ACT OF 1934 |   |
|---|-----------------------------------------------------------------------------------------|--------|

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

----

----

----

| Part I.           |   |                                                                                                                    |   |
|------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|
|                   |   |                                                                                                                    |   |
| Item 1.           |   | Business                                                                                                                | 3      |
| Item 1A.          |   | Risk Factors                                                                                                            | 5      |
| Item 1B.          |   | Unresolved Staff Comments                                                                                               | 10     |
| Item 2.           |   | Properties                                                                                                              | 10     |
| Item 3.           |   | Legal Proceedings                                                                                                       | 11     |
| Item 4.           |   | Reserved                                                                                                                | 11     |
|                   |   |                                                                                                                    |   |
| Part II.          |   |                                                                                                                    |   |
|                   |   |                                                                                                                    |   |
| Item 5.           |   | Market for Registrant’s Common Equity, Related Stockholder      Matters and Issuer Purchases of Equity Securities | 12     |
| Item 6.           |   | Selected Financial Data                                                                                                 | 14     |
| Item 7.           |   | Management’s Discussion and Analysis of Financial Condition      and Results of Operations                        | 15     |
| Item 7A.          |   | Quantitative and Qualitative Disclosures About Market      Risk                                                         | 46     |
| Item 8.           |   | Financial Statements and Supplementary    Data                                                                          | 47     |
| Item 9.           |   | Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure                               | 84     |
| Item 9A (T). |   | Controls and Procedures                                                                                                 | 84     |
| Item 9B.          |   | Other Information                                                                                                       | 84     |
|                   |   |                                                                                                                    |   |
| Part III.         |   |                                                                                                                    |   |
|                   |   |                                                                                                                    |   |
| Item 10.          |   | Directors, Executive Officers and Corporate      Governance                                                             | 84     |
| Item 11.          |   | Executive Compensation                                                                                                  | 85     |
| Item 12.          |   | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters                     | 85     |
| Item 13.          |   | Certain Relationships and Related Transactions, and      Director Independence                                          | 85     |
| Item 14.          |   | Principal Accountant Fees and Services                                                                                  | 85     |
|                   |   |                                                                                                                    |   |
| Part IV.          |   |                                                                                                                    |   |
|                   |   |                                                                                                                    |   |
| Item 15.          |   | Exhibits, Financial Statement Schedules                                                                                 | 85     |
|                   |   |                                                                                                                    |   |
| Signatures             |   | 88                                                                                                                      |
| Exhibit Index     |   | 89                                                                                                                      |
| Certifications         |   | 93                                                                                                                      |

----

PARTI

|   | § | the      effects of economic deterioration on current customers, specifically the      effect of the economy on loan customers’ ability to repay      loans; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | the      costs and effects of litigation and of unexpected or adverse outcomes in      such litigation; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | § | governmental      monetary and fiscal policies, as well as legislative and regulatory      changes; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | § | the      effect of changes in accounting policies and practices, as may be adopted      by the regulatory agencies, as well as the Financial Accounting Standards      Board and other accounting standardsetters; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | the      risks of changes in interest rates on the level and composition of      deposits, loan demand, and the values of loan collateral, securities and      interest rate protection agreements, as well as interest rate      risks; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | the      effects of competition from other commercial banks, thrifts, mortgage      banking firms, consumer finance companies, credit unions, securities      brokerage firms, insurance companies, money market and other mutual funds      and other financial institutions operating in our market area and      elsewhere, including institutions operating locally, regionally,      nationally and internationally, together with such competitors offering      banking products and services by mail, telephone, computer and the      internet; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | technological      changes; |
|--------|--------|-----------------------------|

|   | § | acquisitions      and integration of acquiredbusinesses; |
|--------|--------|----------------------------------------------------------|

|   | § | the      failure of assumptions underlying the establishment of reserves for loan      and lease losses and estimations of values of collateral and various      financial assets and liabilities; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | volatilities      in the securities markets; |
|--------|--------|----------------------------------------------|

|   | § | deteriorating      economic conditions |
|--------|--------|----------------------------------------|

|   | § | acts      of war or terrorism; and |
|--------|--------|------------------------------------|

|   | § | disruption      of credit and equity markets. |
|--------|--------|-----------------------------------------------|

| ITEM      1: | BUSINESS |
|--------------|----------|

----

|   | § | local      community banks | § | insurance      companies              |
|--------|--------|----------------------------|--------|---------------------------------------|
|   |   |                       |   |                                  |
|   | § | savings      banks         | § | money      market funds               |
|   |   |                       |   |                                  |
|   | § | regional      banks        | § | mutual      funds                     |
|   |   |                       |   |                                  |
|   | § | credit      unions         | § | small      loan companies             |
|   |   |                       |   |                                  |
|   | § | savings      & loans   | § | other      financial servicecompanies |

|   | § | operations               | § | consolidation         |
|--------|--------|--------------------------|--------|-----------------------|
|   |   |                     |   |                  |
|   | § | securities               | § | reserves              |
|   |   |                     |   |                  |
|   | § | risk      management     | § | dividends             |
|   |   |                     |   |                  |
|   | § | consumer      compliance | § | branches              |
|   |   |                     |   |                  |
|   | § | mergers                  | § | capital      adequacy |

----

ITEM1A:  RISKFACTORS

----

----

----

----

| · | Actual or      anticipated variations in quarterly results of      operations. |
|--------|--------------------------------------------------------------------------------|

| · | Recommendations by securities      analysts. |
|--------|----------------------------------------------|

| · | Operating and stock price performance of other      companies that investors deem comparable to the      Company. |
|--------|-------------------------------------------------------------------------------------------------------------------|

| · | News reports relating to trends, concerns and      other issues in the financial services  industry. |
|--------|------------------------------------------------------------------------------------------------------|

| · | Perceptions in the marketplace regarding the      Company and/or itscompetitors. |
|--------|----------------------------------------------------------------------------------|

| · | New technology used, or services offered, by      competitors. |
|--------|----------------------------------------------------------------|

| · | Significant acquisitions or business combinations,      strategic partnerships, joint ventures or capital commitments by or      involving the Company or itscompetitors. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Failure to integrate acquisitions or realize      anticipated benefits fromacquisitions. |
|--------|------------------------------------------------------------------------------------------|

| · | Changes in government      regulations. |
|--------|-----------------------------------------|

| · | Geopolitical conditions such as acts or threats of      terrorism or militaryconflicts. |
|--------|-----------------------------------------------------------------------------------------|

----

ITEM1B:  UNRESOLVED STAFFCOMMENTS

ITEM2:  PROPERTIES

| Location                                                |   | Owned / leased* |   | Type of use                      |   | Full service |   | Drive-thru |   | ATM    |
|---------------------------------------------------------|--------|---------------------------|--------|--------------------------------------------|--------|-------------------|--------|------------|--------|--------|
| Drinker      & Blakely Sts.,Dunmore,      PA        |   | Owned                     |   | Main Branch (1) (2)         |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 111      Green Ridge St.,Scranton,      PA              |   | Leased                    |   | Green Ridge Branch (2)      |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 1311      Morgan Hwy.,Clarks      Summit, PA            |   | Leased                    |   | Abington Branch (3)              |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 1232      Keystone Industrial Park Rd.,Dunmore,      PA |   | Owned                     |   | Keystone Industrial ParkBranch   |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 338      North Washington Ave., Scranton, PA       |   | Owned                     |   | Financial Center Branch (4) |   | x                 |   |       |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 4010      Birney Ave.,Moosic,      PA                   |   | Leased                    |   | Moosic Branch                         |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 801      Wyoming Ave.,West      Pittston, PA            |   | Leased                    |   | West Pittston Branch             |   | x                 |   |       |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 1598      Main St.,Peckville,      PA                   |   | Leased                    |   | Peckville Branch                      |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 247      Wyoming Ave.,Kingston,      PA                 |   | Leased                    |   | Kingston Branch                       |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 511      Scranton-Carbondale Hwy., Eynon, PA       |   | Leased                    |   | Eynon Branch                          |   | x                 |   | x          |   | x      |
|                                                    |   |                      |   |                                       |   |              |   |       |   |   |
| 400      S. Main St.,Scranton,      PA                  |   | Owned                     |   | West Scranton Branch(2)          |   | x                 |   | x          |   | x      |

----

----

|   | · | 139      Wyoming Ave., Scranton (former location of the Bank’s Scranton      branch) |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | Marywood      University, 2300 Adams Ave., Nazareth and Regina Halls,      Scranton |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Snö      Mountain Ski Resort, 1000 Montage Mountain Rd.,  Moosic |
|--------|--------|-----------------------------------------------------------------------|

|   | · | Shoppes      at Montage, 1035 Shoppes Blvd.,Moosic |
|--------|--------|----------------------------------------------------|

ITEM 3:    LEGAL PROCEEDINGS

ITEM 4:   RESERVED

----

PARTII

ITEM5:  MARKET FORREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES

|             |   | 2009 Prices |   |   | Dividends |   |   | 2008 Prices |   |   | Dividends |   |
|------------------|--------|------------------|--------|--------|-----------|--------|--------|------------------|--------|--------|-----------|--------|
|             |   | High             |   |   | Low       |   |   | paid             |   |   | High      |   |   | Low |   |   | paid |   |
| 1st      Quarter |   | $                | 26.50  |   |      | $      | 19.50  |             |   | $      | 0.25      |   |   | $ | 31.00 |   |   | $ | 25.20 |   |   | $ | 0.25 |   |
| 2nd      Quarter |   | $                | 24.00  |   |      | $      | 18.40  |             |   | $      | 0.25      |   |   | $ | 30.00 |   |   | $ | 27.00 |   |   | $ | 0.25 |   |
| 3rd      Quarter |   | $                | 22.00  |   |      | $      | 18.35  |             |   | $      | 0.25      |   |   | $ | 33.50 |   |   | $ | 29.00 |   |   | $ | 0.25 |   |
| 4th      Quarter |   | $                | 19.00  |   |      | $      | 14.60  |             |   | $      | 0.25      |   |   | $ | 28.75 |   |   | $ | 21.75 |   |   | $ | 0.25 |   |

----

|                                            |   |   | Period Ending |   |
|-------------------------------------------------|--------|--------|--------------------|--------|
| Index                                           |   |   | 12/31/04           |   |   | 12/31/05 |   |   | 12/31/06 |   |   | 12/31/07 |   |   | 12/31/08 |   |   | 12/31/09 |   |
| Fidelity      D & D Bancorp, Inc.           |   |   | 100.00             |   |   | 125.47 |   |   | 114.21 |   |   | 100.04 |   |   | 96.48 |   |   | 59.32 |   |
| NASDAQ      Composite                           |   |   | 100.00             |   |   | 101.37 |   |   | 111.03 |   |   | 121.92 |   |   | 72.49 |   |   | 104.31 |   |
| SNL      > $500M OTC-BB and Pink Sheet Banks |   |   | 100.00             |   |   | 106.42 |   |   | 116.77 |   |   | 107.59 |   |   | 78.07 |   |   | 66.75 |   |

----

ITEM6:  SELECTEDFINANCIAL DATA

|                                                              |   | 2009   |        |   | 2008   |   |        | 2007   |   |   | 2006        |   |   | 2005   |        |
|-------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|--------|-------------|
| Balance sheet data:                                               |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |
| Total      assets                                                 |   | $      | 556,017,271 |   |   | $      | 575,718,997 |   |   | $      | 587,412,555 |   |   | $      | 562,317,988 |   |   | $ | 544,060,698 |   |
| Total      investment securities                                  |   |   | 76,529,998  |   |   |   | 84,187,579  |   |   |   | 122,984,160 |   |   |   | 100,410,736 |   |   |   | 97,678,573 |   |
| Net      loans                                                    |   |   | 423,124,054 |   |   |   | 436,207,460 |   |   |   | 421,424,379 |   |   |   | 417,199,048 |   |   |   | 403,144,095 |   |
| Loans      available-for-sale                                     |   |   | 1,221,365   |   |   |   | 84,000      |   |   |   | 827,250     |   |   |   | 122,000     |   |   |   | 428,584 |   |
| Total      deposits                                               |   |   | 458,994,458 |   |   |   | 433,311,932 |   |   |   | 425,708,361 |   |   |   | 410,334,595 |   |   |   | 379,498,640 |   |
| Short-term      borrowings                                        |   |   | 16,533,107  |   |   |   | 38,129,704  |   |   |   | 39,656,354  |   |   |   | 33,656,150  |   |   |   | 28,772,997 |   |
| Long-term      debt                                               |   |   | 32,000,000  |   |   |   | 52,000,000  |   |   |   | 62,708,677  |   |   |   | 62,536,210  |   |   |   | 83,704,188 |   |
| Total      shareholders' equity                                   |   |   | 45,674,547  |   |   |   | 48,960,651  |   |   |   | 55,191,294  |   |   |   | 51,611,863  |   |   |   | 48,846,029 |   |
|                                                              |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Operating data for the year      ended:                           |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Total      interest income                                        |   | $      | 29,909,273  |   |   | $      | 33,961,434  |   |   | $      | 35,279,357  |   |   | $      | 33,529,710  |   |   | $ | 29,020,261 |   |
| Total      interest expense                                       |   |   | 10,796,854  |   |   |   | 14,684,133  |   |   |   | 17,660,075  |   |   |   | 16,361,109  |   |   |   | 11,720,986 |   |
| Net      interest income                                          |   |   | 19,112,419  |   |   |   | 19,277,301  |   |   |   | 17,619,282  |   |   |   | 17,168,601  |   |   |   | 17,299,275 |   |
| Provision      (credit) for loan losses                           |   |   | 5,050,000   |   |   |   | 940,000     |   |   |   | (60,000     | )      |   |   | 325,000     |   |   |   | 830,000 |   |
|                                                              |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      interest income after provision (credit) for loan losses |   |   | 14,062,419  |   |   |   | 18,337,301  |   |   |   | 17,679,282  |   |   |   | 16,843,601  |   |   |   | 16,469,275 |   |
| Other-than-temporary      impairment                              |   |   | (3,300,094  | )      |   |   | (435,665    | )      |   |   | -           |   |   |   | -           |   |   |   | - |   |
| Other      income                                                 |   |   | 5,461,281   |   |   |   | 5,013,966   |   |   |   | 5,205,215   |   |   |   | 4,522,138   |   |   |   | 4,150,502 |   |
| Other      operating expense                                      |   |   | 19,241,125  |   |   |   | 18,210,683  |   |   |   | 16,636,760  |   |   |   | 15,878,376  |   |   |   | 14,561,968 |   |
|                                                              |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| (Loss)      income before income taxes                            |   |   | (3,017,519  | )      |   |   | 4,704,919   |   |   |   | 6,247,737   |   |   |   | 5,487,363   |   |   |   | 6,057,809 |   |
| (Credit)      provision for income taxes                          |   |   | (1,617,314  | )      |   |   | 1,068,971   |   |   |   | 1,636,165   |   |   |   | 1,362,080   |   |   |   | 1,466,112 |   |
| Net      (loss) income                                            |   | $      | (1,400,205  | )      |   | $      | 3,635,948   |   |   | $      | 4,611,572   |   |   | $      | 4,125,283   |   |   | $ | 4,591,697 |   |
|                                                              |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Per share data:                                                   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      (loss) income per share, basic                           |   | $      | (0.67       | )      |   | $      | 1.76        |   |   | $      | 2.23        |   |   | $      | 2.01        |   |   | $ | 2.26 |   |
| Net      (loss) income per share, diluted                         |   | $      | (0.67       | )      |   | $      | 1.76        |   |   | $      | 2.23        |   |   | $      | 2.01        |   |   | $ | 2.25 |   |
| Dividends      declared                                           |   | $      | 2,078,171   |   |   | $      | 2,068,680   |   |   | $      | 1,921,533   |   |   | $      | 1,801,361   |   |   | $ | 1,624,263 |   |
| Dividends      per share                                          |   | $      | 1.00        |   |   | $      | 1.00        |   |   | $      | 0.93        |   |   | $      | 0.88        |   |   | $ | 0.80 |   |
| Book      value per share                                         |   | $      | 21.69       |   |   | $      | 23.73       |   |   | $      | 26.62       |   |   | $      | 25.09       |   |   | $ | 23.95 |   |
| Weighted-average      shares outstanding *                        |   |   | 2,080,507   |   |   |   | 2,068,851   |   |   |   | 2,066,683   |   |   |   | 2,047,975   |   |   |   | 2,031,211 |   |
| Shares      outstanding *                                         |   |   | 2,105,860   |   |   |   | 2,062,927   |   |   |   | 2,072,929   |   |   |   | 2,057,433   |   |   |   | 2,039,639 |   |
|                                                              |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Ratios:                                                           |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Return      on average assets                                     |   |   | -0.25       | %      |   |   | 0.62        | %      |   |   | 0.80        | %      |   |   | 0.73        | % |   |   | 0.86 | % |
| Return      on average equity                                     |   |   | -2.91       | %      |   |   | 6.81        | %      |   |   | 8.65        | %      |   |   | 8.31        | % |   |   | 9.64 | % |
| Net      interest margin                                          |   |   | 3.71        | %      |   |   | 3.60        | %      |   |   | 3.34        | %      |   |   | 3.31        | % |   |   | 3.51 | % |
| Efficiency      ratio                                             |   |   | 72.51       | %      |   |   | 72.98       | %      |   |   | 71.61       | %      |   |   | 71.67       | % |   |   | 65.99 | % |
| Expense      ratio                                                |   |   | 2.37        | %      |   |   | 2.25        | %      |   |   | 2.01        | %      |   |   | 2.02        | % |   |   | 1.93 | % |
| Allowance      for loan losses to loans                           |   |   | 1.75        | %      |   |   | 1.08        | %      |   |   | 1.13        | %      |   |   | 1.29        | % |   |   | 1.46 | % |
| Dividend      payout ratio                                        |   |   | N/M         | **     |   |   | 56.90       | %      |   |   | 41.67       | %      |   |   | 43.67       | % |   |   | 35.37 | % |
| Equity      to assets                                             |   |   | 8.21        | %      |   |   | 8.50        | %      |   |   | 9.40        | %      |   |   | 9.18        | % |   |   | 8.98 | % |
| Equity      to deposits                                           |   |   | 9.95        | %      |   |   | 11.30       | %      |   |   | 12.96       | %      |   |   | 12.58       | % |   |   | 12.87 | % |

----

| *  | The      number of shares and the weighted-average number of shares outstanding      prior to 2006, have been adjusted to reflect the effect of a 10% stock      dividend paid on February 15,2006. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **  | The      result of this calculation is notmeaningful. |
|----------|-------------------------------------------------------|

----

| ITEM      7: | MANAGEMENT’S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF      OPERATIONS |
|--------------|------------------------------------------------------------------------------------------------------|

----

|                                            |   | 2009   |    |   | 2008    |   |   | 2007   |   |
|-------------------------------------------------|--------|--------|---------|--------|---------|--------|--------|--------|--------|
|                                            |   | Amount |    |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
|                                            |   |   |    |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets:                                         |   |   |    |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents                  |   | $      | 8,328   |   |    |   | 1.5    | %      |   | $ | 12,771 |   |   |   | 2.2 | % |   | $ | 10,409 |   |   |   | 1.8 | % |
| Investment      securities                      |   |   | 76,530  |   |    |   | 13.8   |   |   |   | 84,188 |   |   |   | 14.6 |   |   |   | 122,984 |   |   |   | 20.9 |   |
| Federal      Home Loan Bank Stock               |   |   | 4,781   |   |    |   | 0.9    |   |   |   | 4,781 |   |   |   | 0.8 |   |   |   | 3,303 |   |   |   | 0.6 |   |
| Loans      and leases, net                      |   |   | 424,345 |   |    |   | 76.3   |   |   |   | 436,291 |   |   |   | 75.8 |   |   |   | 422,252 |   |   |   | 71.9 |   |
| Bank      premises and equipment                |   |   | 15,362  |   |    |   | 2.8    |   |   |   | 16,056 |   |   |   | 2.8 |   |   |   | 12,965 |   |   |   | 2.2 |   |
| Life      insurance cash surrender value        |   |   | 9,117   |   |    |   | 1.6    |   |   |   | 8,808 |   |   |   | 1.5 |   |   |   | 8,489 |   |   |   | 1.4 |   |
| Other      assets                               |   |   | 17,554  |   |    |   | 3.1    |   |   |   | 12,824 |   |   |   | 2.3 |   |   |   | 7,011 |   |   |   | 1.2 |   |
| Total      assets                               |   | $      | 556,017 |   |    |   | 100.0  | %      |   | $ | 575,719 |   |   |   | 100.0 | % |   | $ | 587,413 |   |   |   | 100.0 | % |
|                                            |   |   |    |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                    |   |   |    |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      deposits                             |   | $      | 458,994 |   |    |   | 82.6   | %      |   | $ | 433,312 |   |   |   | 75.3 | % |   | $ | 425,708 |   |   |   | 72.5 | % |
| Short-term      borrowings                      |   |   | 16,533  |   |    |   | 3.0    |   |   |   | 38,130 |   |   |   | 6.6 |   |   |   | 39,656 |   |   |   | 6.7 |   |
| Long-term      debt                             |   |   | 32,000  |   |    |   | 5.8    |   |   |   | 52,000 |   |   |   | 9.0 |   |   |   | 62,709 |   |   |   | 10.7 |   |
| Other      liabilities                          |   |   | 2,815   |   |    |   | 0.4    |   |   |   | 3,316 |   |   |   | 0.6 |   |   |   | 4,149 |   |   |   | 0.7 |   |
| Total      liabilities                          |   |   | 510,342 |   |    |   | 91.8   |   |   |   | 526,758 |   |   |   | 91.5 |   |   |   | 532,222 |   |   |   | 90.6 |   |
| Shareholders'      equity                       |   |   | 45,675  |   |    |   | 8.2    |   |   |   | 48,961 |   |   |   | 8.5 |   |   |   | 55,191 |   |   |   | 9.4 |   |
| Total      liabilities and shareholders' equity |   | $      | 556,017 |   |    |   | 100.0  | %      |   | $ | 575,719 |   |   |   | 100.0 | % |   | $ | 587,413 |   |   |   | 100.0 | % |

|   |   |   |        |   |   |   |   | Earning |   |   |        |   |   |     |   |   |   |   |       | Short-term |   |   |   |   |   | Other      |        |   |   |   |
|--------|--------|--------|-------------|--------|--------|--------|--------|---------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|------------|------------|--------|--------|--------|--------|--------|------------|-------------|--------|--------|--------|
|   |   | Assets |        |   | %      |   |   | assets* |   |   | %           |   |   | Deposits |   |   | %      |   |       | borrowings |   |   | %      |   |   | borrowings |        |   | %      |   |
| 2009   |   | $      | (19,701,726 | )      |   |   | (3     | )       |   | $      | (26,475,299 | )      |   |     | (5     | )      |   | $      | 25,682,526 |       |   |   | 6      |   |   | $          | (21,596,597 | )      |   |   | (57 | ) |   | $ | (20,000,000 | ) |   |   | (38 | ) |
| 2008   |   |   | (11,693,558 | )      |   |   | (2     | )       |   |   | (22,808,541 | )      |   |     | (4     | )      |   |   | 7,603,571  |       |   |   | 2      |   |   |       | (1,526,650  | )      |   |   | (4 | ) |   |   | (10,708,677 | ) |   |   | (17 | ) |
| 2007   |   |   | 25,094,567  |   |   |   | 4      |    |   |   | 26,073,807  |   |   |     | 5      |   |   |   | 15,373,766 |       |   |   | 4      |   |   |       | 6,000,204   |   |   |   | 18 |   |   |   | 172,467 |   |   |   | - |   |
| 2006   |   |   | 18,257,290  |   |   |   | 3      |    |   |   | 21,202,050  |   |   |     | 4      |   |   |   | 30,835,955 |       |   |   | 8      |   |   |       | 4,883,153   |   |   |   | 17 |   |   |   | (21,167,978 | ) |   |   | (25 | ) |
| 2005   |   |   | 7,385,560   |   |   |   | 1      |    |   |   | 2,784,580   |   |   |     | 1      |   |   |   | 13,883,305 |       |   |   | 4      |   |   |       | (21,761,049 | )      |   |   | (43 | ) |   |   | 12,585,000 |   |   |   | 18 |   |

