----

| [ X      ]         ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGEACTOF      1934                       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                    |   |
| For      the Fiscal Year Ended December 31, 2007                                                                                                                                        |
|                                                                                                                                                                                    |   |
|             [   ]     TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES      EXCHANGE ACT OF 1934                                                                                                                                                    |

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

----

|          | Part I                                                                              |   |
|---------------|-------------------------------------------------------------------------------------|--------|
|          |                                                                                |   |
| Item      1.  | Business                                                                            | 2      |
| Item      1A. | Risk      Factors                                                                   | 9      |
| Item      1B. | Unresolved      Staff Comments                                                      | 15     |
| Item      2.  | Properties                                                                          | 15     |
| Item      3.  | Legal      Proceedings                                                              | 15     |
| Item      4.  | Submission      of Matters to a Vote of Security Holders                            | 15     |
|          |                                                                                |   |
|          | Part      II                                                                        |   |
|          |                                                                                |   |
| Item      5.  | Market      for Common Equity, Related Shareholder Matters and Issuer               |   |
|          | Purchases      of Equity Securities                                                 | 16     |
| Item      6.  | Selected      Financial Data                                                        | 19     |
| Item      7.  | Management’s      Discussion and Analysis of Financial Condition and          |   |
|          | Results      of Operation                                                           | 20     |
| Item      7A. | Quantitative      and Qualitative Disclosures About Market Risk                     | 40     |
| Item      8.  | Financial      Statements and Supplementary Data                                    | 43     |
| Item      9.  | Changes      in and Disagreements with Accountants on Accounting and                |   |
|          | Financial      Disclosure                                                           | 44     |
| Item      9A. | Controls      and Procedures                                                        | 44     |
| Item      9B. | Other      Information                                                              | 46     |
|          |                                                                                |   |
|          | Part      III                                                                       |   |
|          |                                                                                |   |
| Item      10  | Directors,      Executive Officers and Corporate Governance                         | 48     |
| Item      11  | Executive      Compensation                                                         | 48     |
| Item      12  | Security      Ownership of Certain Beneficial Owners and Management and             |   |
|          | Related      Shareholder Matters                                                    | 48     |
| Item      13  | Certain      Relationships and Related Transactions, and Director      Independence | 48     |
| Item      14  | Principal      Accountant Fees and Services                                         | 48     |
|          |                                                                                |   |
|          | Part      IV                                                                        |   |
|          |                                                                                |   |
| Item      15  | Exhibits      and Financial Statement Schedules                                     | 49     |

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| Item      5.    | Market      for Common Equity, Related Shareholder Matters and IssuerPurchases of Equity      Securities  |
|--------------------------------|----------------------------------------------------------------------------------------------------------------|

|               |   | 2007                                                        |                                                        | 2006                                                        |
|--------------------|--------|-------------------------------------------------------------|-------------------------------------------------------------|-------------------------------------------------------------|
|               |   |                                                        |                                                        | Cash                                                        |   |   |   | Cash |
|               |   | Sales      Price                                            | Dividends                                                   |                                                        | Sales      Price | Dividends |
| Quarter      Ended |   | High                                                        | Low                                                         | Declared                                                    |   | High | Low | Declared |
|               |   |                                                        |                                                        |                                                        |   |   |   |   |
| March      31      |   |  $      26.52            |  $      20.75            |  $      0.045            |   |  $      26.05 |  $      20.00 |  $      0.040 |
| June      30       |   |          23.50 |          20.50 |          0.045 |   |          30.24 |          23.75 |          0.045 |
| September      30  |   |          22.73 |          18.97 |          0.045 |   |          30.50 |          23.00 |          0.045 |
| December      31   |   |          20.93 |          15.25 |          0.045 |   |          27.25 |          23.50 |          0.045 |

----

|                                                                      | Number      of securities to be      issued upon exercise      of outstanding options,      warrants and rights(a) | Weighted-average      exercise      price of outstanding      options, warrants      and rights(b) | Number      of securities remaining      available for future      issuance under equity      compensation plans      (excluding securities      reflected in      column (a))(c) |
|---------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Equity      compensation plans      approved by security      holders     | 60,000                                                                                                             | $10.13                                                                                             | -                                                                                                                                                                                 |
|                                                                      |                                                                                                               |                                                                                               |                                                                                                                                                                              |
| Equity      compensation plans      not approved by security      holders | -                                                                                                                  | -                                                                                                  | -                                                                                                                                                                                 |
|                                                                      |                                                                                                               |                                                                                               |                                                                                                                                                                              |
| Total                                                                     | 60,000                                                                                                             | $10.13                                                                                             | -                                                                                                                                                                                 |