----

----

|                         |   | 2009   |    |   | 2008    |   |
|------------------------------|--------|--------|---------|--------|---------|--------|
|                         |   | Amount |    |   | Percent |   |   | Amount |   |   | Percent |   |
|                         |   |   |    |   |    |   |   |   |   |   |   |   |
| Money      market            |   | $      | 91,488  |   |    |   | 19.9 | % |   | $ | 96,738 |   |   |   | 22.3 | % |
| NOW                          |   |   | 62,031  |   |    |   | 13.5 |   |   |   | 50,124 |   |   |   | 11.6 |   |
| Savings      and clubs       |   |   | 86,335  |   |    |   | 18.8 |   |   |   | 41,326 |   |   |   | 9.5 |   |
| Certificates      of deposit |   |   | 139,502 |   |    |   | 30.5 |   |   |   | 173,681 |   |   |   | 40.1 |   |
| CDARS                        |   |   | 8,748   |   |    |   | 1.9 |   |   |   | - |   |   |   | - |   |
| Total      interest-bearing  |   |   | 388,104 |   |    |   | 84.6 |   |   |   | 361,869 |   |   |   | 83.5 |   |
| Non-interest      bearing    |   |   | 70,890  |   |    |   | 15.4 |   |   |   | 71,443 |   |   |   | 16.5 |   |
| Total      deposits          |   | $      | 458,994 |   |    |   | 100.0 | % |   | $ | 433,312 |   |   |   | 100.0 | % |

|                           |   | Three months |   |   | Three to six |   |   | Six to twelve |   |   | Over twelve |   |   |   |   |
|--------------------------------|--------|-------------------|--------|--------|------------------------|--------|--------|-------------------------|--------|--------|------------------|--------|--------|--------|--------|
|                           |   | or less      |   |   | months                 |   |   | months                  |   |   | months           |   |   | Total  |   |
| CDs      of $100,000 or more   |   | $                 | 19,883 |   |                   | $      | 5,197  |                    |   | $      | 7,992            |   |   | $      | 21,867 |   |   | $ | 54,939 |   |
| CDs      of less than $100,000 |   |              | 17,817 |   |                   |   | 8,157  |                    |   |   | 17,980           |   |   |   | 40,609 |   |   |   | 84,563 |   |
| CDARS                          |   |              | -      |   |                   |   | 740    |                    |   |   | 4,088            |   |   |   | 3,920  |   |   |   | 8,748 |   |
| Total      CDs                 |   | $                 | 37,700 |   |                   | $      | 14,094 |                    |   | $      | 30,060           |   |   | $      | 66,396 |   |   | $ | 148,250 |   |

----

----

|                                        |   | 2009   |       |   | 2008    |   |
|---------------------------------------------|--------|--------|------------|--------|---------|--------|
|                                        |   | Amount |       |   | Percent |   |   | Amount |   |   | Percent |   |
|                                        |   |   |       |   |    |   |   |   |   |   |   |   |
| Agency      - GSE                           |   | $      | 33,132,301 |   |    |   | 43.3 | % |   | $ | 43,507,359 |   |   |   | 51.7 |  % |
| MBS      - GSE residential                  |   |   | 14,456,037 |   |    |   | 18.9 |   |   |   | 12,438,721 |   |   |   | 14.8 |   |
| State      & municipal subdivisions     |   |   | 23,270,289 |   |    |   | 30.4 |   |   |   | 17,552,729 |   |   |   | 20.8 |   |
| Pooled      trust preferred securities      |   |   | 5,241,844  |   |    |   | 6.8 |   |   |   | 10,260,196 |   |   |   | 12.2 |   |
| Equity      securities - financial services |   |   | 429,527    |   |    |   | 0.6 |   |   |   | 428,574 |   |   |   | 0.5 |   |
| Total                                       |   | $      | 76,529,998 |   |    |   | 100.0 | % |   | $ | 84,187,579 |   |   |   | 100.0 | % |

|                                    |   | One year |   |   | One      through |   |   | Five      through |   |   | More than |   |   |   |       |
|-----------------------------------------|--------|---------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|----------------|--------|--------|--------|------------|
|                                    |   | or less  |   |   | five years  |   |   | ten years    |   |   | ten years |   |   | Total  |       |
| Agency      - GSE                       |   | $             | -      |   |             | $      | -      |              |   | $      | 6,939,700      |   |   | $      | 26,192,601 |   |   | $ | 33,132,301 |   |
| MBS      - GSE residential              |   |          | -      |   |             |   | 46,579 |              |   |   | 487,049        |   |   |   | 13,922,409 |   |   |   | 14,456,037 |   |
| State      & municipal subdivisions |   |          | -      |   |             |   | -      |              |   |   | 592,410        |   |   |   | 22,677,879 |   |   |   | 23,270,289 |   |
| Pooled      trust preferred securities  |   |          | -      |   |             |   | -      |              |   |   | -              |   |   |   | 5,241,844  |   |   |   | 5,241,844 |   |
| Total      debt securities              |   | $             | -      |   |             | $      | 46,579 |              |   | $      | 8,019,159      |   |   | $      | 68,034,733 |   |   | $ | 76,100,471 |   |

|                                    |   | One      year |   |   | One      through |   |   | Five      through |   |   | More      than |   |   |   |   |
|-----------------------------------------|--------|---------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|----------------|--------|--------|--------|--------|
|                                    |   | or less       |   |   | five years       |   |   | ten years         |   |   | ten years      |   |   | Total  |   |
|                                    |   |          |   |   |             |   |   |              |   |   |           |   |   |   |   |
| Agency      - GSE                       |   |          | -      | %      |             |   | -      | %                 |   |   | 3.32           | %      |   |   | 5.02   | % |   |   | 4.67 | % |
| MBS      - GSE residential              |   |          | -      |   |             |   | 6.00   |              |   |   | 6.04           |   |   |   | 4.76   |   |   |   | 4.81 |   |
| State      & municipal subdivisions |   |          | -      |   |             |   | -      |              |   |   | 5.60           |   |   |   | 6.22   |   |   |   | 6.21 |   |
| Pooled      trust preferred securities  |   |          | -      |   |             |   | -      |              |   |   | -              |   |   |   | 1.69   |   |   |   | 1.69 |   |
| Total      debt securities              |   |          | -      | %      |             |   | 6.00   | %                 |   |   | 3.65           | %      |   |   | 4.54   | % |   |   | 4.46 | % |

----

----

|   | · | The      few observable transactions and market quotations that were available were      not reliable for purposes of determining fair value at December 31,      2009, |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An      income valuation approach (present value technique) that maximizes the use      of relevant observable inputs and minimizes the use of unobservable inputs      are equally or more representative of fair value than the market approach      valuation technique, and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      PreTSLs securities are classified within “Level 3” (as defined in current      accounting guidance and explained in Note 12, “Fair Value of Financial      Instruments and Derivatives” of the consolidated financial statements) of      the fair value hierarchy because significant adjustments are required to      determine fair value at the measurement date.  The valuations of      the Company’s PreTSLs were prepared by an independent third party and      corroborated by management.  The approach to determine fair      value involved the following: |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | o | Data      about the issue structure as defined in the indenture and the underlying      collateral were collected, |
|--|---|--------------------------------------------------------------------------------------------------------------------|

|  | o | The      credit quality of the collateral is estimated using issuer-specific      probability of defaultvalues, |
|--|---|-----------------------------------------------------------------------------------------------------------------|

|  | o | The      default probabilities also considered the potential for 50% correlation      among issuers within the same industry (e.g. banks with other banks) and      30% correlation between industries (e.g. banks vs.    insurance), |
|--|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | o | The      loss given default, or amount of cash lost to the investor when a debt      asset defaults, was assumed to be 100% (no recovery) based upon Moody’s      research.  This replicates the historically high default loss      levels on trust preferredinstruments, |
|--|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | o | The      cash flows were forecast for the underlying collateral and applied to each      tranche to determine the resulting distribution among the      securities.  This ascertains which investors are paid and which      investors incur losses.  Thus, these cash flow projections      capture the credit risk, |
|--|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | o | The      expected cash flows utilize no prepayments and were discounted utilizing      three-month LIBOR as the risk-free rate for the base case and then added a      300bp liquidity premium as the discount rate to calculate the present      value of the security, |
|--|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | o | The      effective discount rates on an overall basis range from 9.84% to 341.92%      and are highly dependent upon the credit quality of the collateral, the      relative position of the tranche within the capital structure of the      security and the prepayment assumptions,and |
|--|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | o | The      calculations were modeled in several thousand scenarios using a Monte      Carlo engine to establish a distribution of intrinsic values and the      average was used for valuationpurposes. |
|--|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                           |   | 2009   |        |   | 2008   |   |        | 2007   |   |   | 2006        |   |   | 2005   |        |
|--------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|--------|-------------|
|                           |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |
| Real      estate:              |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |
| Commercial                     |   | $      | 186,726,196 |   |   | $      | 164,772,236 |   |   | $      | 143,596,397 |   |   | $      | 158,446,052 |   |   | $ | 158,566,841 |   |
| Residential                    |   |   | 71,001,298  |   |   |   | 98,510,562  |   |   |   | 116,978,378 |   |   |   | 112,742,692 |   |   |   | 103,920,613 |   |
| Construction                   |   |   | 10,125,354  |   |   |   | 11,426,978  |   |   |   | 10,703,249  |   |   |   | 13,369,712  |   |   |   | 14,198,858 |   |
| Commercial      and industrial |   |   | 76,787,809  |   |   |   | 80,707,756  |   |   |   | 72,461,485  |   |   |   | 59,767,164  |   |   |   | 57,721,756 |   |
| Consumer                       |   |   | 85,689,831  |   |   |   | 85,091,205  |   |   |   | 81,998,093  |   |   |   | 77,729,520  |   |   |   | 74,070,328 |   |
| Direct      financing leases   |   |   | 367,169     |   |   |   | 443,957     |   |   |   | 511,178     |   |   |   | 588,211     |   |   |   | 650,348 |   |
| Gross      loans               |   |   | 430,697,657 |   |   |   | 440,952,694 |   |   |   | 426,248,780 |   |   |   | 422,643,351 |   |   |   | 409,128,744 |   |
| Less:                          |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Allowance      for loan losses |   |   | 7,573,603   |   |   |   | 4,745,234   |   |   |   | 4,824,401   |   |   |   | 5,444,303   |   |   |   | 5,984,649 |   |
| Net      loans                 |   | $      | 423,124,054 |   |   | $      | 436,207,460 |   |   | $      | 421,424,379 |   |   | $      | 417,199,048 |   |   | $ | 403,144,095 |   |
|                           |   |   |        |   |   |   |        |   |   |   |        |   |   |   |        |   |   |   |   |   |
| Loans      available-for-sale  |   | $      | 1,221,365   |   |   | $      | 84,000      |   |   | $      | 827,250     |   |   | $      | 122,000     |   |   | $ | 428,584 |   |

----

|                           |   | 2009   |   |   | 2008   |   |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real      estate:              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                     |   |   | 43.3   | %      |   |   | 37.4   | %      |   |   | 33.7   | %      |   |   | 37.5   | % |   |   | 38.8 | % |
| Residential                    |   |   | 16.5   |   |   |   | 22.3   |   |   |   | 27.5   |   |   |   | 26.7   |   |   |   | 25.4 |   |
| Construction                   |   |   | 2.4    |   |   |   | 2.6    |   |   |   | 2.5    |   |   |   | 3.2    |   |   |   | 3.5 |   |
| Commercial      and industrial |   |   | 17.8   |   |   |   | 18.3   |   |   |   | 17.0   |   |   |   | 14.1   |   |   |   | 14.1 |   |
| Consumer                       |   |   | 19.9   |   |   |   | 19.3   |   |   |   | 19.2   |   |   |   | 18.4   |   |   |   | 18.1 |   |
| Direct      financing leases   |   |   | 0.1    |   |   |   | 0.1    |   |   |   | 0.1    |   |   |   | 0.1    |   |   |   | 0.1 |   |
| Gross      loans               |   |   | 100.0  | %      |   |   | 100.0  | %      |   |   | 100.0  | %      |   |   | 100.0  | % |   |   | 100.0 | % |

|                          |   | One year |   |   | One to five |   |   | More than  |   |   |    |   |
|-------------------------------|--------|---------------|--------|--------|-----------------------|--------|--------|-----------------|--------|--------|---------|--------|
|                          |   | or less  |   |   | years                 |   |   | five years |   |   | Total   |   |
| Commercial      and CRE       |   | $             | 27,130 |   |                  | $      | 50,854 |            |   | $      | 185,530 |   |   | $ | 263,514 |   |
| Real      estate construction |   |          | 10,125 |   |                  |   | -      |            |   |   | -       |   |   |   | 10,125 |   |
| Total                         |   | $             | 37,255 |   |                  | $      | 50,854 |            |   | $      | 185,530 |   |   | $ | 273,639 |   |

|                        |   | One to five |    |   | More than  |   |   |   |   |
|-----------------------------|--------|-----------------------|---------|--------|-----------------|--------|--------|--------|--------|
|                        |   | years                 |    |   | five years |   |   | Total  |   |
|                        |   |                  |    |   |            |   |   |   |   |
| Fixed      interest rate    |   | $                     | 33,564  |   |            | $      | 37,822 |   |   | $ | 71,386 |   |
| Variable      interest rate |   |                  | 81,718  |   |            |   | 53,186 |   |   |   | 134,904 |   |
| Total                       |   | $                     | 115,282 |   |            | $      | 91,008 |   |   | $ | 206,290 |   |

----

|   | § | identification      of specific impaired loans by loancategory; |
|--------|--------|-----------------------------------------------------------------|

|   | § | specific      loans that could have potentialloss; |
|--------|--------|----------------------------------------------------|

|   | § | calculation      of specific allowances where required for the impaired loans based on      collateral and other objective and quantifiable  evidence; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | determination      of homogenous pools by loan category and eliminating the impaired      loans; |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | § | application      of historical loss percentages (three-year average) to pools to determine      the allowance allocation; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | § | application      of qualitative factor adjustment percentages to historical losses for      trends or changes in the loan portfolio.  Qualitative factor      adjustments include: |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | levels      of and trends in delinquencies and non-accrual  loans; |
|--------|---|--------------------------------------------------------------------|

|   | o | levels      of and trends in charge-offs andrecoveries; |
|--------|---|---------------------------------------------------------|

|   | o | trends      in volume and terms of loans; |
|--------|---|-------------------------------------------|

|   | o | changes      in risk selection and underwritingstandards; |
|--------|---|-----------------------------------------------------------|

|   | o | changes      in lending policies, procedures andpractices; |
|--------|---|------------------------------------------------------------|

|   | o | experience,      ability and depth of lendingmanagement; |
|--------|---|----------------------------------------------------------|

|   | o | national      and local economic trends and conditions;and |
|--------|---|------------------------------------------------------------|

|   | o | changes      in credit concentrations. |
|--------|---|----------------------------------------|

----

|                                                                             |   | 2009   |    |   | 2008   |   |    | 2007   |   |   | 2006    |   |   | 2005   |    |
|----------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
|                                                                             |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |
| Balance      at beginning of period                                              |   | $      | 4,745   |   |   | $      | 4,824   |   |   | $      | 5,444   |   |   | $      | 5,985   |   |   | $ | 5,988 |   |
|                                                                             |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Charge-offs:                                                                     |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Real      estate:                                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Commercial                                                                       |   |   | 844     |   |   |   | 565     |   |   |   | -       |   |   |   | 31      |   |   |   | 463 |   |
| Residential                                                                      |   |   | 9       |   |   |   | 45      |   |   |   | 90      |   |   |   | 109     |   |   |   | 21 |   |
| Commercial      and industrial                                                   |   |   | 983     |   |   |   | 168     |   |   |   | 376     |   |   |   | 630     |   |   |   | 614 |   |
| Consumer                                                                         |   |   | 433     |   |   |   | 351     |   |   |   | 256     |   |   |   | 285     |   |   |   | 288 |   |
| Lease      financing                                                             |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | 8 |   |
| Total                                                                            |   |   | 2,269   |   |   |   | 1,129   |   |   |   | 722     |   |   |   | 1,055   |   |   |   | 1,394 |   |
|                                                                             |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Recoveries:                                                                      |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Real      estate:                                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Commercial                                                                       |   |   | 2       |   |   |   | 18      |   |   |   | 2       |   |   |   | 27      |   |   |   | 275 |   |
| Residential                                                                      |   |   | -       |   |   |   | -       |   |   |   | 125     |   |   |   | 1       |   |   |   | 11 |   |
| Commercial      and industrial                                                   |   |   | 35      |   |   |   | 61      |   |   |   | 16      |   |   |   | 37      |   |   |   | 120 |   |
| Consumer                                                                         |   |   | 11      |   |   |   | 31      |   |   |   | 19      |   |   |   | 124     |   |   |   | 155 |   |
| Total                                                                            |   |   | 48      |   |   |   | 110     |   |   |   | 162     |   |   |   | 189     |   |   |   | 561 |   |
| Net      charge-offs                                                             |   |   | 2,221   |   |   |   | 1,019   |   |   |   | 560     |   |   |   | 866     |   |   |   | 833 |   |
| Provision      (credit) for loan losses                                          |   |   | 5,050   |   |   |   | 940     |   |   |   | (60     | )      |   |   | 325     |   |   |   | 830 |   |
| Balance      at end of period                                                    |   | $      | 7,574   |   |   | $      | 4,745   |   |   | $      | 4,824   |   |   | $      | 5,444   |   |   | $ | 5,985 |   |
|                                                                             |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      charge-offs to average net loans outstanding                            |   |   | 0.51    | %      |   |   | 0.24    | %      |   |   | 0.13    | %      |   |   | 0.21    | % |   |   | 0.22 | % |
| Allowance      for loan losses to net charge-offs                                |   |   | 3.41    | x      |   |   | 4.66    | x      |   |   | 8.62    | x      |   |   | 6.29    | x |   |   | 7.18 | x |
| Allowance      for loan losses to total loans                                    |   |   | 1.75    | %      |   |   | 1.08    | %      |   |   | 1.13    | %      |   |   | 1.29    | % |   |   | 1.46 | % |
| Loans      30 - 89 days past due and accruing                                    |   | $      | 5,173   |   |   | $      | 1,858   |   |   | $      | 4,698   |   |   | $      | 2,571   |   |   | $ | 1,609 |   |
| Loans      90 days or more past due and accruing                                 |   | $      | 555     |   |   | $      | 604     |   |   | $      | 26      |   |   | $      | 81      |   |   | $ | 197 |   |
| Non-accruing      loans                                                          |   | $      | 12,329  |   |   | $      | 3,493   |   |   | $      | 3,811   |   |   | $      | 3,358   |   |   | $ | 9,453 |   |
| Allowance      for loan losses to loans 90 days or more past due and    accruing |   |   | 13.65   | x      |   |   | 7.85    | x      |   |   | 189.41  | x      |   |   | 67.54   | x |   |   | 30.39 | x |
| Allowance      for loan losses to non-accruing loans                             |   |   | 0.61    | x      |   |   | 1.36    | x      |   |   | 1.27    | x      |   |   | 1.62    | x |   |   | 0.63 | x |
| Allowance      for loan losses to non-performing loans                           |   |   | 0.59    | x      |   |   | 1.16    | x      |   |   | 1.26    | x      |   |   | 1.58    | x |   |   | 0.62 | x |
| Average      net loans                                                           |   | $      | 432,642 |   |   | $      | 416,438 |   |   | $      | 419,586 |   |   | $      | 412,523 |   |   | $ | 385,800 |   |

----

|                           |   | 2009   |      |   | %      |   |   | 2008   |   |   | %         |   |   | 2007   |   |   | %      |   |      | 2006   |   |   | %      |   |   | 2005   |      |   | %      |   |
|--------------------------------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|
| Category                       |   |   |      |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |      |   |   |   |
| Real      estate:              |   |   |      |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |      |   |   |   |
| Commercial                     |   | $      | 4,045,046 |   |   |   | 53.3   | %      |   | $      | 1,930,511 |   |   |   | 40.7   | %      |   | $      | 1,989,267 |   |   |   | 41.2   | %      |   | $      | 2,586,967 |   |   |   | 47.5 | % |   | $ | 2,969,168 |   |   |   | 49.6 | % |
| Residential                    |   |   | 880,401   |   |   |   | 11.6   |   |   |   | 710,981   |   |   |   | 15.0   |   |   |   | 636,899   |   |   |   | 13.2   |   |   |   | 578,117   |   |   |   | 10.6 |   |   |   | 595,092 |   |   |   | 9.9 |   |
| Construction                   |   |   | 72,105    |   |   |   | 1.0    |   |   |   | 67,141    |   |   |   | 1.4    |   |   |   | 52,634    |   |   |   | 1.1    |   |   |   | 59,617    |   |   |   | 1.1 |   |   |   | 59,953 |   |   |   | 1.0 |   |
| Commercial      and industrial |   |   | 1,639,872 |   |   |   | 21.7   |   |   |   | 929,548   |   |   |   | 19.6   |   |   |   | 990,105   |   |   |   | 20.5   |   |   |   | 962,903   |   |   |   | 17.7 |   |   |   | 1,066,782 |   |   |   | 17.8 |   |
| Consumer                       |   |   | 840,660   |   |   |   | 11.1   |   |   |   | 973,356   |   |   |   | 20.5   |   |   |   | 960,505   |   |   |   | 19.9   |   |   |   | 1,157,091 |   |   |   | 21.2 |   |   |   | 1,180,175 |   |   |   | 19.7 |   |
| Direct      financing leases   |   |   | -         |   |   |   | -      |   |   |   | 6,837     |   |   |   | 0.1    |   |   |   | 9,355     |   |   |   | 0.2    |   |   |   | 14,058    |   |   |   | 0.3 |   |   |   | 14,828 |   |   |   | 0.3 |   |
| Unallocated                    |   |   | 95,519    |   |   |   | 1.3    |   |   |   | 126,860   |   |   |   | 2.7    |   |   |   | 185,636   |   |   |   | 3.9    |   |   |   | 85,550    |   |   |   | 1.6 |   |   |   | 98,651 |   |   |   | 1.7 |   |
| Total                          |   | $      | 7,573,603 |   |   |   | 100.0  | %      |   | $      | 4,745,234 |   |   |   | 100.0  | %      |   | $      | 4,824,401 |   |   |   | 100.0  | %      |   | $      | 5,444,303 |   |   |   | 100.0 | % |   | $ | 5,984,649 |   |   |   | 100.0 | % |

|                                               |   | 2009   |    |   | 2008   |   |    | 2007   |   |   | 2006    |   |   | 2005   |    |
|----------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| Net      loans, including loans available-for-sale |   | $      | 424,345 |   |   | $      | 436,291 |   |   | $      | 422,252 |   |   | $      | 417,321 |   |   | $ | 403,573 |   |
|                                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Loans      past due 90 days or more and accruing   |   | $      | 555     |   |   | $      | 604     |   |   | $      | 26      |   |   | $      | 81      |   |   | $ | 197 |   |
| Non-accrual      loans                             |   |   | 12,329  |   |   |   | 3,493   |   |   |   | 3,811   |   |   |   | 3,358   |   |   |   | 9,453 |   |
| Total      non-performing loans                    |   |   | 12,884  |   |   |   | 4,097   |   |   |   | 3,837   |   |   |   | 3,439   |   |   |   | 9,650 |   |
| Restructured      loans                            |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Other      real estate owned                       |   |   | 887     |   |   |   | 1,451   |   |   |   | 107     |   |   |   | 197     |   |   |   | - |   |
| Non-accrual      securities                        |   |   | 583     |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Repossessed      assets                            |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | 19 |   |
| Total      non-performing assets                   |   | $      | 14,354  |   |   | $      | 5,548   |   |   | $      | 3,944   |   |   | $      | 3,636   |   |   | $ | 9,669 |   |
|                                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Non-accrual      loans to net loans                |   |   | 2.91    | %      |   |   | 0.80    | %      |   |   | 0.90    | %      |   |   | 0.80    | % |   |   | 2.34 | % |
| Non-performing      loans to net loans             |   |   | 3.04    | %      |   |   | 0.94    | %      |   |   | 0.91    | %      |   |   | 0.82    | % |   |   | 2.39 | % |
| Non-performing      assets to total assets         |   |   | 2.58    | %      |   |   | 0.96    | %      |   |   | 0.67    | %      |   |   | 0.65    | % |   |   | 1.78 | % |

----

|                           |   | Gross    |    |   | Past due 90        |   |   | Non-    |   |   | Total non- |   |   | % of |   |
|--------------------------------|--------|----------|---------|--------|------------------------------|--------|--------|---------|--------|--------|-----------------|--------|--------|-----------|--------|
|                           |   | loan     |    |   | days or more       |   |   | accrual |   |   | performing      |   |   | gross     |   |
|                           |   | balances |    |   | and still accruing |   |   | loans   |   |   | loans           |   |   | loans     |   |
| Real      estate:              |   |     |    |   |                         |   |   |    |   |   |            |   |   |      |   |
| Commercial                     |   | $        | 186,726 |   |                         | $      | 103    |    |   | $      | 7,382           |   |   | $         | 7,485  |   |   |   | 4.01 | % |
| Residential                    |   |     | 71,001  |   |                         |   | 387    |    |   |   | 3,865           |   |   |      | 4,253  |   |   |   | 5.99 | % |
| Construction                   |   |     | 10,125  |   |                         |   | -      |    |   |   | -               |   |   |      | -      |   |   |   | - |   |
| Commercial      and industrial |   |     | 76,788  |   |                         |   | 12     |    |   |   | 726             |   |   |      | 738    |   |   |   | 0.96 | % |
| Consumer                       |   |     | 85,690  |   |                         |   | 52     |    |   |   | 355             |   |   |      | 408    |   |   |   | 0.48 | % |
| Direct      financing leases   |   |     | 367     |   |                         |   | -      |    |   |   | -               |   |   |      | -      |   |   |   | - |   |
| Total                          |   | $        | 430,698 |   |                         | $      | 555    |    |   | $      | 12,329          |   |   | $         | 12,884 |   |   |   | 2.99 | % |

----

----

----

|                                                 |   | 2009    |         |   | 2008     |   |   | 2007         |   |
|------------------------------------------------------|--------|---------|--------------|--------|----------|--------|--------|--------------|--------|
|                                                 |   | Average |         |   |     |   |   | Yield / |   |   | Average |   |   |   |   |   | Yield / |   |   | Average |   |   |   |   |   | Yield / |   |
|                                                 |   | balance |         |   | Interest |   |   | rate         |   |   | balance |   |   | Interest |   |   | rate |   |   | balance |   |   | Interest |   |   | rate |   |
| Assets                                               |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      earning assets                         |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      deposits                       |   | $       | 562          |   |     | $      | 1      |         |   |   | 0.10 | % |   | $ | 233 |   |   | $ | 3 |   |   |   | 1.36 | % |   | $ | 184 |   |   | $ | 9 |   |   |   | 4.81 | % |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments:                                         |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency      - GSE                                    |   |    | 36,842       |   |     |   | 1,769  |         |   |   | 4.80 |   |   |   | 49,034 |   |   |   | 2,576 |   |   |   | 5.25 |   |   |   | 34,682 |   |   |   | 1,724 |   |   |   | 4.97 |   |
| MBS      - GSE residential                           |   |    | 11,072       |   |     |   | 618    |         |   |   | 5.58 |   |   |   | 35,294 |   |   |   | 1,833 |   |   |   | 5.19 |   |   |   | 51,781 |   |   |   | 2,540 |   |   |   | 4.91 |   |
| State      and municipal                             |   |    | 24,278       |   |     |   | 1,610  |         |   |   | 6.63 |   |   |   | 15,813 |   |   |   | 1,014 |   |   |   | 6.41 |   |   |   | 12,267 |   |   |   | 780 |   |   |   | 6.36 |   |
| Other                                                |   |    | 25,988       |   |     |   | 475    |         |   |   | 1.83 |   |   |   | 25,967 |   |   |   | 1,252 |   |   |   | 4.82 |   |   |   | 17,487 |   |   |   | 1,175 |   |   |   | 6.72 |   |
| Total      investments                               |   |    | 98,180       |   |     |   | 4,472  |         |   |   | 4.56 |   |   |   | 126,108 |   |   |   | 6,675 |   |   |   | 5.29 |   |   |   | 116,217 |   |   |   | 6,219 |   |   |   | 5.35 |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans:                                               |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and CRE                              |   |    | 261,842      |   |     |   | 15,829 |         |   |   | 6.05 |   |   |   | 231,721 |   |   |   | 15,869 |   |   |   | 6.85 |   |   |   | 220,968 |   |   |   | 16,458 |   |   |   | 7.45 |   |
| Consumer                                             |   |    | 65,916       |   |     |   | 4,559  |         |   |   | 6.92 |   |   |   | 71,089 |   |   |   | 4,872 |   |   |   | 6.85 |   |   |   | 68,395 |   |   |   | 4,625 |   |   |   | 6.76 |   |
| Residential      real estate                         |   |    | 104,481      |   |     |   | 5,787  |         |   |   | 5.54 |   |   |   | 117,547 |   |   |   | 6,985 |   |   |   | 5.94 |   |   |   | 134,869 |   |   |   | 8,360 |   |   |   | 6.20 |   |
| Direct      financing leases                         |   |    | 403          |   |     |   | 25     |         |   |   | 6.12 |   |   |   | 477 |   |   |   | 29 |   |   |   | 6.15 |   |   |   | 549 |   |   |   | 34 |   |   |   | 6.16 |   |
| Total      loans                                     |   |    | 432,642      |   |     |   | 26,200 |         |   |   | 6.06 |   |   |   | 420,834 |   |   |   | 27,755 |   |   |   | 6.60 |   |   |   | 424,781 |   |   |   | 29,477 |   |   |   | 6.94 |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal      funds sold                              |   |    | 4,603        |   |     |   | 11     |         |   |   | 0.25 |   |   |   | 3,342 |   |   |   | 91 |   |   |   | 2.73 |   |   |   | 1,948 |   |   |   | 103 |   |   |   | 5.28 |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest-earning assets                   |   |    | 535,987      |   |     |   | 30,684 |         |   |   | 5.72 | % |   |   | 550,517 |   |   |   | 34,524 |   |   |   | 6.27 | % |   |   | 543,130 |   |   |   | 35,808 |   |   |   | 6.59 | % |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      earning assets                     |   |    | 29,289       |   |     |   |   |         |   |   |   |   |   |   | 33,301 |   |   |   |   |   |   |   |   |   |   |   | 32,328 |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                    |   | $       | 565,276      |   |     |   |   |         |   |   |   |   |   | $ | 583,818 |   |   |   |   |   |   |   |   |   |   | $ | 575,458 |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      and shareholders' equity            |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities                    |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                            |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                                              |   | $       | 53,690       |   |     | $      | 404    |         |   |   | 0.75 | % |   | $ | 38,425 |   |   | $ | 331 |   |   |   | 0.86 | % |   | $ | 41,055 |   |   | $ | 511 |   |   |   | 1.24 | % |
| NOW                                                  |   |    | 62,090       |   |     |   | 197    |         |   |   | 0.32 |   |   |   | 59,130 |   |   |   | 616 |   |   |   | 1.04 |   |   |   | 67,489 |   |   |   | 1,837 |   |   |   | 2.72 |   |
| MMDA                                                 |   |    | 106,115      |   |     |   | 1,624  |         |   |   | 1.53 |   |   |   | 93,465 |   |   |   | 2,460 |   |   |   | 2.63 |   |   |   | 84,000 |   |   |   | 3,658 |   |   |   | 4.35 |   |
| CDs      < $100,000                               |   |    | 101,286      |   |     |   | 3,217  |         |   |   | 3.18 |   |   |   | 98,410 |   |   |   | 4,052 |   |   |   | 4.12 |   |   |   | 94,420 |   |   |   | 4,173 |   |   |   | 4.42 |   |
| CDs      > $100,000                               |   |    | 63,436       |   |     |   | 2,435  |         |   |   | 3.84 |   |   |   | 80,389 |   |   |   | 3,638 |   |   |   | 4.53 |   |   |   | 66,998 |   |   |   | 3,168 |   |   |   | 4.73 |   |
| Clubs                                                |   |    | 1,687        |   |     |   | 19     |         |   |   | 1.14 |   |   |   | 1,764 |   |   |   | 21 |   |   |   | 1.19 |   |   |   | 1,908 |   |   |   | 23 |   |   |   | 1.21 |   |
| Total      interest-bearing deposits                 |   |    | 388,304      |   |     |   | 7,896  |         |   |   | 2.03 |   |   |   | 371,583 |   |   |   | 11,118 |   |   |   | 2.99 |   |   |   | 355,870 |   |   |   | 13,370 |   |   |   | 3.76 |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Repurchase      agreements                           |   |    | 8,743        |   |     |   | 28     |         |   |   | 0.32 |   |   |   | 12,074 |   |   |   | 103 |   |   |   | 0.85 |   |   |   | 19,580 |   |   |   | 465 |   |   |   | 2.38 |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowed      funds                                  |   |    | 45,979       |   |     |   | 2,873  |         |   |   | 6.25 |   |   |   | 74,530 |   |   |   | 3,463 |   |   |   | 4.65 |   |   |   | 71,573 |   |   |   | 3,825 |   |   |   | 5.34 |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest-bearing liabilities              |   |    | 443,026      |   |     |   | 10,797 |         |   |   | 2.44 | % |   |   | 458,187 |   |   |   | 14,684 |   |   |   | 3.20 | % |   |   | 447,023 |   |   |   | 17,660 |   |   |   | 3.95 | % |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      bearing deposits                   |   |    | 70,285       |   |     |   |   |         |   |   |   |   |   |   | 67,717 |   |   |   |   |   |   |   |   |   |   |   | 70,606 |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      bearing liabilities                |   |    | 3,828        |   |     |   |   |         |   |   |   |   |   |   | 4,503 |   |   |   |   |   |   |   |   |   |   |   | 4,499 |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      liabilities                               |   |    | 517,139      |   |     |   |   |         |   |   |   |   |   |   | 530,407 |   |   |   |   |   |   |   |   |   |   |   | 522,128 |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders'      equity                            |   |    | 48,137       |   |     |   |   |         |   |   |   |   |   |   | 53,411 |   |   |   |   |   |   |   |   |   |   |   | 53,330 |   |   |   |   |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      liabilities and shareholders'      equity |   | $       | 565,276      |   |     |   |   |         |   |   |   |   |   | $ | 583,818 |   |   |   |   |   |   |   |   |   |   | $ | 575,458 |   |   |   |   |   |   |   |   |   |
| Net      interest income                             |   |    |         |   |     | $      | 19,887 |         |   |   |   |   |   |   |   |   |   | $ | 19,840 |   |   |   |   |   |   |   |   |   |   | $ | 18,148 |   |   |   |   |   |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest spread                             |   |    |    |   |     |   |   |         |   |   | 3.28 | %  |   |   |   |   |   |   |   |   |   | 3.07 | %  |   |   |   |   |   |   |   |   |   | 2.64 | % |
|                                                 |   |    |         |   |     |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest margin                             |   |    |         |   |     |   |   |         |   |   | 3.71 | %  |   |   |   |   |   |   |   |   |   | 3.60 | %  |   |   |   |   |   |   |   |   |   | 3.34 | % |

----

|                                                                              |   | Years ended December 31,   |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                              |   | 2009 compared to 2008      |   |   | 2008 compared to 2007 |   |
|                                                                              |   | Increase (decrease) due to |   |
|                                                                              |   | Volume                                    |   |   | Rate |   |   | Total |   |   | Volume |   |   | Rate |   |   | Total |   |
| Interest      income:                                                             |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      and leases:                                                            |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential      real estate                                                      |   | $                                         | (744   | ) |   | $ | (454 | ) |   | $ | (1,198 | ) |   | $ | (1,040 | ) |   | $ | (336 | ) |   | $ | (1,376 | ) |
| Commercial      and CRE                                                           |   |                                      | 1,912  |   |   |   | (1,992 | ) |   |   | (80 | ) |   |   | 766 |   |   |   | (1,305 | ) |   |   | (539 | ) |
| Consumer                                                                          |   |                                      | (362   | ) |   |   | 45 |   |   |   | (317 | ) |   |   | 178 |   |   |   | 66 |   |   |   | 244 |   |
| Total      loans and leases                                                       |   |                                      | 806    |   |   |   | (2,401 | ) |   |   | (1,595 | ) |   |   | (96 | ) |   |   | (1,575 | ) |   |   | (1,671 | ) |
| Investment      securities, interest-bearing deposits and Federal funds      sold |   |                                      | (1,159 | ) |   |   | (1,298 | ) |   |   | (2,457 | ) |   |   | 564 |   |   |   | (211 | ) |   |   | 353 |   |
| Total      interest income                                                        |   |                                      | (353   | ) |   |   | (3,699 | ) |   |   | (4,052 | ) |   |   | 468 |   |   |   | (1,786 | ) |   |   | (1,318 | ) |
|                                                                              |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense:                                                            |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                         |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Certificates      of deposit greater than $100,000                                |   |                                      | (700   | ) |   |   | (503 | ) |   |   | (1,203 | ) |   |   | 611 |   |   |   | (141 | ) |   |   | 470 |   |
| Other                                                                             |   |                                      | 790    |   |   |   | (2,809 | ) |   |   | (2,019 | ) |   |   | 81 |   |   |   | (2,803 | ) |   |   | (2,722 | ) |
| Total      deposits                                                               |   |                                      | 90     |   |   |   | (3,312 | ) |   |   | (3,222 | ) |   |   | 692 |   |   |   | (2,944 | ) |   |   | (2,252 | ) |
| Other      interest-bearing liabilities                                           |   |                                      | (1,525 | ) |   |   | 860 |   |   |   | (665 | ) |   |   | (206 | ) |   |   | (518 | ) |   |   | (724 | ) |
| Total      interest expense                                                       |   |                                      | (1,435 | ) |   |   | (2,452 | ) |   |   | (3,887 | ) |   |   | 486 |   |   |   | (3,462 | ) |   |   | (2,976 | ) |
| Net      interest income                                                          |   | $                                         | 1,082  |   |   | $ | (1,247 | ) |   | $ | (165 | ) |   | $ | (18 | ) |   | $ | 1,676 |   |   | $ | 1,658 |   |

----

----

----

|                                    |   | One year |   |   | One through |   |   | Five through |   |   | More than |   |   |   |   |
|-----------------------------------------|--------|---------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|----------------|--------|--------|--------|--------|
|                                    |   | or less  |   |   | five years  |   |   | ten years    |   |   | ten years |   |   | Total  |   |
| Agency      - GSE                       |   |          | -      | %      |             |   | -      | %                 |   |   | 5.07           | %      |   |   | 5.87   | % |   |   | 5.74 | % |
| MBS      - GSE residential              |   |          | -      |   |             |   | -      |              |   |   | 6.01           |   |   |   | 5.44   |   |   |   | 5.45 |   |
| State      & municipal subdivisions |   |          | -      |   |             |   | -      |              |   |   | 5.47           |   |   |   | 5.90   |   |   |   | 5.83 |   |
| Pooled      trust preferred securities  |   |          | -      |   |             |   | -      |              |   |   | -              |   |   |   | 4.00   |   |   |   | 4.00 |   |
| Total      debt securities              |   |          | -      | %      |             |   | -      | %                 |   |   | 5.21           | %      |   |   | 5.35   | % |   |   | 5.34 | % |

----

----

----

----

|                           |   |          |    |   | Over one     |   |   | Over three    |   |   |            |   |   |   |   |
|--------------------------------|--------|---------------|---------|--------|-------------------|--------|--------|--------------------|--------|--------|-----------------|--------|--------|--------|--------|
|                           |   | One year |    |   | year through |   |   | years through |   |   | Over            |   |   |   |   |
|                           |   | or less  |    |   | three years  |   |   | five years    |   |   | five years |   |   | Total  |   |
| Contractual obligations:       |   |          |    |   |              |   |   |               |   |   |            |   |   |   |   |
| Certificates      of deposit * |   | $             | 81,854  |   |              | $      | 54,794 |               |   | $      | 10,015          |   |   | $      | 1,587  |   |   | $ | 148,250 |   |
| Long-term      debt            |   |          | 11,000  |   |              |   | 5,000  |               |   |   | -               |   |   |   | 16,000 |   |   |   | 32,000 |   |
| Repurchase      agreements     |   |          | 7,747   |   |              |   | -      |               |   |   | -               |   |   |   | -      |   |   |   | 7,747 |   |
| Operating      leases          |   |          | 357     |   |              |   | 695    |               |   |   | 670             |   |   |   | 3,493  |   |   |   | 5,215 |   |
|                           |   |          |    |   |              |   |   |               |   |   |            |   |   |   |   |   |   |   |   |   |
| Significant commitments:       |   |          |    |   |              |   |   |               |   |   |            |   |   |   |   |   |   |   |   |   |
| Letters      of credit         |   |          | 2,169   |   |              |   | 6,105  |               |   |   | -               |   |   |   | 772    |   |   |   | 9,046 |   |
| Loan      commitments **       |   |          | 17,652  |   |              |   | -      |               |   |   | -               |   |   |   | -      |   |   |   | 17,652 |   |
|                           |   |          |    |   |              |   |   |               |   |   |            |   |   |   |   |   |   |   |   |   |
| Total                          |   | $             | 120,779 |   |              | $      | 66,594 |               |   | $      | 10,685          |   |   | $      | 21,852 |   |   | $ | 219,910 |   |