----

|                                |   | Period      Ending |   |
|-------------------------------------|--------|--------------------|--------|
| Index                               |   | 12/31/02           |   |   | 12/31/03 |   |   | 12/31/04 |   |   | 12/31/05 |   |   | 12/31/06 |   |   | 12/31/07 |   |
|                                |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Patriot      National Bancorp, Inc. |   |               | 100.00 |   |   |   | 133.00 |   |   |   | 196.00 |   |   |   | 221.00 |   |   |   | 281.00 |   |   |   | 170.00 |   |
| S      & P 500                  |   |               | 100.00 |   |   |   | 126.00 |   |   |   | 138.00 |   |   |   | 142.00 |   |   |   | 161.00 |   |   |   | 167.00 |   |
| NASDAQ      Bank Index              |   |               | 100.00 |   |   |   | 130.00 |   |   |   | 144.00 |   |   |   | 138.00 |   |   |   | 153.00 |   |   |   | 119.00 |   |

----

|                              |   | At      or for the year ended December 31, |        |
|-----------------------------------|--------|--------------------------------------------|-------------|
|                              |   | 2007                                       |        |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
| Operating      Data:              |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      and dividend income |   | $                                          | 51,862,157  |   |   | $ | 38,009,526 |   |   | $ | 25,148,701 |   |   | $ | 18,678,251 |   |   | $ | 15,214,702 |   |
| Interest      expense             |   |                                       | 27,767,310  |   |   |   | 18,069,648 |   |   |   | 10,269,625 |   |   |   | 7,008,508 |   |   |   | 5,588,255 |   |
| Net      interest income          |   |                                       | 24,094,847  |   |   |   | 19,939,878 |   |   |   | 14,879,076 |   |   |   | 11,669,743 |   |   |   | 9,626,447 |   |
| Provision      for loan losses    |   |                                       | 75,000      |   |   |   | 1,040,000 |   |   |   | 1,110,000 |   |   |   | 556,000 |   |   |   | 563,000 |   |
| Noninterest      income           |   |                                       | 2,233,915   |   |   |   | 2,359,149 |   |   |   | 3,229,037 |   |   |   | 2,702,204 |   |   |   | 4,813,740 |   |
| Noninterest      expense          |   |                                       | 22,038,836  |   |   |   | 17,576,872 |   |   |   | 14,634,487 |   |   |   | 12,256,550 |   |   |   | 11,659,467 |   |
| Provision      for income taxes   |   |                                       | 1,537,000   |   |   |   | 1,267,000 |   |   |   | 957,000 |   |   |   | 633,000 |   |   |   | 877,000 |   |
| Net      income                   |   |                                       | 2,677,926   |   |   |   | 2,415,155 |   |   |   | 1,406,626 |   |   |   | 926,397 |   |   |   | 1,340,720 |   |
|                              |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per      Share Data:              |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      income per share       |   |                                       | 0.56        |   |   |   | 0.67 |   |   |   | 0.52 |   |   |   | 0.38 |   |   |   | 0.56 |   |
| Diluted      income per share     |   |                                       | 0.56        |   |   |   | 0.66 |   |   |   | 0.51 |   |   |   | 0.37 |   |   |   | 0.55 |   |
| Dividends      per share          |   |                                       | 0.180       |   |   |   | 0.175 |   |   |   | 0.155 |   |   |   | 0.135 |   |   |   | 0.115 |   |
|                              |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      Sheet Data           |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   |                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and due from banks      |   |                                       | 2,760,246   |   |   |   | 3,868,670 |   |   |   | 7,220,577 |   |   |   | 6,670,409 |   |   |   | 4,023,732 |   |
| Federal      funds sold           |   |                                       | 11,000,000  |   |   |   | 27,000,000 |   |   |   | 6,500,000 |   |   |   | 37,500,000 |   |   |   | 15,000,000 |   |
| Short      term investments       |   |                                       | 251,668     |   |   |   | 24,605,869 |   |   |   | 2,247,028 |   |   |   | 11,460,057 |   |   |   | 10,430,939 |   |
| Investment      securities        |   |                                       | 71,857,840  |   |   |   | 70,222,035 |   |   |   | 80,991,068 |   |   |   | 78,258,775 |   |   |   | 92,330,533 |   |
| Loans,      net                   |   |                                       | 685,885,990 |   |   |   | 506,884,155 |   |   |   | 364,243,777 |   |   |   | 263,874,820 |   |   |   | 214,420,528 |   |
| Total      assets                 |   |                                       | 807,530,254 |   |   |   | 645,982,795 |   |   |   | 470,641,162 |   |   |   | 405,046,955 |   |   |   | 342,469,049 |   |
| Total      deposits               |   |                                       | 672,399,409 |   |   |   | 561,451,664 |   |   |   | 419,075,288 |   |   |   | 367,005,325 |   |   |   | 289,992,182 |   |
| Total      borrowings             |   |                                       | 62,748,000  |   |   |   | 16,248,000 |   |   |   | 17,248,000 |   |   |   | 16,248,000 |   |   |   | 31,301,385 |   |
| Total      shareholders' equity   |   |                                       | 66,835,367  |   |   |   | 64,283,345 |   |   |   | 31,374,615 |   |   |   | 19,756,434 |   |   |   | 18,779,913 |   |