----

| * | Includes      certificates in the CDARSprogram. |
|---|-------------------------------------------------|

| ** | Available      credit to borrowers in the amount of $61,713 is excluded from the above      table since, by its nature, the borrowers may not have the need for      additional funding, and, therefore, the credit may or may not be disbursed      by the Company. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   | Net                |       |   | Cash dividends |   |      | Earnings |   |
|--------|--------|--------------------|------------|--------|---------------------|--------|-----------|----------|--------|
|   |   | (loss) income |       |   | declared            |   |      | retained |   |
|   |   |               |       |   |                |   |      |     |   |
| 2009   |   | $                  | (1,400,205 | )      |                | $      | 2,078,171 |     |   | $ | (3,478,376 | ) |
| 2008   |   |               | 3,635,948  |   |                |   | 2,068,680 |     |   |   | 1,567,268 |   |
| 2007   |   |               | 4,611,572  |   |                |   | 1,921,533 |     |   |   | 2,690,039 |   |
| 2006   |   |               | 4,125,283  |   |                |   | 1,801,361 |     |   |   | 2,323,922 |   |
| 2005   |   |               | 4,591,697  |   |                |   | 1,624,263 |     |   |   | 2,967,434 |   |

----

----

----

|                                               |   | Three months |    |   | Three to      |   |    | One to      |   |   | Over             |   |   |   |    |
|----------------------------------------------------|--------|-------------------|---------|--------|--------------------|--------|---------|------------------|--------|--------|------------------|--------|--------|--------|---------|
|                                               |   | or less      |    |   | twelve months |   |    | three years |   |   | three years |   |   | Total  |    |
|                                               |   |              |    |   |               |   |    |             |   |   |             |   |   |   |    |
| Cash      and cash equivalents                     |   | $                 | 117     |   |               | $      | -       |             |   | $      | -                |   |   | $      | 8,211   |   |   | $ | 8,328 |   |
| Investment      securities (1)(2)                  |   |              | 16,665  |   |               |   | 2,005   |             |   |   | 24,022           |   |   |   | 38,619  |   |   |   | 81,311 |   |
| Loans      (2)                                     |   |              | 133,949 |   |               |   | 53,600  |             |   |   | 105,175          |   |   |   | 131,621 |   |   |   | 424,345 |   |
| Fixed      and other assets                        |   |              | -       |   |               |   | 9,117   |             |   |   | -                |   |   |   | 32,916  |   |   |   | 42,033 |   |
| Total      assets                                  |   | $                 | 150,731 |   |               | $      | 64,722  |             |   | $      | 129,197          |   |   | $      | 211,367 |   |   | $ | 556,017 |   |
| Total      cumulative assets                       |   | $                 | 150,731 |   |               | $      | 215,453 |             |   | $      | 344,650          |   |   | $      | 556,017 |   |   |   |   |   |
|                                               |   |              |    |   |               |   |    |             |   |   |             |   |   |   |    |   |   |   |   |   |
| Non-interest-bearing transaction      deposits (3) |   | $                 | -       |   |               | $      | 7,090   |             |   | $      | 19,495           |   |   | $      | 44,306  |   |   | $ | 70,891 |   |
| Interest-bearing      transaction deposits         |   |              | 63,917  |   |               |   | -       |             |   |   | 66,621           |   |   |   | 109,315 |   |   |   | 239,853 |   |
| Certificates      of deposit                       |   |              | 38,439  |   |               |   | 43,415  |             |   |   | 54,814           |   |   |   | 11,583  |   |   |   | 148,251 |   |
| Repurchase      agreements                         |   |              | 7,747   |   |               |   | -       |             |   |   | -                |   |   |   | -       |   |   |   | 7,747 |   |
| Short-term      borrowings                         |   |              | 8,786   |   |               |   | -       |             |   |   | -                |   |   |   | -       |   |   |   | 8,786 |   |
| Long-term      debt                                |   |              | -       |   |               |   | 11,000  |             |   |   | -                |   |   |   | 21,000  |   |   |   | 32,000 |   |
| Other      liabilities                             |   |              | -       |   |               |   | -       |             |   |   | -                |   |   |   | 2,815   |   |   |   | 2,815 |   |
| Total      liabilities                             |   | $                 | 118,889 |   |               | $      | 61,505  |             |   | $      | 140,930          |   |   | $      | 189,019 |   |   | $ | 510,343 |   |
| Total      cumulative liabilities                  |   | $                 | 118,889 |   |               | $      | 180,394 |             |   | $      | 321,324          |   |   | $      | 510,343 |   |   |   |   |   |
|                                               |   |              |    |   |               |   |    |             |   |   |             |   |   |   |    |   |   |   |   |   |
| Interest      sensitivity gap                      |   | $                 | 31,842  |   |               | $      | 3,217   |             |   | $      | (11,733          | )      |   | $      | 22,348  |   |   |   |   |   |
| Cumulative      gap                                |   | $                 | 31,842  |   |               | $      | 35,059  |             |   | $      | 23,326           |   |   | $      | 45,674  |   |   |   |   |   |
|                                               |   |              |    |   |               |   |    |             |   |   |             |   |   |   |    |   |   |   |   |   |
| Cumulative      gap to total assets                |   |              | 5.7     | %      |               |   | 6.3     | %                |   |   | 4.2              | %      |   |   | 8.2     | % |   |   |   |   |

----

| (1) | Includes      FHLB stock and the net unrealized gains/losses on available-for-sale      securities. |
|-----|-----------------------------------------------------------------------------------------------------|

| (2) | Investments      and loans are included in the earlier of the period in which interest      rates were next scheduled to adjust or the period in which they are      due.  In addition, loans were included in the periods in which      they are scheduled to be repaid based on scheduled      amortization.  For amortizing loans and MBS – GSE residential,      annual prepayment rates are assumed reflecting historical experience as      well as management’s knowledge and experience of its loan      products. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The      Company’s demand and savings accounts were generally subject to immediate      withdrawal.  However, management considers a certain amount of      such accounts to be core accounts having significantly longer effective      maturities based on the retention experiences of such deposits in changing      interest rate environments.  The effective maturities presented      are the recommended maturity distribution limits for non-maturing deposits      based on historical depositstudies. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                       |   | Rates +200 |   |   | Rates -200 |   |
|------------------------------------------------------------|--------|-----------------|--------|--------|-----------------|--------|
|                                                       |   |            |   |   |            |   |
| Earnings      at risk:                                     |   |            |   |   |            |   |
| Percent      change in:                                    |   |            |   |   |            |   |
| Net      interest income                                   |   |            | 3.9    | %      |            |   | 0.4 | % |
| Net      income                                            |   |            | 14.3   |   |            |   | 1.0 |   |
|                                                       |   |            |   |   |            |   |   |   |
| Economic      value at risk:                               |   |            |   |   |            |   |   |   |
| Percent      change in:                                    |   |            |   |   |            |   |   |   |
| Economic      value of equity                              |   |            | (42.0  | )      |            |   | (2.0 | ) |
| Economic      value of equity as a percent of total assets |   |            | (3.5   | )      |            |   | (0.2 | ) |

|                     |   | Net interest |   |   | $        |   |   | %        |   |
|--------------------------|--------|-------------------|--------|--------|----------|--------|--------|----------|--------|
|                     |   | income            |   |   | variance |   |   | variance |   |
|                     |   |              |   |   |     |   |   |     |   |
| Change in interest rates |   |              |   |   |     |   |   |     |   |
|                     |   |              |   |   |     |   |   |     |   |
| +200      basis points   |   | $                 | 21,637 |   |     | $      | 803    |     |   |   | 1.3 | % |
| +100      basis points   |   |              | 21,015 |   |     |   | 181    |     |   |   | 1.6 |   |
| Flat      rate           |   |              | 20,834 |   |     |   | -      |     |   |   | - |   |
| -100      basis points   |   |              | 21,086 |   |     |   | 252    |     |   |   | 3.1 |   |
| -200      basis points   |   |              | 20,912 |   |     |   | 78     |     |   |   | 5.1 |   |

----

----

----

Item 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

----

Item 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARYDATA

| /s/ ParenteBeard LLC  |   |
|---------------------------------|--------|
| ParenteBeard      LLC           |
| Wilkes-Barre,      Pennsylvania |
| March      5, 2010              |

----

|                                                                    |   | 2009   |        |   | 2008   |   |
|-------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                                                    |   |   |        |   |   |   |
| Assets:                                                                 |   |   |        |   |   |   |
| Cash      and due from banks                                            |   | $      | 8,173,199   |   |   | $      | 12,335,905 |   |
| Interest-bearing      deposits with financial institutions              |   |   | 154,755     |   |   |   | 435,242 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Total      cash and cash equivalents                                    |   |   | 8,327,954   |   |   |   | 12,771,147 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Available-for-sale      securities                                      |   |   | 75,821,292  |   |   |   | 83,278,132 |   |
| Held-to-maturity      securities                                        |   |   | 708,706     |   |   |   | 909,447 |   |
| Federal      Home Loan Bank stock                                       |   |   | 4,781,100   |   |   |   | 4,781,100 |   |
| Loans      and leases, net (allowance for loan losses of                |   |   |        |   |   |   |   |   |
| $7,573,603      in 2009; $4,745,234 in 2008)                            |   |   | 423,124,054 |   |   |   | 436,207,460 |   |
| Loans      available-for-sale (fair value $1,233,345 in                 |   |   |        |   |   |   |   |   |
| 2009;      $85,312 in 2008)                                             |   |   | 1,221,365   |   |   |   | 84,000 |   |
| Bank      premises and equipment, net                                   |   |   | 15,361,810  |   |   |   | 16,056,362 |   |
| Cash      surrender value of bank owned life insurance                  |   |   | 9,117,156   |   |   |   | 8,807,784 |   |
| Other      assets                                                       |   |   | 14,415,582  |   |   |   | 8,929,917 |   |
| Accrued      interest receivable                                        |   |   | 2,250,855   |   |   |   | 2,443,141 |   |
| Foreclosed      assets held-for-sale                                    |   |   | 887,397     |   |   |   | 1,450,507 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Total      assets                                                       |   | $      | 556,017,271 |   |   | $      | 575,718,997 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Liabilities:                                                            |   |   |        |   |   |   |   |   |
| Deposits:                                                               |   |   |        |   |   |   |   |   |
| Interest-bearing                                                        |   | $      | 388,103,880 |   |   | $      | 361,869,281 |   |
| Non-interest-bearing                                                    |   |   | 70,890,578  |   |   |   | 71,442,651 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Total      deposits                                                     |   |   | 458,994,458 |   |   |   | 433,311,932 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Accrued      interest payable and other liabilities                     |   |   | 2,815,159   |   |   |   | 3,316,710 |   |
| Short-term      borrowings                                              |   |   | 16,533,107  |   |   |   | 38,129,704 |   |
| Long-term      debt                                                     |   |   | 32,000,000  |   |   |   | 52,000,000 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Total      liabilities                                                  |   |   | 510,342,724 |   |   |   | 526,758,346 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Shareholders'      equity:                                              |   |   |        |   |   |   |   |   |
| Preferred      stock authorized 5,000,000 shares with no par            |   |   |        |   |   |   |   |   |
| value;      none issued                                                 |   |   | -           |   |   |   | - |   |
| Capital      stock, no par value (10,000,000 shares authorized;         |   |   |        |   |   |   |   |   |
| shares      issued and outstanding; 2,105,860 in 2009; and              |   |   |        |   |   |   |   |   |
| 2,075,182      shares issued and 2,062,927 shares outstanding           |   |   |        |   |   |   |   |   |
| in      2008)                                                           |   |   | 19,982,677  |   |   |   | 19,410,306 |   |
| Treasury      stock, at cost (no shares in 2009; 12,255 shares in 2008) |   |   | -           |   |   |   | (351,665 | ) |
| Retained      earnings                                                  |   |   | 34,886,265  |   |   |   | 38,126,250 |   |
| Accumulated      other comprehensive loss                               |   |   | (9,194,395  | )      |   |   | (8,224,240 | ) |
|                                                                    |   |   |        |   |   |   |   |   |
| Total      shareholders' equity                                         |   |   | 45,674,547  |   |   |   | 48,960,651 |   |
|                                                                    |   |   |        |   |   |   |   |   |
| Total      liabilities and shareholders' equity                         |   | $      | 556,017,271 |   |   | $      | 575,718,997 |   |

----

|                                                                            |   | 2009   |        |   | 2008   |   |       | 2007   |   |
|---------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|
|                                                                            |   |   |        |   |   |   |       |   |   |
| Interest      income:                                                           |   |   |        |   |   |   |       |   |   |
| Loans      and leases:                                                          |   |   |        |   |   |   |       |   |   |
| Taxable                                                                         |   | $      | 25,521,742  |   |   | $      | 27,194,191 |   |   | $ | 28,765,640 |   |
| Nontaxable                                                                      |   |   | 447,802     |   |   |   | 370,097    |   |   |   | 469,389 |   |
| Interest-bearing      deposits with financial institutions                      |   |   | 589         |   |   |   | 3,173      |   |   |   | 8,865 |   |
| Investment      securities:                                                     |   |   |        |   |   |   |       |   |   |   |   |   |
| U.S.      government agency and corporations                                    |   |   | 2,387,192   |   |   |   | 4,408,437  |   |   |   | 4,264,152 |   |
| States      and political subdivisions (nontaxable)                             |   |   | 1,072,027   |   |   |   | 648,000    |   |   |   | 498,335 |   |
| Other      securities                                                           |   |   | 468,604     |   |   |   | 1,246,403  |   |   |   | 1,170,063 |   |
| Federal      funds sold                                                         |   |   | 11,317      |   |   |   | 91,133     |   |   |   | 102,913 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Total      interest income                                                      |   |   | 29,909,273  |   |   |   | 33,961,434 |   |   |   | 35,279,357 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Interest      expense:                                                          |   |   |        |   |   |   |       |   |   |   |   |   |
| Deposits                                                                        |   |   | 7,895,576   |   |   |   | 11,118,194 |   |   |   | 13,369,992 |   |
| Securities      sold under repurchase agreements                                |   |   | 27,959      |   |   |   | 102,577    |   |   |   | 465,391 |   |
| Other      short-term borrowings and other                                      |   |   | 34,602      |   |   |   | 276,407    |   |   |   | 504,972 |   |
| Long-term      debt                                                             |   |   | 2,838,717   |   |   |   | 3,186,955  |   |   |   | 3,319,720 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Total      interest expense                                                     |   |   | 10,796,854  |   |   |   | 14,684,133 |   |   |   | 17,660,075 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Net      interest income                                                        |   |   | 19,112,419  |   |   |   | 19,277,301 |   |   |   | 17,619,282 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Provision      for loan losses                                                  |   |   | 5,050,000   |   |   |   | 940,000    |   |   |   | (60,000 | ) |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Net      interest income after provision for loan losses                        |   |   | 14,062,419  |   |   |   | 18,337,301 |   |   |   | 17,679,282 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Other      income:                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Service      charges on deposit accounts                                        |   |   | 2,630,190   |   |   |   | 2,901,156  |   |   |   | 3,007,365 |   |
| Fees      and other service charges                                             |   |   | 1,940,912   |   |   |   | 1,818,901  |   |   |   | 1,797,253 |   |
| Gain      (loss) on sale or disposal of:                                        |   |   |        |   |   |   |       |   |   |   |   |   |
| Loans                                                                           |   |   | 1,059,876   |   |   |   | 260,940    |   |   |   | 159,441 |   |
| Investment      securities                                                      |   |   | 10,695      |   |   |   | 25,428     |   |   |   | 79 |   |
| Premises      and equipment                                                     |   |   | (43,027     | )      |   |   | (35,658    | )      |   |   | 97,518 |   |
| Foreclosed      assets held-for-sale                                            |   |   | 40,195      |   |   |   | 43,199     |   |   |   | 143,559 |   |
| Write-down      of foreclosed assets held-for-sale                              |   |   | (177,560    | )      |   |   | -          |   |   |   | - |   |
| Impairment      losses on investment securities:                                |   |   |        |   |   |   |       |   |   |   |   |   |
| Other-than-temporary      impairment on investment securities                   |   |   | (12,050,257 | )      |   |   | (435,665   | )      |   |   | - |   |
| Non-credit      related losses on investment securities not expected            |   |   |        |   |   |   |       |   |   |   |   |   |
| to      be sold (recognized in other comprehensive income/(loss))               |   |   | 8,750,163   |   |   |   | -          |   |   |   | - |   |
| Net      impairment losses on investment securities recognized in      earnings |   |   | (3,300,094  | )      |   |   | (435,665   | )      |   |   | - |   |
| Total      other income                                                         |   |   | 2,161,187   |   |   |   | 4,578,301  |   |   |   | 5,205,215 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Other      expenses:                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Salaries      and employee benefits                                             |   |   | 9,763,430   |   |   |   | 9,869,866  |   |   |   | 8,705,698 |   |
| Premises      and equipment                                                     |   |   | 3,556,862   |   |   |   | 3,251,453  |   |   |   | 3,156,372 |   |
| Advertising                                                                     |   |   | 524,868     |   |   |   | 717,685    |   |   |   | 684,732 |   |
| Other                                                                           |   |   | 5,395,965   |   |   |   | 4,371,679  |   |   |   | 4,089,958 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Total      other expenses                                                       |   |   | 19,241,125  |   |   |   | 18,210,683 |   |   |   | 16,636,760 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| (Loss)      income before income taxes                                          |   |   | (3,017,519  | )      |   |   | 4,704,919  |   |   |   | 6,247,737 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| (Credit)      provision for income taxes                                        |   |   | (1,617,314  | )      |   |   | 1,068,971  |   |   |   | 1,636,165 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Net      (loss) income                                                          |   | $      | (1,400,205  | )      |   | $      | 3,635,948  |   |   | $ | 4,611,572 |   |
|                                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Per      share data:                                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Net      (loss) income - basic                                                  |   | $      | (0.67       | )      |   | $      | 1.76       |   |   | $ | 2.23 |   |
| Net      (loss) income - diluted                                                |   | $      | (0.67       | )      |   | $      | 1.76       |   |   | $ | 2.23 |   |
| Dividends                                                                       |   | $      | 1.00        |   |   | $      | 1.00       |   |   | $ | 0.93 |   |

----

|                                                     |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   | Accumulated        |   |       |   |   |
|----------------------------------------------------------|--------|--------------------|-----------|--------|---------------------|--------|------------|----------|--------|--------|---------------|--------|--------|----------|----------|--------|--------------------|--------|------------|--------|--------|
|                                                     |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   | other              |   |       |   |   |
|                                                     |   | Capital      stock |      |   | Treasury      stock |   |       | Retained |   |   | comprehensive |   |   |     |     |
|                                                     |   | Shares             |      |   | Amount              |   |       | Shares   |   |   | Amount        |   |   | earnings |     |   | income      (loss) |   |       | Total  |   |
|                                                     |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |
| Balance,      December 31, 2006                          |   |               | 2,057,433 |   |                | $      | 18,702,537 |     |   |   | -             |   |   | $        | -        |   |               | $      | 33,874,118 |   |   | $ | (964,792 | ) |   | $ | 51,611,863 |   |
| Total      comprehensive income:                         |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Net      income                                          |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   | 4,611,572  |   |   |   |   |   |   |   | 4,611,572 |   |
| Change      in net unrealized holding losses             |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| on      available-for-sale securities, net of            |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| reclassification      adjustment and tax effects         |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   | (16,258 | ) |   |   | (16,258 | ) |
| Change      in cash flow hedge intrinsic value           |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   | 384,824 |   |   |   | 384,824 |   |
| Comprehensive      income                                |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 4,980,138 |   |
| Issuance      of common stock through Employee Stock     |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Purchase      Plan                                       |   |               | 2,266     |   |                |   | 67,820     |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 67,820 |   |
| Dividends      reinvested through Dividend               |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Reinvestment      Plan                                   |   |               | 13,230    |   |                |   | 437,145    |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 437,145 |   |
| Stock-based      compensation expense                    |   |               |      |   |                |   | 15,861     |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 15,861 |   |
| Cash      dividends declared                             |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   | (1,921,533 | )      |   |   |   |   |   |   | (1,921,533 | ) |
|                                                     |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Balance,      December 31, 2007                          |   |               | 2,072,929 |   |                | $      | 19,223,363 |     |   |   | -             |   |   | $        | -        |   |               | $      | 36,564,157 |   |   | $ | (596,226 | ) |   | $ | 55,191,294 |   |
| Total      comprehensive loss:                           |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Net      income                                          |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   | 3,635,948  |   |   |   |   |   |   |   | 3,635,948 |   |
| Change      in net unrealized holding losses             |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| on      available-for-sale securities, net of            |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| reclassification      adjustment and tax effects         |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   | (7,848,766 | ) |   |   | (7,848,766 | ) |
| Change      in cash flow hedge intrinsic value           |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   | 220,752 |   |   |   | 220,752 |   |
| Comprehensive      loss                                  |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | (3,992,066 | ) |
| Issuance      of common stock through Employee           |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Stock      Purchase Plan                                 |   |               | 2,253     |   |                |   | 57,891     |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 57,891 |   |
| Dividends      reinvested through Dividend               |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Reinvestment      Plan                                   |   |               |      |   |                |   |       |     |   |   | 2,745         |   |   |     | 78,770   |   |               |   | (5,175     | )      |   |   |   |   |   |   | 73,595 |   |
| Stock-based      compensation expense                    |   |               |      |   |                |   | 129,052    |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 129,052 |   |
| Purchase      of treasury stock                          |   |               |      |   |                |   |       |     |   |   | (15,000       | )      |   |     | (430,435 | )      |               |   |       |   |   |   |   |   |   |   | (430,435 | ) |
| Cash      dividends declared                             |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   | (2,068,680 | )      |   |   |   |   |   |   | (2,068,680 | ) |
|                                                     |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Balance,      December 31, 2008                          |   |               | 2,075,182 |   |                | $      | 19,410,306 |     |   |   | (12,255       | )      |   | $        | (351,665 | )      |               | $      | 38,126,250 |   |   | $ | (8,224,240 | ) |   | $ | 48,960,651 |   |
| Cumulative      effect of change in accounting principle |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   | 350,720    |   |   |   | (350,720 | ) |   |   | - |   |
| Total      comprehensive loss:                           |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Net      loss                                            |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   | (1,400,205 | )      |   |   |   |   |   |   | (1,400,205 | ) |
| Change      in net unrealized holding losses             |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| on      available-for-sale securities, net of            |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| reclassification      adjustment and tax effects         |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   | 5,762,165 |   |   |   | 5,762,165 |   |
| Non-credit      related impairment losses on             |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| investment      securities not expected to               |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| be      sold, net of tax effects                    |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   | (5,775,107 | ) |   |   | (5,775,107 | ) |
| Change      in cash flow hedge intrinsic value           |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   | (606,493 | ) |   |   | (606,493 | ) |
| Comprehensive      loss                                  |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | (2,019,640 | ) |
| Issuance      of common stock through Employee Stock     |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Purchase      Plan                                       |   |               | 1,701     |   |                |   | 40,569     |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 40,569 |   |
| Purchase      of treasury stock                          |   |               |      |   |                |   |       |     |   |   | (2,500        | )      |   |     | (56,505  | )      |               |   |       |   |   |   |   |   |   |   | (56,505 | ) |
| Dividends      reinvested through Dividend               |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   |   |   |
| Reinvestment      Plan                                   |   |               | 28,977    |   |                |   | 527,294    |     |   |   | 14,755        |   |   |     | 408,170  |   |               |   | (112,329   | )      |   |   |   |   |   |   | 823,135 |   |
| Stock-based      compensation expense                    |   |               |      |   |                |   | 4,508      |     |   |   |          |   |   |     |     |   |               |   |       |   |   |   |   |   |   |   | 4,508 |   |
| Cash      dividends declared                             |   |               |      |   |                |   |       |     |   |   |          |   |   |     |     |   |               |   | (2,078,171 | )      |   |   |   |   |   |   | (2,078,171 | ) |
| Balance,      December 30, 2009                          |   |               | 2,105,860 |   |                | $      | 19,982,677 |     |   |   | -             |   |   | $        | -        |   |               | $      | 34,886,265 |   |   | $ | (9,194,395 | ) |   | $ | 45,674,547 |   |

----

|                                                                    |   | 2009   |        |   | 2008   |   |        | 2007   |   |
|-------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
|                                                                    |   |   |        |   |   |   |        |   |   |
| Cash      flows from operating activities:                              |   |   |        |   |   |   |        |   |   |
| Net      (loss) income                                                  |   | $      | (1,400,205  | )      |   | $      | 3,635,948   |   |   | $ | 4,611,572 |   |
| Adjustments      to reconcile net (loss) income to net cash provided by |   |   |        |   |   |   |        |   |   |   |   |   |
| operating      activities:                                              |   |   |        |   |   |   |        |   |   |   |   |   |
| Depreciation,      amortization and accretion                           |   |   | 1,603,459   |   |   |   | 611,429     |   |   |   | 1,130,274 |   |
| Provision      (credit) for loan losses                                 |   |   | 5,050,000   |   |   |   | 940,000     |   |   |   | (60,000 | ) |
| Deferred      income tax (benefit) expense                              |   |   | (1,776,033  | )      |   |   | (2,941      | )      |   |   | 78,838 |   |
| Stock-based      compensation expense                                   |   |   | 4,508       |   |   |   | 129,052     |   |   |   | 15,861 |   |
| Loss      from investment in limited partnership                        |   |   | 40,961      |   |   |   | 80,400      |   |   |   | 80,400 |   |
| Proceeds      from sale of loans available-for-sale                     |   |   | 98,391,716  |   |   |   | 47,230,437  |   |   |   | 16,399,530 |   |
| Originations      of loans available-for-sale                           |   |   | (87,896,403 | )      |   |   | (14,754,219 | )      |   |   | (16,945,339 | ) |
| Write-down      of foreclosed assets held-for-sale                      |   |   | 177,560     |   |   |   | -           |   |   |   | - |   |
| Increase      in cash surrender value of life insurance                 |   |   | (309,372    | )      |   |   | (319,121    | )      |   |   | (310,702 | ) |
| Net      gain on sale of loans                                          |   |   | (1,059,876  | )      |   |   | (260,940    | )      |   |   | (159,441 | ) |
| Net      gain on sale of investment securities                          |   |   | (10,695     | )      |   |   | (25,428     | )      |   |   | (79 | ) |
| Net      gain on sale of foreclosed assets held for sale                |   |   | (40,195     | )      |   |   | (43,199     | )      |   |   | (143,559 | ) |
| Loss      (gain) on disposal of equipment                               |   |   | 43,027      |   |   |   | 35,658      |   |   |   | (97,518 | ) |
| Other-than-temporary      impairment on securities                      |   |   | 3,300,094   |   |   |   | 435,665     |   |   |   | - |   |
| Change      in:                                                         |   |   |        |   |   |   |        |   |   |   |   |   |
| Accrued      interest receivable                                        |   |   | (26,435     | )      |   |   | 48,394      |   |   |   | 1,880 |   |
| Other      assets                                                       |   |   | (3,797,337  | )      |   |   | (1,122,487  | )      |   |   | (8,933 | ) |
| Accrued      interest payable and other liabilities                     |   |   | (499,931    | )      |   |   | (829,539    | )      |   |   | (29,680 | ) |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      cash provided by operating activities                          |   |   | 11,794,843  |   |   |   | 35,789,109  |   |   |   | 4,563,104 |   |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Cash      flows from investing activities:                              |   |   |        |   |   |   |        |   |   |   |   |   |
| Held-to-maturity      securities:                                       |   |   |        |   |   |   |        |   |   |   |   |   |
| Proceeds      from maturities, calls and principal pay-downs            |   |   | 200,697     |   |   |   | 237,303     |   |   |   | 421,096 |   |
| Available-for-sale      securities:                                     |   |   |        |   |   |   |        |   |   |   |   |   |
| Proceeds      from sale                                                 |   |   | 5,075,325   |   |   |   | 48,402,457  |   |   |   | 3,818,914 |   |
| Proceeds      from maturities, calls and principal pay-downs            |   |   | 39,348,330  |   |   |   | 31,969,469  |   |   |   | 12,001,895 |   |
| Purchases                                                               |   |   | (39,614,223 | )      |   |   | (53,111,087 | )      |   |   | (38,399,150 | ) |
| Net      (increase) decrease in FHLB stock                              |   |   | -           |   |   |   | (1,478,200  | )      |   |   | 492,200 |   |
| Net      increase in loans and leases                                   |   |   | (3,890,584  | )      |   |   | (48,759,407 | )      |   |   | (4,517,367 | ) |
| Acquisition      of bank premises and equipment                         |   |   | (1,068,538  | )      |   |   | (3,950,934  | )      |   |   | (2,939,866 | ) |
| Proceeds      from sale of bank premises and equipment                  |   |   | 2,323       |   |   |   | 600         |   |   |   | 453,186 |   |
| Proceeds      from sale of foreclosed assets held-for-sale              |   |   | 893,677     |   |   |   | 262,406     |   |   |   | 584,088 |   |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      cash provided by (used in) investing activities                |   |   | 947,007     |   |   |   | (26,427,393 | )      |   |   | (28,085,004 | ) |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Cash      flows from financing activities:                              |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      increase in deposits                                           |   |   | 25,682,526  |   |   |   | 7,603,571   |   |   |   | 15,373,765 |   |
| Net      (decrease) increase in short-term borrowings                   |   |   | (21,596,597 | )      |   |   | (1,526,650  | )      |   |   | 6,000,204 |   |
| Proceeds      from issuance of long-term debt advances                  |   |   | -           |   |   |   | -           |   |   |   | 20,000,000 |   |
| Repayments      of long-term debt                                       |   |   | (20,000,000 | )      |   |   | (10,708,677 | )      |   |   | (19,827,533 | ) |
| Purchase      of treasury stock                                         |   |   | (56,505     | )      |   |   | (430,435    | )      |   |   | - |   |
| Proceeds      from employee stock purchase plan                         |   |   | 40,569      |   |   |   | 57,891      |   |   |   | 67,820 |   |
| Dividends      paid, net of dividends reinvested                        |   |   | (1,255,036  | )      |   |   | (1,995,085  | )      |   |   | (1,484,388 | ) |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      cash (used in) provided by financing  activities     |   |   | (17,185,043 | )      |   |   | (6,999,385  | )      |   |   | 20,129,868 |   |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      (decrease) increase in cash and cash equivalents               |   |   | (4,443,193  | )      |   |   | 2,362,331   |   |   |   | (3,392,032 | ) |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Cash      and cash equivalents, beginning                               |   |   | 12,771,147  |   |   |   | 10,408,816  |   |   |   | 13,800,848 |   |
|                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Cash      and cash equivalents, ending                                  |   | $      | 8,327,954   |   |   | $      | 12,771,147  |   |   | $ | 10,408,816 |   |

----

| 1. | NATURE      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING    POLICIES |
|----|-----------------------------------------------------------------------------|

----

----

----

|   | · | Cash      and cash equivalents; |
|--------|--------|---------------------------------|

|   | · | Non-interest      bearing deposit accounts; |
|--------|--------|---------------------------------------------|

|   | · | Savings,      NOW and money market accounts; |
|--------|--------|----------------------------------------------|

|   | · | Short-term      borrowings and |
|--------|--------|--------------------------------|

|   | · | Accrued      interest |
|--------|--------|-----------------------|

----

|                                                                    |   | 2009   |       |   | 2008   |   |        | 2007   |   |
|-------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-------------|--------|--------|
|                                                                    |   |   |       |   |   |   |        |   |   |
| Unrealized      holding gains (losses) on available-for-sale securities |   | $      | 8,741,249  |   |   | $      | (11,866,642 | )      |   | $ | (24,554 | ) |
|                                                                    |   |   |       |   |   |   |        |   |   |   |   |   |
| Loan      reclassification adjustment for gains realized in income      |   |   | (10,695    | )      |   |   | (25,428     | )      |   |   | (79 | ) |
|                                                                    |   |   |       |   |   |   |        |   |   |   |   |   |
| Non-credit      related impairment losses on investment securities      |   |   | (8,750,163 | )      |   |   | -           |   |   |   | - |   |
|                                                                    |   |   |       |   |   |   |        |   |   |   |   |   |
| Net      unrealized losses                                              |   |   | (19,609    | )      |   |   | (11,892,070 | )      |   |   | (24,633 | ) |
|                                                                    |   |   |       |   |   |   |        |   |   |   |   |   |
| Tax      effect                                                         |   |   | 6,667      |   |   |   | 4,043,304   |   |   |   | 8,375 |   |
|                                                                    |   |   |       |   |   |   |        |   |   |   |   |   |
| Net      of tax amount                                                  |   |   | (12,942    | )      |   |   | (7,848,766  | )      |   |   | (16,258 | ) |
|                                                                    |   |   |       |   |   |   |        |   |   |   |   |   |
| Change      in cash flow hedge intrinsic value                          |   |   | (606,493   | )      |   |   | 220,752     |   |   |   | 384,824 |   |
|                                                                    |   |   |       |   |   |   |        |   |   |   |   |   |
| Total                                                                   |   | $      | (619,435   | )      |   | $      | (7,628,014  | )      |   | $ | 368,566 |   |

----

|                                                               |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|--------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                                               |   |   |       |   |   |   |       |   |   |
| Unrealized      holding losses on available-for-sale securities    |   | $      | (3,068,568 | )      |   | $      | (8,830,733 | )      |   | $ | (981,967 | ) |
|                                                               |   |   |       |   |   |   |       |   |   |   |   |   |
| Non-credit      related impairment losses on investment securities |   |   | (6,125,827 | )      |   |   | -          |   |   |   | - |   |
|                                                               |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash      flow hedge intrinsic value                               |   |   | -          |   |   |   | 606,493    |   |   |   | 385,741 |   |
|                                                               |   |   |       |   |   |   |       |   |   |   |   |   |
| Accumulated      other comprehensive loss                          |   | $      | (9,194,395 | )      |   | $      | (8,224,240 | )      |   | $ | (596,226 | ) |

| 2. | CASH |
|----|------|

----

| 3. | INVESTMENT      SECURITIES |
|----|----------------------------|

|                                        |   | 2009      |   |
|---------------------------------------------|--------|-----------|--------|
|                                        |   |      |   |   | Gross |   |   | Gross |   |   |   |   |
|                                        |   | Amortized |   |   | unrealized |   |   | unrealized |   |   | Fair |   |
|                                        |   | cost      |   |   | gains |   |   | losses |   |   | value |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |
| Held-to-maturity      securities:           |   |      |   |   |   |   |   |   |   |   |   |   |
| MBS      - GSE residential                  |   | $         | 709    |   |   | $ | 56 |   |   | $ | - |   |   | $ | 765 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale      securities:         |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency      - GSE                           |   | $         | 34,205 |   |   | $ | 4 |   |   | $ | 1,077 |   |   | $ | 33,132 |   |
| Obligations      of states and              |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political      subdivisions                 |   |      | 23,013 |   |   |   | 394 |   |   |   | 137 |   |   |   | 23,270 |   |
| Corporate      bonds:                       |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pooled      trust preferred securities      |   |      | 18,794 |   |   |   | - |   |   |   | 13,552 |   |   |   | 5,242 |   |
| MBS      - GSE residential                  |   |      | 13,418 |   |   |   | 401 |   |   |   | 71 |   |   |   | 13,748 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      debt securities                  |   |      | 89,430 |   |   |   | 799 |   |   |   | 14,837 |   |   |   | 75,392 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity      securities - financial services |   |      | 322    |   |   |   | 121 |   |   |   | 14 |   |   |   | 429 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      available-for-sale securities    |   | $         | 89,752 |   |   | $ | 920 |   |   | $ | 14,851 |   |   | $ | 75,821 |   |

|                                        |   | 2008      |   |
|---------------------------------------------|--------|-----------|--------|
|                                        |   |      |   |   | Gross |   |   | Gross |   |   |   |   |
|                                        |   | Amortized |   |   | unrealized |   |   | unrealized |   |   | Fair |   |
|                                        |   | cost      |   |   | gains |   |   | losses |   |   | value |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |
| Held-to-maturity      securities:           |   |      |   |   |   |   |   |   |   |   |   |   |
| MBS      - GSE residential                  |   | $         | 909    |   |   | $ | 31 |   |   | $ | - |   |   | $ | 940 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale      securities:         |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency      - GSE                           |   | $         | 45,824 |   |   | $ | 134 |   |   | $ | 2,451 |   |   | $ | 43,507 |   |
| Obligations      of states and              |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political      subdivisions                 |   |      | 18,009 |   |   |   | 97 |   |   |   | 553 |   |   |   | 17,553 |   |
| Corporate      bonds:                       |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pooled      trust preferred securities      |   |      | 21,415 |   |   |   | - |   |   |   | 11,155 |   |   |   | 10,260 |   |
| MBS      - GSE residential                  |   |      | 11,088 |   |   |   | 442 |   |   |   | - |   |   |   | 11,530 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      debt securities                  |   |      | 96,336 |   |   |   | 673 |   |   |   | 14,159 |   |   |   | 82,850 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity      securities - financial services |   |      | 322    |   |   |   | 122 |   |   |   | 16 |   |   |   | 428 |   |
|                                        |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      available-for-sale               |   | $         | 96,658 |   |   | $ | 795 |   |   | $ | 14,175 |   |   | $ | 83,278 |   |

----

|                                          |   | Amortized |   |   | Fair   |   |
|-----------------------------------------------|--------|-----------|--------|--------|--------|--------|
|                                          |   | cost      |   |   | value  |   |
| Held-to-maturitysecurities:                   |   |      |   |   |   |   |
| MBS      - GSE residential                    |   | $         | 709    |   |   | $      | 765 |   |
|                                          |   |      |   |   |   |   |   |   |
| Available-for-sale    securities:             |   |      |   |   |   |   |   |   |
| Debt      securities:                         |   |      |   |   |   |   |   |   |
| Due      in one year or less                  |   | $         | -      |   |   | $      | - |   |
| Due      after one year through five years    |   |      | -      |   |   |   | - |   |
| Due      after five years through ten years   |   |      | 7,590  |   |   |   | 7,532 |   |
| Due      after ten years                      |   |      | 68,422 |   |   |   | 54,112 |   |
|                                          |   |      |   |   |   |   |   |   |
| Total      debt securities                    |   |      | 76,012 |   |   |   | 61,644 |   |
|                                          |   |      |   |   |   |   |   |   |
| MBS      - GSE residential                    |   |      | 13,418 |   |   |   | 13,748 |   |
|                                          |   |      |   |   |   |   |   |   |
| Total      available-for-sale debt securities |   | $         | 89,430 |   |   | $      | 75,392 |   |

----

|                                                        |   | Less      than 12 months |   |   | More      than 12 months |   |   | Total  |   |
|-------------------------------------------------------------|--------|--------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
|                                                        |   | Fair                     |   |   | Unrealized               |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                                                        |   | value                    |   |   | losses                   |   |   | value  |   |   | losses |   |   | value |   |   | losses |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2009:                                     |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency      - GSE                                           |   | $                        | 21,090 |   |                     | $      | 291    |   |   | $ | 5,038 |   |   | $ | 786 |   |   | $ | 26,128 |   |   | $ | 1,077 |   |
| Obligations      of states and political subdivisions       |   |                     | 3,534  |   |                     |   | 115    |   |   |   | 2,600 |   |   |   | 22 |   |   |   | 6,134 |   |   |   | 137 |   |
| Corporate      bonds:                                       |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pooled      trust preferred securities                      |   |                     | -      |   |                     |   | -      |   |   |   | 5,242 |   |   |   | 13,552 |   |   |   | 5,242 |   |   |   | 13,552 |   |
| MBS      – GSE residential                            |   |                     | 5,055  |   |                     |   | 71     |   |   |   | - |   |   |   | - |   |   |   | 5,055 |   |   |   | 71 |   |
| Subtotal,      debt securities                              |   |                     | 29,679 |   |                     |   | 477    |   |   |   | 12,880 |   |   |   | 14,360 |   |   |   | 42,559 |   |   |   | 14,837 |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity      securities - financial services                 |   |                     | 114    |   |                     |   | 10     |   |   |   | 46 |   |   |   | 4 |   |   |   | 160 |   |   |   | 14 |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      temporarily impaired securities                  |   | $                        | 29,793 |   |                     | $      | 487    |   |   | $ | 12,926 |   |   | $ | 14,364 |   |   | $ | 42,719 |   |   | $ | 14,851 |   |
| Number      of securities                                   |   |                     | 23     |   |                     |   |   |   |   |   | 17 |   |   |   |   |   |   |   | 40 |   |   |   |   |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2008:                                     |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency      - GSE                                           |   | $                        | 12,506 |   |                     | $      | 1,878  |   |   | $ | 5,145 |   |   | $ | 573 |   |   | $ | 17,651 |   |   | $ | 2,451 |   |
| Obligations      of states and political subdivisions       |   |                     | 8,154  |   |                     |   | 496    |   |   |   | 1,455 |   |   |   | 57 |   |   |   | 9,609 |   |   |   | 553 |   |
| Corporate      bonds:                                       |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pooled      trust preferred securities                      |   |                     | 2,235  |   |                     |   | 2,352  |   |   |   | 8,025 |   |   |   | 8,803 |   |   |   | 10,260 |   |   |   | 11,155 |   |
| MBS      - GSE residential                                  |   |                     | 17     |   |                     |   | -      |   |   |   | - |   |   |   | - |   |   |   | 17 |   |   |   | - |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subtotal,      debt securities                              |   |                     | 22,912 |   |                     |   | 4,726  |   |   |   | 14,625 |   |   |   | 9,433 |   |   |   | 37,537 |   |   |   | 14,159 |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity      securities - financial services                 |   |                     | -      |   |                     |   | -      |   |   |   | 60 |   |   |   | 16 |   |   |   | 60 |   |   |   | 16 |   |
|                                                        |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      securities Total temporarily impaired securities |   | $                        | 22,912 |   |                     | $      | 4,726  |   |   | $ | 14,685 |   |   | $ | 9,449 |   |   | $ | 37,597 |   |   | $ | 14,175 |   |
| Number      of securities                                   |   |                     | 20     |   |                     |   |   |   |   |   | 22 |   |   |   |   |   |   |   | 42 |   |   |   |   |   |

----

|                                                                          |   | Twelve      months ended |   |
|-------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                          |   | December 31,             |   |
|                                                                          |   | 2009                     |   |   | 2008 |   |
| Pooled      trust preferred securities:                                       |   |                     |   |   |   |   |
|      PreTSL      VII, Mezzanine                      |   | $                        | 674    |   |   | $ | 430 |   |
|      PreTSL      IX, B1, B3                          |   |                     | 690    |   |   |   | - |   |
|      PreTSL      XV, B1                              |   |                     | 154    |   |   |   | - |   |
|      PreTSL      XVI, C                              |   |                     | 1,275  |   |   |   | - |   |
|      PreTSL      XXV, C1                             |   |                     | 507    |   |   |   | - |   |
| Equity      securities                                                        |   |                     | -      |   |   |   | 6 |   |
|             Total |   | $                        | 3,300  |   |   | $ | 436 |   |

----

|                                                    |   | Twelve      months ended |   |
|---------------------------------------------------------|--------|--------------------------|--------|
|                                                    |   | December 31, 2009        |   |
|                                                    |   | HTM                      |   |   | AFS |   |   | Total |   |
| Beginning      balance of credit-related OTTI           |   | $                        | -      |   |   | $ | (429 | ) |   | $ | (429 | ) |
| Reduction      - cumulative effect of accounting change |   |                     | -      |   |   |   | 531 |   |   |   | 531 |   |
|   Additions      for credit-related OTTI      |   |                     |   |   |   |   |   |   |   |   |   |   |
| not      previously recognized                          |   |                     | -      |   |   |   | (2,626 | ) |   |   | (2,626 | ) |
|   Additional      credit-related OTTI         |   |                     |   |   |   |   |   |   |   |   |   |   |
| previously      recognized when there                   |   |                     |   |   |   |   |   |   |   |   |   |   |
| is      no intent to sell before recovery               |   |                     |   |   |   |   |   |   |   |   |   |   |
| of      amortized cost basis                            |   |                     | -      |   |   |   | (674 | ) |   |   | (674 | ) |
| Ending      balance of credit-related OTTI              |   | $                        | -      |   |   | $ | (3,198 | ) |   | $ | (3,198 | ) |

----

|                       |   |      |   |   |   |       |   |   |   |      |       |   |           |        | Current      |                 |   |              |         |   | Actual            |   |    |          |   |   | Excess            |   |   | Effective         |   |
|----------------------------|--------|-----------|--------|--------|--------|------------|--------|--------|--------|-----------|------------|--------|----------------|-------------|--------------|----------------------|--------|-------------------|--------------|--------|-------------------|--------|---------|---------------|--------|--------|-------------------|--------|--------|-------------------|--------|
|                       |   |      |   |   |   |       |   |   |   |      |       |   |           |        | number       |                 |   |              |         |   | deferrals         |   |    |          |   |   | subordination (2) |   |   | subordination (3) |   |
|                       |   |      |   |   |   |       |   |   |   |      |       |   |           |        | of           |                 |   | Actual            |         |   | and      defaults |   |    |          |   |   | as a      % of    |   |   | as a      % of    |   |
|                       |   |      |   |   |   |       |   |   |   |      |       |   | Moody's      / |        | banks      / |                 |   | deferrals         |         |   | as a      % of    |   |    | Excess        |   |   | current           |   |   | current           |   |
|                       |   |      |   |   | Book   |       |   | Fair   |   |      | Unrealized |   | Fitch          |        | insurance    |                 |   | and      defaults |         |   | current           |   |    | subordination |   |   | performing        |   |   | performing        |   |
| Deal                       |   | Class     |   |   | value  |       |   | value  |   |      | loss       |   | ratings (1)    |        | companies    |                 |   | $(000)            |         |   | collateral        |   |    | $(000)        |   |   | collateral        |   |   | collateral        |   |
| Pre      TSL  IV |   | Mezzanine |   |   | $      | 609,971    |   |   | $      | 440,643   |       |   | $              | (169,328    | )            |  Ca      / CCC  |   |              | 6 /      -   |   |              |   | 18,000  |          |   |   | 27.1              |   |   |              | 9,760  |   |   |   | 19.0 |   |   |   | 33.1 |   |
| Pre      TSL  V  |   | Mezzanine |   |   |   | 276,694    |   |   |   | 167,566   |       |   |           | (109,128    | )            |  Ba3      / C   |   |              | 4 /      -   |   |              |   | 18,950  |          |   |   | 43.1              |   |   | None              |   |   |   | N/A |   |   |   | N/A |   |
| Pre      TSL VII           |   | Mezzanine |   |   |   | 431,869    |   |   |   | 219,403   |       |   |           | (212,466    | )            |  Ca      / C    |   |              | 19 /      -  |   |              |   | 142,000 |          |   |   | 62.6              |   |   | None              |   |   |   | N/A |   |   |   | N/A |   |
| Pre      TSL  IX |   | B-1,B-3   |   |   |   | 2,810,338  |   |   |   | 1,101,100 |       |   |           | (1,709,238  | )            |  Ca      / C    |   |              | 49 /      -  |   |              |   | 126,510 |          |   |   | 28.1              |   |   | None              |   |   |   | N/A |   |   |   | N/A |   |
| Pre      TSL XI            |   | B-3       |   |   |   | 2,391,182  |   |   |   | 965,000   |       |   |           | (1,426,182  | )            |  Ca      / C    |   |              | 65 /      -  |   |              |   | 114,250 |          |   |   | 19.0              |   |   | None              |   |   |   | N/A |   |   |   | 9.4 |   |
| Pre      TSL  XV |   | B-1       |   |   |   | 1,359,562  |   |   |   | 296,737   |       |   |           | (1,062,825  | )            |  Ca      / C    |   |              | 63 /      9  |   |              |   | 141,050 |          |   |   | 23.6              |   |   | None              |   |   |   | N/A |   |   |   | 1.6 |   |
| Pre      TSL XVI           |   | C         |   |   |   | 1,289,741  |   |   |   | 65,122    |       |   |           | (1,224,619  | )            |  Ca      / C    |   |              | 49 /      7  |   |              |   | 182,270 |          |   |   | 31.7              |   |   | None              |   |   |   | N/A |   |   |   | N/A |   |
| Pre      TSL XVII          |   | C         |   |   |   | 1,001,574  |   |   |   | 91,012    |       |   |           | (910,562    | )            |  Ca      / C    |   |              | 50 /      7  |   |              |   | 95,840  |          |   |   | 19.9              |   |   | None              |   |   |   | N/A |   |   |   | 7.7 |   |
| Pre      TSL XVIII         |   | C         |   |   |   | 1,003,885  |   |   |   | 123,578   |       |   |           | (880,307    | )            |  Ca      / C    |   |              | 66 /      14 |   |              |   | 134,640 |          |   |   | 19.9              |   |   | None              |   |   |   | N/A |   |   |   | 7.6 |   |
| Pre      TSL XIX           |   | C         |   |   |   | 2,537,026  |   |   |   | 477,461   |       |   |           | (2,059,565  | )            |  Ca      / C    |   |              | 60 /      14 |   |              |   | 115,000 |          |   |   | 16.4              |   |   | None              |   |   |   | N/A |   |   |   | 11.6 |   |
| Pre      TSL XXIV          |   | B-1       |   |   |   | 2,198,696  |   |   |   | 499,473   |       |   |           | (1,699,223  | )            |  Caa3      / CC |   |              | 80 /      13 |   |              |   | 309,300 |          |   |   | 29.4              |   |   | None              |   |   |   | N/A |   |   |   | 15.7 |   |
| Pre      TSL XXV           |   | C-1       |   |   |   | 506,673    |   |   |   | 2,128     |       |   |           | (504,545    | )            |  Ca      / C    |   |              | 64 /      9  |   |              |   | 271,600 |          |   |   | 31.0              |   |   | None              |   |   |   | N/A |   |   |   | N/A |   |
| Pre      TSL XXVII         |   | B         |   |   |   | 2,376,455  |   |   |   | 792,621   |       |   |           | (1,583,834  | )            |  Caa3      / B  |   |              | 42 /      7  |   |              |   | 69,300  |          |   |   | 21.0              |   |   |              | 10,833 |   |   |   | 4.2 |   |   |   | 25.4 |   |
|                       |   |      |   |   | $      | 18,793,666 |   |   | $      | 5,241,844 |       |   | $              | (13,551,822 | )            |                 |   |              |         |   |              |   |    |          |   |   |              |   |   |              |   |   |   |   |   |   |   |   |   |   |

----

|                     |   | 2009   |   |   | 2008   |   |    | 2007   |   |
|--------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
|                     |   |   |   |   |   |   |    |   |   |
| Gross      realized gain |   | $      | 84,989 |   |   | $      | 113,070 |   |   | $ | 18,853 |   |
| Gross      realized loss |   |   | 74,294 |   |   |   | 87,642  |   |   |   | 18,774 |   |
| Net      gain            |   | $      | 10,695 |   |   | $      | 25,428  |   |   | $ | 79 |   |

----

| 4. | LOANS      AND LEASES |
|----|-----------------------|

|                           |   | 2009   |        |   | 2008   |   |
|--------------------------------|--------|--------|-------------|--------|--------|--------|
|                           |   |   |        |   |   |   |
| Real      estate:              |   |   |        |   |   |   |
| Commercial                     |   | $      | 186,726,196 |   |   | $      | 164,772,236 |   |
| Residential                    |   |   | 71,001,298  |   |   |   | 98,510,562 |   |
| Construction                   |   |   | 10,125,354  |   |   |   | 11,426,978 |   |
| Commercial      and industrial |   |   | 76,787,809  |   |   |   | 80,707,756 |   |
| Consumer                       |   |   | 85,689,831  |   |   |   | 85,091,205 |   |
| Direct      financing leases   |   |   | 367,169     |   |   |   | 443,957 |   |
|                           |   |   |        |   |   |   |   |   |
| Total                          |   |   | 430,697,657 |   |   |   | 440,952,694 |   |
|                           |   |   |        |   |   |   |   |   |
| Less:                          |   |   |        |   |   |   |   |   |
| Allowance      for loan losses |   |   | 7,573,603   |   |   |   | 4,745,234 |   |
|                           |   |   |        |   |   |   |   |   |
| Loans      and leases, net     |   | $      | 423,124,054 |   |   | $      | 436,207,460 |   |

|                                                                                  |   | 2009   |       |   | 2008   |   |
|---------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| At      December 31:                                                                  |   |   |       |   |   |   |
| Non-accrual      loans                                                                |   | $      | 12,329,337 |   |   | $      | 3,493,169 |   |
| Other      impaired loans                                                             |   |   | 20,312     |   |   |   | 186,774 |   |
| Total      impaired loans                                                             |   | $      | 12,349,649 |   |   | $      | 3,679,943 |   |
|                                                                                  |   |   |       |   |   |   |   |   |
| Amount      of impaired loans that have a specific allowance                          |   | $      | 5,635,548  |   |   | $      | 2,571,851 |   |
| Amount      of impaired loans with no specific allowance                              |   |   | 6,714,101  |   |   |   | 1,108,092 |   |
| Allowance      for impaired loans                                                     |   |   | 793,267    |   |   |   | 630,093 |   |
|                                                                                  |   |   |       |   |   |   |   |   |
| Accruing      loans that are contractually past due as to principal or      interest: |   |   |       |   |   |   |   |   |
| Past      due 90 days or more                                                         |   |   | 554,806    |   |   |   | 604,140 |   |
| Past      due 30-89 days                                                              |   |   | 5,173,394  |   |   |   | 1,858,481 |   |
|                                                                                  |   |   |       |   |   |   |   |   |
| During      the year ended December 31:                                               |   |   |       |   |   |   |   |   |
| Average      investment in impaired loans                                             |   |   | 7,951,402  |   |   |   | 4,372,742 |   |
| Interest      income recognized on impaired loans                                     |   |   | 41,645     |   |   |   | 327,063 |   |
| Interest      income recognized on impaired loans (cash basis)                        |   |   | 31,495     |   |   |   | 310,899 |   |

----

|                                    |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|-----------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                    |   |   |       |   |   |   |       |   |   |
| Balance,      beginning                 |   | $      | 4,745,234  |   |   | $      | 4,824,401  |   |   | $ | 5,444,303 |   |
| Recoveries                              |   |   | 47,495     |   |   |   | 109,703    |   |   |   | 161,861 |   |
| Provision      (credit) for loan losses |   |   | 5,050,000  |   |   |   | 940,000    |   |   |   | (60,000 | ) |
| Losses      charged to allowance        |   |   | (2,269,126 | )      |   |   | (1,128,870 | )      |   |   | (721,763 | ) |
|                                    |   |   |       |   |   |   |       |   |   |   |   |   |
| Balance,      ending                    |   | $      | 7,573,603  |   |   | $      | 4,745,234  |   |   | $ | 4,824,401 |   |

| 5. | BANK      PREMISES AND EQUIPMENT |
|----|----------------------------------|

|                                                |   | 2009   |       |   | 2008   |   |
|-----------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                |   |   |       |   |   |   |
| Land                                                |   | $      | 2,072,048  |   |   | $      | 2,072,048 |   |
| Bank      premises                                  |   |   | 9,686,913  |   |   |   | 9,683,614 |   |
| Furniture,      fixtures and equipment              |   |   | 10,228,790 |   |   |   | 10,096,550 |   |
| Leasehold      improvements                         |   |   | 4,836,002  |   |   |   | 4,820,202 |   |
|                                                |   |   |       |   |   |   |   |   |
| Total                                               |   |   | 26,823,753 |   |   |   | 26,672,414 |   |
|                                                |   |   |       |   |   |   |   |   |
| Less      accumulated depreciation and amortization |   |   | 11,461,943 |   |   |   | 10,616,052 |   |
|                                                |   |   |       |   |   |   |   |   |
| Bank      premises and equipment, net               |   | $      | 15,361,810 |   |   | $      | 16,056,362 |   |

|                     |   |   |      |
|--------------------------|--------|--------|-----------|
| Year ending December 31  |   | Amount |      |
|                     |   |   |      |
| 2010                     |   | $      | 357,415   |   |
| 2011                     |   |   | 359,717   |   |
| 2012                     |   |   | 335,018   |   |
| 2013                     |   |   | 334,950   |   |
| 2014                     |   |   | 334,950   |   |
| 2015      and thereafter |   |   | 3,492,839 |   |
|                     |   |   |      |   |
| Total                    |   | $      | 5,214,889 |   |

----

| 6. | DEPOSITS |
|----|----------|

| 2010                     |   | $      | 81,854,344  |   |   |   | 55.2   | %      |
|--------------------------|--------|--------|-------------|--------|--------|--------|--------|--------|
| 2011                     |   |   | 30,453,680  |   |   |   | 20.6   |   |
| 2012                     |   |   | 24,339,350  |   |   |   | 16.4   |   |
| 2013                     |   |   | 3,461,321   |   |   |   | 2.3    |   |
| 2014                     |   |   | 6,553,909   |   |   |   | 4.4    |   |
| 2015      and thereafter |   |   | 1,587,304   |   |   |   | 1.1    |   |
|                     |   |   |        |   |   |   |   |   |
|                     |   | $      | 148,249,908 |   |   |   | 100.0  | %      |

| 7. | SHORT-TERM      BORROWINGS |
|----|----------------------------|

|                                             |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|--------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                             |   |   |       |   |   |   |       |   |   |
| Overnight      borrowings                        |   | $      | 8,573,000  |   |   | $      | 25,668,000 |   |   | $ | 18,950,000 |   |
| Securities      sold under repurchase agreements |   |   | 7,746,597  |   |   |   | 11,411,939 |   |   |   | 20,504,408 |   |
| Demand      note, U.S. Treasury                  |   |   | 213,510    |   |   |   | 1,049,765  |   |   |   | 201,946 |   |
| Total                                            |   | $      | 16,533,107 |   |   | $      | 38,129,704 |   |   | $ | 39,656,354 |   |

----

|                            |   | Maximum     |       |   |        |   |       | Weighted-        |   |   |         |   |
|---------------------------------|--------|-------------|------------|--------|-------------|--------|------------|------------------|--------|--------|--------------|--------|
|                            |   | outstanding |       |   |        |   |       | average          |   |   |         |   |
|                            |   | at      any |       |   | Average     |   |       | rate during |   |   | Rate      at |   |
|                            |   | month end   |       |   | outstanding |   |       | the year         |   |   | year-end     |   |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |
| 2009                            |   |        |       |   |        |   |       |             |   |   |         |   |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |
| Overnight      borrowings       |   | $           | 29,133,000 |   |        | $      | 4,896,685  |             |   |   | 0.66         | %      |   |   | 0.65 | % |
| Repurchase      agreements      |   |        | 10,130,515 |   |        |   | 8,743,015  |             |   |   | 0.32         | %      |   |   | 0.30 | % |
| Demand      note, U.S. Treasury |   |        | 985,663    |   |        |   | 525,807    |             |   |   | 0.00         | %      |   |   | 0.00 | % |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
| Total                           |   | $           | 40,249,178 |   |        | $      | 14,165,507 |             |   |   |         |   |   |   |   |   |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
| 2008                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
| Overnight      borrowings       |   | $           | 29,960,000 |   |        | $      | 12,314,584 |             |   |   | 2.13         | %      |   |   | 0.62 | % |
| Repurchase      agreements      |   |        | 17,210,316 |   |        |   | 12,074,345 |             |   |   | 0.85         | %      |   |   | 0.33 | % |
| Demand      note, U.S. Treasury |   |        | 1,049,765  |   |        |   | 509,715    |             |   |   | 1.85         | %      |   |   | 0.00 | % |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
| Total                           |   | $           | 48,220,081 |   |        | $      | 24,898,644 |             |   |   |         |   |   |   |   |   |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
| 2007                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
| Overnight      borrowings       |   | $           | 30,795,000 |   |        | $      | 8,781,767  |             |   |   | 5.17         | %      |   |   | 4.24 | % |
| Repurchase      agreements      |   |        | 21,678,303 |   |        |   | 19,579,632 |             |   |   | 2.38         | %      |   |   | 1.94 | % |
| Demand      note, U.S. Treasury |   |        | 1,057,677  |   |        |   | 523,018    |             |   |   | 6.19         | %      |   |   | 3.60 | % |
|                            |   |        |       |   |        |   |       |             |   |   |         |   |   |   |   |   |
| Total                           |   | $           | 53,530,980 |   |        | $      | 28,884,417 |             |   |   |         |   |   |   |   |   |

| 8. | LONG-TERM      DEBT |
|----|---------------------|

----

| Year ending December 31, |   | Amount |       |   | Rate   |   |
|--------------------------|--------|--------|------------|--------|--------|--------|
|                     |   |   |       |   |   |   |
| 2010                     |   | $      | 11,000,000 |   |   |   | 5.59 | % |
| 2013                     |   |   | 5,000,000  |   |   |   | 3.61 |   |
| 2016                     |   |   | 16,000,000 |   |   |   | 5.26 |   |
|                     |   |   |       |   |   |   |   |   |
| Total                    |   | $      | 32,000,000 |   |   |   | 5.11 | % |

| 9. | STOCK      PLANS |
|----|------------------|

----

|                                                |   |    |   |   |      |   |   | Weighted-       |   |
|-----------------------------------------------------|--------|---------|--------|--------|-----------|--------|--------|-----------------|--------|
|                                                |   |    |   |   | Weighted- |   |   | average         |   |
|                                                |   |    |   |   | average   |   |   | remaining       |   |
|                                                |   |    |   |   | exercise  |   |   | contractual     |   |
|                                                |   | Options |   |   | price     |   |   | term (yrs) |   |
|                                                |   |    |   |   |      |   |   |            |   |
| Outstanding      and exercisable, December 31, 2006 |   |    | 20,680 |   |      | $      | 32.64  |            |   |   | 4.3 |   |
| Granted                                             |   |    | 22,500 |   |      |   | 28.90  |            |   |   |   |   |
| Exercised                                           |   |    | -      |   |      |   | -      |            |   |   |   |   |
| Forfeited                                           |   |    | -      |   |      |   | -      |            |   |   |   |   |
|                                                |   |    |   |   |      |   |   |            |   |   |   |   |
| Outstanding      and exercisable, December 31, 2007 |   |    | 43,180 |   |      |   | 30.69  |            |   |   | 6.8 |   |
| Granted                                             |   |    | 2,000  |   |      |   | 26.90  |            |   |   |   |   |
| Exercised                                           |   |    | -      |   |      |   | -      |            |   |   |   |   |
| Forfeited                                           |   |    | (2,200 | )      |      |   | 31.85  |            |   |   |   |   |
|                                                |   |    |   |   |      |   |   |            |   |   |   |   |
| Outstanding      and exercisable, December 31, 2008 |   |    | 42,980 |   |      |   | 30.46  |            |   |   | 6.1 |   |
| Granted                                             |   |    | -      |   |      |   | -      |            |   |   |   |   |
| Exercised                                           |   |    | -      |   |      |   | -      |            |   |   |   |   |
| Forfeited                                           |   |    | (5,390 | )      |      |   | 31.61  |            |   |   |   |   |
|                                                |   |    |   |   |      |   |   |            |   |   |   |   |
| Outstanding,      December 31, 2009                 |   |    | 37,590 |   |      | $      | 30.29  |            |   |   | 5.6 |   |
| Exercisable,      December 31, 2009                 |   |    | 37,590 |   |      | $      | 30.29  |            |   |   |   |   |

|                         |   | 2008            |   |   | 2007            |   |
|------------------------------|--------|-----------------|--------|--------|-----------------|--------|
| Expected      volatility     |   |            | 26.31  | %      |            |   | 25.36 | % |
| Expected      dividend       |   |            | 3.72   | %      |            |   | 3.46 | % |
| Risk-free      interest rate |   |            | 2.77   | %      |            |   | 3.57 | % |
| Expected      term           |   | 5.25      years |   |   | 5.25      years |   |

----

|                                   |   | 2009   |   |   | 2008   |   |    | 2007   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| Stock-based      compensation expense: |   |   |   |   |   |   |    |   |   |
|                                   |   |   |   |   |   |   |    |   |   |
| Director's      Plan                   |   | $      | -      |   |   | $      | 90,550  |   |   | $ | 6,925 |   |
| Incentive      Plan                    |   |   | -      |   |   |   | 35,562  |   |   |   | 1,978 |   |
|                                   |   |   |   |   |   |   |    |   |   |   |   |   |
| Total                                  |   | $      | -      |   |   | $      | 126,112 |   |   | $ | 8,903 |   |

|                                                |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Unrecognized      stock-based compensation expense: |   |   |   |   |   |   |   |   |   |
|                                                |   |   |   |   |   |   |   |   |   |
| Director's      Plan                                |   | $      | -      |   |   | $      | -      |   |   | $ | 90,550 |   |
| Incentive      Plan                                 |   |   | -      |   |   |   | -      |   |   |   | 25,872 |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                               |   | $      | -      |   |   | $      | -      |   |   | $ | 116,422 |   |

|                 |   | 2008    |   |   | 2007               |   |
|----------------------|--------|---------|--------|--------|--------------------|--------|
|                 |   |    |   |   | Weighted-          |   |   |   |   |   | Weighted- |   |
|                 |   | Options |   |   | average      grant |   |   | Options |   |   | average      grant |   |
|                 |   | granted |   |   | date fair value    |   |   | granted |   |   | date fair value |   |
|                 |   |    |   |   |               |   |   |   |   |   |   |   |
| Director's      Plan |   |    | -      |   |               | $      | - |   |   |   | 17,500 |   |   | $ | 5.57 |   |
| Incentive      Plan  |   |    | 2,000  |   |               |   | 4.85 |   |   |   | 5,000 |   |   |   | 5.57 |   |
|                 |   |    |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Total                |   |    | 2,000  |   |               | $      | 4.85 |   |   |   | 22,500 |   |   | $ | 5.57 |   |

----

| 10.  | INCOME      TAXES |
|-----------|-------------------|

|                                                                  |   | 2009   |       |   | 2008   |   |
|-----------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Deferred      tax assets:                                             |   |   |       |   |   |   |
| Allowance      for loan losses                                        |   | $      | 2,575,024  |   |   | $      | 1,613,380 |   |
| Unrealized      losses on available-for-sale securities               |   |   | 4,736,506  |   |   |   | 4,549,165 |   |
| Deferred      interest from non-accrual assets                        |   |   | 463,780    |   |   |   | 269,278 |   |
| Other-than-temporary      impairment on available-for-sale securities |   |   | 1,089,484  |   |   |   | 148,126 |   |
| Stock-based      compensation                                         |   |   | 45,905     |   |   |   | 45,905 |   |
| Retirement      settlement reserve                                    |   |   | 57,861     |   |   |   | 32,365 |   |
| Other                                                                 |   |   | 208,537    |   |   |   | 121,013 |   |
|                                                                  |   |   |       |   |   |   |   |   |
| Total                                                                 |   |   | 9,177,097  |   |   |   | 6,779,232 |   |
|                                                                  |   |   |       |   |   |   |   |   |
| Deferred      tax liabilities:                                        |   |   |       |   |   |   |   |   |
| Depreciation                                                          |   |   | (466,933   | )      |   |   | (272,108 | ) |
| Loan      fees and costs                                              |   |   | (603,736   | )      |   |   | (510,858 | ) |
| Other                                                                 |   |   | (307,284   | )      |   |   | (160,496 | ) |
|                                                                  |   |   |       |   |   |   |   |   |
| Total                                                                 |   |   | (1,377,953 | )      |   |   | (943,462 | ) |
|                                                                  |   |   |       |   |   |   |   |   |
| Deferred      tax asset, net                                          |   | $      | 7,799,144  |   |   | $      | 5,835,770 |   |

|                                           |   | 2009   |       |   | 2008   |   |      | 2007   |   |
|------------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
|                                           |   |   |       |   |   |   |      |   |   |
| Current                                        |   | $      | 158,719    |   |   | $      | 1,071,912 |   |   | $ | 1,557,327 |   |
| Deferred                                       |   |   | (1,776,033 | )      |   |   | (2,941    | )      |   |   | 78,838 |   |
|                                           |   |   |       |   |   |   |      |   |   |   |   |   |
| Total      (credit) provision for income taxes |   | $      | (1,617,314 | )      |   | $      | 1,068,971 |   |   | $ | 1,636,165 |   |

----

|                                             |   | 2009   |       |   | 2008   |   |      | 2007   |   |
|--------------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
|                                             |   |   |       |   |   |   |      |   |   |
| Expected      provision at the statutory rate    |   | $      | (1,025,956 | )      |   | $      | 1,599,672 |   |   | $ | 2,124,231 |   |
| Tax-exempt      income                           |   |   | (511,488   | )      |   |   | (371,360  | )      |   |   | (348,903 | ) |
| Nondeductible      interest expense              |   |   | 45,713     |   |   |   | 41,542    |   |   |   | 47,385 |   |
| Bank      owned life insurance                   |   |   | (105,186   | )      |   |   | (108,501  | )      |   |   | (105,639 | ) |
| Nondeductible      other expenses and other, net |   |   | 25,409     |   |   |   | 25,319    |   |   |   | 36,792 |   |
| Low      income housing credits                  |   |   | (45,806    | )      |   |   | (117,701  | )      |   |   | (117,701 | ) |
|                                             |   |   |       |   |   |   |      |   |   |   |   |   |
| Actual      (credit) provision for income taxes  |   | $      | (1,617,314 | )      |   | $      | 1,068,971 |   |   | $ | 1,636,165 |   |

| 11. | RETIREMENT      PLAN |
|-----|----------------------|

| 12. | FAIR      VALUE OF FINANCIAL INSTRUMENTS ANDDERIVATIVES |
|-----|---------------------------------------------------------|

|                                         |   | 2009     |    |   | 2008       |   |
|----------------------------------------------|--------|----------|---------|--------|------------|--------|
|                                         |   | Carrying |    |   | Estimated  |   |   | Carrying |   |   | Estimated |   |
|                                         |   | amount   |    |   | fair value |   |   | amount |   |   | fair value |   |
|                                         |   |     |    |   |       |   |   |   |   |   |   |   |
| Financial      assets:                       |   |     |    |   |       |   |   |   |   |   |   |   |
| Cash      and cash equivalents               |   | $        | 8,328   |   |       | $      | 8,328 |   |   | $ | 12,771 |   |   | $ | 12,771 |   |
| Held-to-maturity      securities             |   |     | 709     |   |       |   | 765 |   |   |   | 910 |   |   |   | 940 |   |
| Available-for-sale      securities           |   |     | 75,821  |   |       |   | 75,821 |   |   |   | 83,278 |   |   |   | 83,278 |   |
| FHLB      Stock                              |   |     | 4,781   |   |       |   | 4,781 |   |   |   | 4,781 |   |   |   | 4,781 |   |
| Loans      and leases                        |   |     | 423,124 |   |       |   | 420,908 |   |   |   | 436,207 |   |   |   | 438,838 |   |
| Loans      available-for-sale                |   |     | 1,221   |   |       |   | 1,233 |   |   |   | 84 |   |   |   | 85 |   |
| Accrued      interest                        |   |     | 2,251   |   |       |   | 2,251 |   |   |   | 2,443 |   |   |   | 2,443 |   |
|                                         |   |     |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Financial      liabilities:                  |   |     |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Deposit      liabilities                     |   |     | 458,994 |   |       |   | 453,264 |   |   |   | 433,312 |   |   |   | 436,011 |   |
| Short-term      borrowings                   |   |     | 16,533  |   |       |   | 16,533 |   |   |   | 38,130 |   |   |   | 38,130 |   |
| Long-term      debt                          |   |     | 32,000  |   |       |   | 35,017 |   |   |   | 52,000 |   |   |   | 57,230 |   |
| Accrued      interest                        |   |     | 665     |   |       |   | 665 |   |   |   | 1,390 |   |   |   | 1,390 |   |
|                                         |   |     |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| On-balance      sheet derivative instrument: |   |     |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Cash      flow hedge                         |   |     | -       |   |       |   | - |   |   |   | 636 |   |   |   | 636 |   |

----

|                                                  |   |                   |   |   | Fair value measurements at December 31, 2009: |   |
|-------------------------------------------------------|--------|------------------------|--------|--------|-----------------------------------------------------------------------------|--------|
|                                                  |   | Total carrying    |   |   | Quoted prices                                                          |   |   | Significant other |   |   | Significant |   |
|                                                  |   | value at          |   |   | in active markets                                                 |   |   | observable inputs |   |   | unobservable inputs |   |
|                                             |   | December      31, 2009 |   |   | (Level      1)                                                              |   |   | (Level      2) |   |   | (Level      3) |   |
| Assets:                                               |   |                   |   |   |                                                                        |   |   |   |   |   |   |   |
| Available-for-sale      securities:                   |   |                   |   |   |                                                                        |   |   |   |   |   |   |   |
| Agency      - GSE                                     |   | $                      | 33,132 |   |                                                                        | $      | - |   |   | $ | 33,132 |   |   | $ | - |   |
| Obligations      of states and political subdivisions |   |                   | 23,270 |   |                                                                        |   | - |   |   |   | 23,270 |   |   |   | - |   |
| Corporate      bonds:                                 |   |                   |   |   |                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Pooled      trust preferred securities                |   |                   | 5,242  |   |                                                                        |   | - |   |   |   | - |   |   |   | 5,242 |   |
| MBS      - GSE residential                            |   |                   | 13,748 |   |                                                                        |   | - |   |   |   | 13,748 |   |   |   | - |   |
| Equity      securities - financial services           |   |                   | 429    |   |                                                                        |   | 429 |   |   |   | - |   |   |   | - |   |
| Total      available-for-sale securities              |   |                   | 75,821 |   |                                                                        |   | 429 |   |   |   | 70,150 |   |   |   | 5,242 |   |
| Loans      available-for-sale                         |   |                   | 1,221  |   |                                                                        |   | - |   |   |   | 1,221 |   |   |   | - |   |
| Total                                                 |   | $                      | 77,042 |   |                                                                        | $      | 429 |   |   | $ | 71,371 |   |   | $ | 5,242 |   |

|                                                  |   |                   |   |   | Fair value measurements at December 31, 2008: |   |
|-------------------------------------------------------|--------|------------------------|--------|--------|-----------------------------------------------------------------------------|--------|
|                                                  |   | Total carrying    |   |   | Quoted prices                                                          |   |   | Significant other |   |   | Significant |   |
|                                                  |   | value at          |   |   | in active markets                                                 |   |   | observable inputs |   |   | unobservable inputs |   |
|                                        |   | December      31, 2008 |   |   | (Level      1)                                                              |   |   | (Level      2) |   |   | (Level      3) |   |
| Assets:                                          |   |                   |   |   |                                                                        |   |   |   |   |   |   |   |
| Available-for-sale      securities:                   |   |                   |   |   |                                                                        |   |   |   |   |   |   |   |
| Agency      - GSE                                     |   | $                      | 43,507 |   |                                                                        | $      | - |   |   | $ | 43,507 |   |   | $ | - |   |
| Obligations      of states and political subdivisions |   |                   | 17,553 |   |                                                                        |   | - |   |   |   | 17,553 |   |   |   | - |   |
| Corporate      bonds:                                 |   |                   |   |   |                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Pooled      trust preferred securities                |   |                   | 10,260 |   |                                                                        |   | - |   |   |   | - |   |   |   | 10,260 |   |
| MBS      - GSE residential                            |   |                   | 11,530 |   |                                                                        |   | - |   |   |   | 11,530 |   |   |   | - |   |
| Equity      securities - financial services           |   |                   | 428    |   |                                                                        |   | 428 |   |   |   | - |   |   |   | - |   |
| Total      available-for-sale securities              |   |                   | 83,278 |   |                                                                        |   | 428 |   |   |   | 72,590 |   |   |   | 10,260 |   |
| Loans      available-for-sale                         |   |                   | 84     |   |                                                                        |   | - |   |   |   | 84 |   |   |   | - |   |
| Derivative      instrument                            |   |                   | 636    |   |                                                                        |   | - |   |   |   | 636 |   |   |   | - |   |
| Total                                                 |   | $                      | 83,998 |   |                                                                        | $      | 428 |   |   | $ | 73,310 |   |   | $ | 10,260 |   |

----

|                                                                                   |   | As of and for the |   |   | As of and for the |   |
|----------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|---------------------------------------|--------|
|                                                                                   |   | twelve months ended         |   |   | twelve months ended         |   |
|                                                                                   |   | December 31, 2009           |   |   | December 31, 2008           |   |
| Assets:                                                                                |   |                                  |   |   |                                  |   |
| Balance      at beginning of period                                                    |   | $                                     | 10,260 |   |                                  | $      | 16,335 |   |
| Realized      / unrealized losses:                                                     |   |                                  |   |   |                                  |   |   |   |
| in      earnings                                                                       |   |                                  | (3,300 | )      |                                  |   | (430 | ) |
| in      comprehensive income loss                                                      |   |                                  | (2,397 | )      |                                  |   | (9,958 | ) |
| Purchases,      sales, issuances and settlements, amortization and accretion,      net |   |                                  | 679    |   |                                  |   | 4,313 |   |
| Balance      at end of period                                                          |   | $                                     | 5,242  |   |                                  | $      | 10,260 |   |

|                |   | Fair value measurement at December 31, 2009 |   |
|---------------------|--------|---------------------------------------------------------------------------|--------|
|                |   |                                                                      |   |   | Quoted prices in |   |   | Significant other |   |   | Significant other |   |
|                |   | Total carrying value                                            |   |   | active markets |   |   | observable inputs |   |   | unobservable inputs |   |
|                |   | at December 31, 2009                                                 |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                |   |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Impaired      loans |   | $                                                                         | 4,842  |   |   | $ | 15 |   |   | $ | 4,447 |   |   | $ | 380 |   |

|                |   | Fair value measurement at December 31, 2008 |   |
|---------------------|--------|---------------------------------------------------------------------------|--------|
|                |   |                                                                      |   |   | Quoted prices in |   |   | Significant other |   |   | Significant other |   |
|                |   | Total carrying value                                            |   |   | active markets |   |   | observable inputs |   |   | unobservable inputs |   |
|                |   | at December 31, 2008                                                      |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                |   |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Impaired      loans |   | $                                                                         | 1,942  |   |   | $ | 12 |   |   | $ | 1,136 |   |   | $ | 794 |   |

----

|                                          |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|
| Off-balance      sheet financial instruments: |   |   |   |   |   |   |
| Commitments      to extend credit             |   | $      | 79,365 |   |   | $      | 93,992 |   |
| Standby      letters of credit                |   |   | 9,046  |   |   |   | 3,968 |   |

|                      |   | Less than |   |   | One to five |   |   | Over five |   |   |   |   |
|---------------------------|--------|----------------|--------|--------|-----------------------|--------|--------|----------------|--------|--------|--------|--------|
|                      |   | one year  |   |   | years                 |   |   | years          |   |   | Total  |   |
| Secured      by:          |   |           |   |   |                  |   |   |           |   |   |   |   |
| Collateral                |   | $              | 1,696  |   |                  | $      | 6,020  |           |   | $      | 772    |   |   | $ | 8,488 |   |
| Bank      lines of credit |   |           | 386    |   |                  |   | 80     |           |   |   | -      |   |   |   | 466 |   |
|                      |   |           |   |   |                  |   |   |           |   |   |   |   |   |   |   |   |
|                      |   |           | 2,082  |   |                  |   | 6,100  |           |   |   | 772    |   |   |   | 8,954 |   |
|                      |   |           |   |   |                  |   |   |           |   |   |   |   |   |   |   |   |
| Unsecured                 |   |           | 87     |   |                  |   | 5      |           |   |   | -      |   |   |   | 92 |   |
|                      |   |           |   |   |                  |   |   |           |   |   |   |   |   |   |   |   |
| Total                     |   | $              | 2,169  |   |                  | $      | 6,105  |           |   | $      | 772    |   |   | $ | 9,046 |   |

----

| 13. | EARNINGS      PER SHARE |
|-----|-------------------------|

----

|                                                                          |   | 2009   |       |   | 2008   |   |      | 2007   |   |
|-------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
|                                                                          |   |   |       |   |   |   |      |   |   |
| Basic EPS:                                                                    |   |   |       |   |   |   |      |   |   |
|                                                                          |   |   |       |   |   |   |      |   |   |
| Net      (loss) income available to common shareholders                       |   | $      | (1,400,205 | )      |   | $      | 3,635,948 |   |   | $ | 4,611,572 |   |
|                                                                          |   |   |       |   |   |   |      |   |   |   |   |   |
| Weighted-average      common shares outstanding                               |   |   | 2,080,507  |   |   |   | 2,068,851 |   |   |   | 2,066,683 |   |
|                                                                          |   |   |       |   |   |   |      |   |   |   |   |   |
| Basic      EPS                                                                |   | $      | (0.67      | )      |   | $      | 1.76      |   |   | $ | 2.23 |   |
|                                                                          |   |   |       |   |   |   |      |   |   |   |   |   |
| Diluted EPS:                                                                  |   |   |       |   |   |   |      |   |   |   |   |   |
|                                                                          |   |   |       |   |   |   |      |   |   |   |   |   |
| Net      (loss) income available to common shareholders                       |   | $      | (1,400,205 | )      |   | $      | 3,635,948 |   |   | $ | 4,611,572 |   |
|                                                                          |   |   |       |   |   |   |      |   |   |   |   |   |
| Weighted-average      common shares outstanding                               |   |   | 2,080,507  |   |   |   | 2,068,851 |   |   |   | 2,066,683 |   |
| Diluted      potential common shares                                          |   |   | -          |   |   |   | 20        |   |   |   | 386 |   |
| Weighted-average      common shares and dilutive potential shares outstanding |   |   | 2,080,507  |   |   |   | 2,068,871 |   |   |   | 2,067,069 |   |
|                                                                          |   |   |       |   |   |   |      |   |   |   |   |   |
| Diluted      EPS                                                              |   | $      | (0.67      | )      |   | $      | 1.76      |   |   | $ | 2.23 |   |

| 14. | REGULATORY      MATTERS |
|-----|-------------------------|

----

|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   | To be well capitalized |       |
|-----------------------------------------------|--------|--------|------------|--------|------------------------|--------|--------|------------------------|--------|--------|-----------------------------------|--------|--------|---------------------------------------|------------|
|                                          |   |   |       |   |                   |   |   | For capital       |   |   | under prompt corrective |   |
|                                          |   | Actual |       |   | adequacy purposes |   |   | action provisions |   |
|                                          |   | Amount |       |   | Ratio                  |   |   | Amount                 |   |   | Ratio                             |   |   | Amount                                |       |   | Ratio |   |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |
| As      of December 31, 2009:                 |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |
| Total      capital (to risk-weighted assets)  |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |
| Consolidated                                  |   | $      | 61,568,720 |   |                   |   | 11.4   | %                      |   | $      | ≥43,085,677                 |   |   |                                  | ≥8.0 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                          |   | $      | 61,170,729 |   |                   |   | 11.4   | %                      |   | $      | ≥43,075,958                 |   |   |                                  | ≥8.0 | % |   | $ | ≥53,844,947 |   |   |   | ≥10.0 | % |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Tier      I capital (to risk-weighted assets) |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Consolidated                                  |   | $      | 54,778,019 |   |                   |   | 10.2   | %                      |   | $      | ≥21,542,839                 |   |   |                                  | ≥4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                          |   | $      | 54,429,494 |   |                   |   | 10.1   | %                      |   | $      | ≥21,537,979                 |   |   |                                  | ≥4.0 | % |   | $ | ≥32,306,968 |   |   |   | ≥6.0 | % |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Tier      I capital (to average assets)       |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Consolidated                                  |   | $      | 54,778,019 |   |                   |   | 9.8    | %                      |   | $      | ≥22,380,403                 |   |   |                                  | ≥4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                          |   | $      | 54,429,494 |   |                   |   | 9.7    | %                      |   | $      | ≥22,363,361                 |   |   |                                  | ≥4.0 | % |   | $ | ≥27,954,202 |   |   |   | ≥5.0 | % |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| As      of December 31, 2008:                 |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Total      capital (to risk-weighted assets)  |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Consolidated                                  |   | $      | 61,929,662 |   |                   |   | 13.6   | %                      |   | $      | ≥36,323,088                 |   |   |                                  | ≥8.0 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                          |   | $      | 61,552,250 |   |                   |   | 13.6   | %                      |   | $      | ≥36,313,495                 |   |   |                                  | ≥8.0 | % |   | $ | ≥45,391,868 |   |   |   | ≥10.0 | % |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Tier      I capital (to risk-weighted assets) |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Consolidated                                  |   | $      | 57,136,680 |   |                   |   | 12.6   | %                      |   | $      | ≥18,161,544                 |   |   |                                  | ≥4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                          |   | $      | 56,806,892 |   |                   |   | 12.5   | %                      |   | $      | ≥18,156,747                 |   |   |                                  | ≥4.0 | % |   | $ | ≥27,235,121 |   |   |   | ≥6.0 | % |
|                                          |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Tier      I capital (to average assets)       |   |   |       |   |                   |   |   |                   |   |   |                              |   |   |                                  |       |   |   |   |   |   |   |   |   |   |
| Consolidated                                  |   | $      | 57,136,680 |   |                   |   | 10.0   | %                      |   | $      | ≥22,934,915                 |   |   |                                  | ≥4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                          |   | $      | 56,806,892 |   |                   |   | 9.9    | %                      |   | $      | ≥22,918,851                 |   |   |                                  | ≥4.0 | % |   | $ | ≥28,648,563 |   |   |   | ≥5.0 | % |

| 15. | RELATED      PARTY TRANSACTIONS |
|-----|---------------------------------|

|                                                  |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|-------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                                  |   |   |       |   |   |   |       |   |   |
| Balance,      beginning                               |   | $      | 8,053,604  |   |   | $      | 7,665,710  |   |   | $ | 9,028,873 |   |
| Adjustments      for loans to individuals no longer   |   |   |       |   |   |   |       |   |   |   |   |   |
| officers,      directors, associates, or greater than |   |   |       |   |   |   |       |   |   |   |   |   |
| 5%      shareholders                                  |   |   | -          |   |   |   | -          |   |   |   | (1,254,485 | ) |
| Additions                                             |   |   | 531,239    |   |   |   | 1,696,194  |   |   |   | 1,261,950 |   |
| Collections                                           |   |   | (1,755,988 | )      |   |   | (1,308,300 | )      |   |   | (1,370,628 | ) |
|                                                  |   |   |       |   |   |   |       |   |   |   |   |   |
| Balance,      ending                                  |   | $      | 6,828,855  |   |   | $      | 8,053,604  |   |   | $ | 7,665,710 |   |

----

|                    |   | 2009   |       |   | 2008   |   |      | 2007   |   |
|-------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
|                    |   |   |       |   |   |   |      |   |   |
| Number      of persons  |   |   | 2          |   |   |   | 2         |   |   |   | 2 |   |
|                    |   |   |       |   |   |   |      |   |   |   |   |   |
| Balance,      beginning |   | $      | 7,578,162  |   |   | $      | 7,196,079 |   |   | $ | 7,349,167 |   |
| Additions               |   |   | 106,044    |   |   |   | 1,090,044 |   |   |   | 793,049 |   |
| Collections             |   |   | (1,079,090 | )      |   |   | (707,961  | )      |   |   | (946,137 | ) |
|                    |   |   |       |   |   |   |      |   |   |   |   |   |
| Balance,      ending    |   | $      | 6,605,116  |   |   | $      | 7,578,162 |   |   | $ | 7,196,079 |   |

| 16. | QUARTERLY      FINANCIAL INFORMATION(UNAUDITED) |
|-----|-------------------------------------------------|

|                                       |   | First   |   |   | Second  |   |   | Third   |   |   | Fourth  |   |   |   |   |
|--------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
|                                       |   | quarter |   |   | quarter |   |   | quarter |   |   | quarter |   |   | Total  |   |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
| 2009                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Interest      income                       |   | $       | 7,827  |   |    | $      | 7,456  |    |   | $      | 7,454   |   |   | $      | 7,173  |   |   | $ | 29,910 |   |
| Interest      expense                      |   |    | (3,002 | )      |    |   | (2,715 | )       |   |   | (3,033  | )      |   |   | (2,047 | ) |   |   | (10,797 | ) |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      interest income                   |   |    | 4,825  |   |    |   | 4,741  |    |   |   | 4,421   |   |   |   | 5,126  |   |   |   | 19,113 |   |
| Provision      for loan losses             |   |    | (425   | )      |    |   | (300   | )       |   |   | (3,125  | )      |   |   | (1,200 | ) |   |   | (5,050 | ) |
| Gain      on sale of investment securities |   |    | -      |   |    |   | -      |    |   |   | -       |   |   |   | 11     |   |   |   | 11 |   |
| Other-than-temporary      impairment       |   |    | (326   | )      |    |   | (1     | )       |   |   | (2,432  | )      |   |   | (542   | ) |   |   | (3,301 | ) |
| Other      income                          |   |    | 1,639  |   |    |   | 1,459  |    |   |   | 1,139   |   |   |   | 1,213  |   |   |   | 5,450 |   |
| Other      expenses                        |   |    | (4,662 | )      |    |   | (4,739 | )       |   |   | (5,109  | )      |   |   | (4,731 | ) |   |   | (19,241 | ) |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Income      (loss) before taxes            |   |    | 1,051  |   |    |   | 1,160  |    |   |   | (5,106  | )      |   |   | (123   | ) |   |   | (3,018 | ) |
| (Provision)      credit for income taxes   |   |    | (226   | )      |    |   | (248   | )       |   |   | 1,895   |   |   |   | 197    |   |   |   | 1,618 |   |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      income (loss)                     |   | $       | 825    |   |    | $      | 912    |    |   | $      | (3,211  | )      |   | $      | 74     |   |   | $ | (1,400 | ) |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      income (loss) per share           |   | $       | 0.40   |   |    | $      | 0.44   |    |   | $      | (1.55   | )      |   | $      | 0.04   |   |   | $ | (0.67 | ) |

----

|                                       |   | First   |   |   | Second  |   |   | Third   |   |   | Fourth  |   |   |   |   |
|--------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
|                                       |   | quarter |   |   | quarter |   |   | quarter |   |   | quarter |   |   | Total  |   |
| 2008                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Interest      income                       |   | $       | 8,745  |   |    | $      | 8,613  |    |   | $      | 8,419   |   |   | $      | 8,184  |   |   | $ | 33,961 |   |
| Interest      expense                      |   |    | (4,198 | )      |    |   | (3,670 | )       |   |   | (3,540  | )      |   |   | (3,276 | ) |   |   | (14,684 | ) |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      interest income                   |   |    | 4,547  |   |    |   | 4,943  |    |   |   | 4,879   |   |   |   | 4,908  |   |   |   | 19,277 |   |
| Provision      for loan losses             |   |    | -      |   |    |   | (125   | )       |   |   | (130    | )      |   |   | (685   | ) |   |   | (940 | ) |
| Gain      on sale of investment securities |   |    | 1      |   |    |   | 7      |    |   |   | 17      |   |   |   | -      |   |   |   | 25 |   |
| Other-than-temporary      impairment       |   |    | -      |   |    |   | -      |    |   |   | (403    | )      |   |   | (33    | ) |   |   | (436 | ) |
| Other      income                          |   |    | 1,295  |   |    |   | 1,259  |    |   |   | 1,231   |   |   |   | 1,204  |   |   |   | 4,989 |   |
| Other      expenses                        |   |    | (4,393 | )      |    |   | (4,445 | )       |   |   | (4,673  | )      |   |   | (4,699 | ) |   |   | (18,210 | ) |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Income      before taxes                   |   |    | 1,450  |   |    |   | 1,639  |    |   |   | 921     |   |   |   | 695    |   |   |   | 4,705 |   |
| Provision      for income taxes            |   |    | (361   | )      |    |   | (435   | )       |   |   | (180    | )      |   |   | (93    | ) |   |   | (1,069 | ) |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      income                            |   | $       | 1,089  |   |    | $      | 1,204  |    |   | $      | 741     |   |   | $      | 602    |   |   | $ | 3,636 |   |
|                                       |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      income per share                  |   | $       | 0.52   |   |    | $      | 0.59   |    |   | $      | 0.35    |   |   | $      | 0.30   |   |   | $ | 1.76 |   |

|                            |   | First   |   |   | Second  |   |   | Third   |   |   | Fourth  |   |   |   |   |
|---------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
|                            |   | quarter |   |   | quarter |   |   | quarter |   |   | quarter |   |   | Total  |   |
|                            |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
| 2007                            |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
|                            |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Interest      income            |   | $       | 8,632  |   |    | $      | 8,684  |    |   | $      | 8,892   |   |   | $      | 9,071  |   |   | $ | 35,279 |   |
| Interest      expense           |   |    | (4,328 | )      |    |   | (4,362 | )       |   |   | (4,470  | )      |   |   | (4,500 | ) |   |   | (17,660 | ) |
|                            |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      interest income        |   |    | 4,304  |   |    |   | 4,322  |    |   |   | 4,422   |   |   |   | 4,571  |   |   |   | 17,619 |   |
| Credit      for loan losses     |   |    | -      |   |    |   | -      |    |   |   | 60      |   |   |   | -      |   |   |   | 60 |   |
| Other      income               |   |    | 1,214  |   |    |   | 1,329  |    |   |   | 1,309   |   |   |   | 1,354  |   |   |   | 5,206 |   |
| Other      expenses             |   |    | (4,113 | )      |    |   | (4,087 | )       |   |   | (4,189  | )      |   |   | (4,248 | ) |   |   | (16,637 | ) |
|                            |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Income      before taxes        |   |    | 1,405  |   |    |   | 1,564  |    |   |   | 1,602   |   |   |   | 1,677  |   |   |   | 6,248 |   |
| Provision      for income taxes |   |    | (361   | )      |    |   | (405   | )       |   |   | (424    | )      |   |   | (446   | ) |   |   | (1,636 | ) |
|                            |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      income                 |   | $       | 1,044  |   |    | $      | 1,159  |    |   | $      | 1,178   |   |   | $      | 1,231  |   |   | $ | 4,612 |   |
|                            |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      income per share       |   | $       | 0.51   |   |    | $      | 0.56   |    |   | $      | 0.57    |   |   | $      | 0.59   |   |   | $ | 2.23 |   |

| 17. | CONTINGENCIES |
|-----|---------------|

| 18. | RECENT      ACCOUNTING PRONOUNCEMENTS |
|-----|---------------------------------------|

----

----

| 19. | PARENT      COMPANY ONLY |
|-----|--------------------------|

|                                  |   | December 31, |   |
|--------------------------------------------|--------|-------------------|--------|
|                                       |   | 2009              |   |   | 2008 |   |
| Assets:                                    |   |              |   |   |   |   |
| Cash                                       |   | $                 | 47     |   |   | $ | 2 |   |
| Investment      in subsidiary              |   |              | 45,256 |   |   |   | 48,561 |   |
| Securities      available-for-sale         |   |              | 429    |   |   |   | 428 |   |
| Other      assets                          |   |              | 10     |   |   |   | 10 |   |
|                                       |   |              |   |   |   |   |   |   |
| Total                                      |   | $                 | 45,742 |   |   | $ | 49,001 |   |
|                                       |   |              |   |   |   |   |   |   |
| Liabilities      and shareholders' equity: |   |              |   |   |   |   |   |   |
| Liabilities                                |   | $                 | 67     |   |   | $ | 40 |   |
| Shareholders'      equity                  |   |              | 45,675 |   |   |   | 48,961 |   |
|                                       |   |              |   |   |   |   |   |   |
| Total                                      |   | $                 | 45,742 |   |   | $ | 49,001 |   |

----

|                                           |   | Years ended December 31, |   |
|-----------------------------------------------------|--------|-----------------------------------------|--------|
|                                                |   | 2009                                    |   |   | 2008 |   |   | 2007 |   |
| Income:                                             |   |                                    |   |   |   |   |   |   |   |
| Equity      in undistributed earnings of subsidiary |   | $                                       | (2,684 | ) |   | $ | 1,337 |   |   | $ | 3,163 |   |
| Dividends      from subsidiary                      |   |                                    | 1,439  |   |   |   | 2,580 |   |   |   | 1,613 |   |
| Other      income                                   |   |                                    | 19     |   |   |   | 16 |   |   |   | 13 |   |
|                                                |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Total      (loss) income                            |   |                                    | (1,226 | ) |   |   | 3,933 |   |   |   | 4,789 |   |
|                                                |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses                             |   |                                    | 258    |   |   |   | 446 |   |   |   | 267 |   |
|                                                |   |                                    |   |   |   |   |   |   |   |   |   |   |
| (Loss)      income before taxes                     |   | $                                       | (1,484 | ) |   | $ | 3,487 |   |   | $ | 4,522 |   |
|                                                |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Credit      for income taxes                        |   |                                    | 84     |   |   |   | 149 |   |   |   | 90 |   |
|                                                |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) income                              |   | $                                       | (1,400 | ) |   | $ | 3,636 |   |   | $ | 4,612 |   |

|                                                                               |   | Years      ended December 31, |   |
|------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                               |   | 2009                          |   |   | 2008 |   |   | 2007 |   |
| Cash      flows from operating activities:                                         |   |                          |   |   |   |   |   |   |   |
| Net      (loss) income                                                             |   | $                             | (1,400 | ) |   | $ | 3,636 |   |   | $ | 4,612 |   |
| Adjustments      to reconcile net (loss) income to net cash used in    operations: |   |                          |   |   |   |   |   |   |   |   |   |   |
| Equity      in earnings of subsidiary                                              |   |                          | 1,245  |   |   |   | (3,917 | ) |   |   | (4,777 | ) |
| Stock-based      compensation expense                                              |   |                          | 5      |   |   |   | 129 |   |   |   | 16 |   |
| Deferred      income tax benefit                                                   |   |                          | -      |   |   |   | (43 | ) |   |   | (3 | ) |
| Changes      in other assets and liabilities, net                                  |   |                          | 27     |   |   |   | (17 | ) |   |   | (10 | ) |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net      cash used in operating activities                                         |   |                          | (123   | ) |   |   | (212 | ) |   |   | (162 | ) |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Cash      flows provided by investing activities:                                  |   |                          |   |   |   |   |   |   |   |   |   |   |
| Dividends      received from subsidiary                                            |   |                          | 1,439  |   |   |   | 2,580 |   |   |   | 1,613 |   |
| Purchases      of securities available-for-sale                                    |   |                          | -      |   |   |   | - |   |   |   | (50 | ) |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net      cash provided by investing activities                                     |   |                          | 1,439  |   |   |   | 2,580 |   |   |   | 1,563 |   |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                         |   |                          |   |   |   |   |   |   |   |   |   |   |
| Dividends      paid, net of dividend reinvestment                                  |   |                          | (1,255 | ) |   |   | (1,995 | ) |   |   | (1,484 | ) |
| Purchase      of treasury stock                                                    |   |                          | (57    | ) |   |   | (430 | ) |   |   | - |   |
| Withholdings      to purchase capital stock                                        |   |                          | 41     |   |   |   | 57 |   |   |   | 68 |   |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net      cash used in financing activities                                         |   |                          | (1,271 | ) |   |   | (2,368 | ) |   |   | (1,416 | ) |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net      increase (decrease) in cash                                               |   |                          | 45     |   |   |   | - |   |   |   | (15 | ) |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Cash,      beginning                                                               |   |                          | 2      |   |   |   | 2 |   |   |   | 17 |   |
|                                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Cash,      ending                                                                  |   | $                             | 47     |   |   | $ | 2 |   |   | $ | 2 |   |

----

Item 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE

Item9A(T): CONTROLSAND PROCEDURES

Item9B:     OTHERINFORMATION

PARTIII

Item10: DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

----

Item11: EXECUTIVECOMPENSATION

Item12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATEDSTOCKHOLDER MATTERS

Item 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, ANDDIRECTOR INDEPENDENCE

Item 14:PRINCIPAL ACCOUNTANT FEES ANDSERVICES

PARTIV

Item 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

| (a) | (1)      Financial Statements - The following financial statements are      included by reference in Part II, Item 8hereof: |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

|  | (2) | Financial      Statement Schedules |
|--|-----|------------------------------------|

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

----

----

| (b) | The      exhibits required to be filed by this Item are listed under Item 15(a) 3,      above. |
|-----|------------------------------------------------------------------------------------------------|

| (c) | Not      applicable. |
|-----|----------------------|

----

----

SIGNATURES

|                     | FIDELITY      D & D BANCORP, INC. |
|--------------------------|---------------------------------------|
|                     | (Registrant)                          |
|                     |                                  |
|                     |                                  |
| Date:      March 5, 2010 | By:                                   | /s/  Patrick      J. Dempsey  |    |
|                     |                                  | Patrick      J. Dempsey, |
|                     |                                  | Interim      President and Chief Executive Officer |
|                     |                                  |
|                     |                                  |
| Date:      March 5, 2010 | By:                                   | /s/      Salvatore      R. DeFrancesco, Jr. |    |
|                     |                                  | Salvatore      R. DeFrancesco, Jr., |
|                     |                                  | Treasurer      and Chief FinancialOfficer |

|   |                                                          |   | DATE               |
|--------|---------------------------------------------------------------|--------|--------------------|
|   |                                                          |   |               |
| By:    | /s/  Patrick      J. Dempsey                        |   | March      5, 2010 |
|   | Patrick      J. Dempsey, Interim President and Chief          |   |               |
|   | Executive      Officer and Chairman of the Board of Directors |   |               |
|   |                                                          |   |               |
| By:    | /s/      Salvatore      R. DeFrancesco, Jr.                   |   | March      5, 2010 |
|   | Salvatore      R. DeFrancesco, Jr., Treasurer                 |   |               |
|   | and      Chief Financial Officer                              |   |               |
|   |                                                          |   |               |
| By:    | /s/      John      T. Cognetti                                |   | March      5, 2010 |
|   | John      T. Cognetti, Secretary and Director                 |   |               |
|   |                                                          |   |               |
| By:    | /s/      Michael      J. McDonald                             |   | March      5, 2010 |
|   | Michael      J. McDonald, Vice Chairman                       |   |               |
|   | of      the Board of Directors and Director                   |   |               |
|   |                                                          |   |               |
| By:    | /s/      David      L. Tressler                               |   | March      5, 2010 |
|   | David      L. Tressler, Director                              |   |               |
|   |                                                          |   |               |
| By:    | /s/      Mary      E. McDonald                                |   | March      5, 2010 |
|   | Mary      E. McDonald, Assistant Secretary and Director       |   |               |
|   |                                                          |   |               |
| By:    | /s/      Brian      J. Cali                                   |   | March      5, 2010 |
|   | Brian      J. Cali, Director                                  |   |               |

----

| Exhibit Index                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Page   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 3(i)      Amended and Restated Articles of Incorporation of Registrant.      Incorporated by reference to Annex B of the Proxy      Statement/Prospectus included in Registrant’s Amendment 4 to its      Registration Statement No. 333-90273 on Form S-4, filed with the SEC on      April 6, 2000.                                                                                                                                                                                                                                                                                          |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 3(ii)      Amended and Restated Bylaws of Registrant. Incorporated by      reference to Exhibit 3(ii) to Registrant’s Form 8-K filed with the SEC on      November 21, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                   |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.1 1998      Independent Directors Stock Option Plan of The Fidelity Deposit and      Discount Bank, as assumed by Registrant. Incorporated by reference      to Exhibit 10.1 to Registrant’s Registration Statement No. 333-90273 on      Form S-4, filed with the SEC on November 3, 1999.                                                                                                                                                                                                                                                                                                 |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.2 1998      Stock Incentive Plan of The Fidelity Deposit and Discount Bank, as assumed      by Registrant. Incorporated by reference to Exhibit 10.2 of      Registrant’s Registration Statement No. 333-90273 on Form S-4, filed with      the SEC on November 3, 1999.                                                                                                                                                                                                                                                                                                                    |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.3      Registrant’s 2000 Dividend Reinvestment      Plan.  Incorporated by reference to Exhibit 4 to      Registrant’s Registration Statement No. 333-45668 on Form S-1, filed with      the SEC on September 12, 2000 and as amended by Pre-Effective Amendment      No. 1 on October 11, 2000, by Post-Effective Amendment No. 1 on May 30,      2001, by Post-Effective Amendment No. 2 on July 7, 2005 and by      Registration Statement No. 333-152806 on Form S-3 filed on August 6,      2008 and by Post-Effective Amendment No. 1 on January 25, 2010      . |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.4      Registrant’s 2000 Independent Directors Stock Option Plan.      Incorporated by reference to Exhibit 4.3 to Registrant’s      Registration Statement No. 333-64356 on Form S-8 filed with the SEC on      July 2, 2001.                                                                                                                                                                                                                                                                                                                                                        |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.5      Amendment, dated October 2, 2007, to the Registrant’s 2000 Independent      Directors Stock Option Plan.  Incorporated by reference      to Exhibit 10.2 to Registrant’s Form 8-K filed with the SEC on October 4,      2007.                                                                                                                                                                                                                                                                                                                                        |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.6      Registrant’s 2000 Stock Incentive Plan. Incorporated by reference      to Exhibit 4.4 to Registrant’s Registration Statement No. 333-64356 on      Form S-8 filed with the SEC on July 2, 2001.                                                                                                                                                                                                                                                                                                                                                                                |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.7      Amendment, dated October 2, 2007, to the Registrant’s 2000 Stock Incentive      Plan.  Incorporated by reference to Exhibit 10.1 to      Registrant’s Form 8-K filed with the SEC on October 4,    2007.                                                                                                                                                                                                                                                                                                                                                             |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.8      Registrant’s 2002 Employee Stock Purchase Plan. Incorporated by      reference to Exhibit 4.5 to Registrant’s Registration Statement No.      333-113339 on Form S-8 filed with the SEC on March 5,2004.                                                                                                                                                                                                                                                                                                                                                                       |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.9 Change      of Control Agreements with Salvatore R. DeFrancesco, Registrant and The      Fidelity Deposit and Discount Bank, dated March 21, 2006. Incorporated by      reference to Exhibit 99.2 to Registrant’s Current Report on Form 8-K filed      with the SEC on March 27, 2006.                                                                                                                                                                                                                                                                                              |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| 10.10      Amended and Restated Executive Employment Agreement between Fidelity D      & D Bancorp, Inc., The Fidelity Deposit and Discount Bank and Steven      C. Ackmann, dated July 11, 2007. Incorporated by      reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed      with the SEC on July 13, 2007.                                                                                                                                                                                                                                                 |   | *      |

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| 10.11      Executive Employment Agreement between Fidelity D & D Bancorp, Inc.,      The Fidelity Deposit and Discount Bank and Timothy P. O’Brien, dated      January 3, 2008.  Incorporated by reference to Exhibit      10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on      January 10, 2008.                                                                   |   | *      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 10.12      Executive Employment Agreement between Fidelity D & D Bancorp, Inc.,      The Fidelity Deposit and Discount Bank and Daniel J. Santaniello, dated      February 28, 2008.  Incorporated by reference to Exhibit      10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on      March 3, 2008.                                                                       |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| *10.13      Release Agreement between Steven C. Ackmann, Registrant and The Fidelity      Deposit and Discount Bank, dated August 31, 2009.  Incorporated      by reference to Exhibit 99.1 to Registrant’s Current Report on Form 8-K      filed with the SEC on September 8, 2009.                                                                                                                |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| *10.14      Consulting Agreement between Steven C. Ackmann, former President and Chief      Executive Officer of the Registrant and The Fidelity Deposit and Discount      Bank, and The Fidelity Deposit and Discount Bank, dated September 1,      2009.  Incorporated      by reference to Exhibit 99.2 to Registrant’s Current Report on Form 8-K      filed with the SEC on September 8, 2009. |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 11      Statement regarding computation of earnings per share. Included      herein Note 13, “Earnings per Share”, contained within the Notes to      Consolidated Financial Statements, and incorporated herein by      reference.                                                                                                                                                                     |   | 76     |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 12      Statement regarding computation of ratios. Included herein in Item      6, “Selected Financial Data”.                                                                                                                                                                                                                                                                                           |   | 14     |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 13 Annual      Report to Shareholders. Incorporated by reference to the 2009      Annual Report to Shareholders filed with the SEC on Form    ARS.                                                                                                                                                                                                                                                                  |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 14 Code of      Ethics. Incorporated by reference to the 2003 Annual Report to      Shareholders on Form 10-K filed with the SEC on March 29,      2004.                                                                                                                                                                                                                                                            |   | *      |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 21      Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                                             |   | 91     |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 23      Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                   |   | 92     |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 31.1      Rule 13a-14(a) Certification of Principal Executive    Officer.                                                                                                                                                                                                                                                                                                                                           |   | 93     |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 31.2      Rule 13a-14(a) Certification of Principal Financial    Officer.                                                                                                                                                                                                                                                                                                                                           |   | 94     |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 32.1      Certification of Principal Executive Officer pursuant to 18 U.S.C. Section      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.                                                                                                                                                                                                                                          |   | 95     |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |
| 32.2      Certification of Principal Financial Officer pursuant to 18 U.S.C. Section      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.                                                                                                                                                                                                                                          |   | 96     |

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