----

| Item      7.   | Management's      Discussion and Analysis of Financial Condition andResults of      Operations  |
|--------------------------|------------------------------------------------------------------------------------------------------|

----

|                                                                 |   | 2007   |       |   | 2006   |   |       | 2005   |   |
|----------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| U.      S. Government sponsored                                      |   |   |       |   |   |   |       |   |   |
|      agency      obligations                |   | $      | 16,924,648 |   |   | $      | 16,566,822 |   |   | $ | 16,476,684 |   |
| U.      S. Government Agency and sponsored                           |   |   |       |   |   |   |       |   |   |   |   |   |
|      agency      mortgage-backed securities |   |   | 41,325,870 |   |   |   | 43,476,313 |   |   |   | 56,195,384 |   |
| Marketable      equity securities                                    |   |   | 9,039,522  |   |   |   | 7,050,000  |   |   |   | 6,000,000 |   |
| Federal      Reserve Bank stock                                      |   |   | 1,911,700  |   |   |   | 1,911,700  |   |   |   | 1,022,300 |   |
| Federal      Home Loan Bank stock                                    |   |   | 2,656,100  |   |   |   | 1,217,200  |   |   |   | 1,296,700 |   |
| Total      Investments                                               |   | $      | 71,857,840 |   |   | $      | 70,222,035 |   |   | $ | 80,991,068 |   |

|                                                     |   |          |       |   | Over      one   |      |      | Over      five |   |   |          |   |   |             |   |   |       |      |       | Weighted |       |
|---------------------------------------------------------------|--------|---------------|------------|--------|-----------------|-----------|-----------|----------------|--------|--------|---------------|--------|--------|------------------|--------|--------|------------|-----------|------------|----------|------------|
|                                                          |   | One      year |       |   | through         |      |      | through        |   |   | Over      ten |   |   |             |   |   |       |      |       | Average  |       |
|                                                          |   | or      less  |       |   | five      years |      |      | ten      years |   |   | years         |   |   | No      maturity |   |   | Total      |      |       | Yield    |       |
|                                                          |   |          |       |   |            |      |      |           |   |   |          |   |   |             |   |   |       |      |       |     |       |
| U.      S. Government Sponsored                               |   |          |       |   |            |      |      |           |   |   |          |   |   |             |   |   |       |      |       |
|      agency      obligations         | $      | 12,000,000    |       |   | $               | 5,000,000 |      |           | $      | -      |          |   | $      | -                |   |   | $          | -         |       |     | $          | 17,000,000 |   |   |   | 3.59 | % |
| U.      S. Government Agency and                              |   |          |       |   |            |      |      |           |   |   |          |   |   |             |   |   |       |      |       |     |       |   |   |   |   |
|      sponsored      agency           |   |          |       |   |            |      |      |           |   |   |          |   |   |             |   |   |       |      |       |     |       |   |   |   |   |   |
|      mortgage-backed      securities | -      |          |       |   | -               |      |      |           | -      |   |          |   | -      |             |   |   | 41,336,808 |      |       |     | 41,336,808 |   |   |   | 4.94 | % |
| Money      market preferred                                   |   |          |       |   |            |      |      |           |   |   |          |   |   |             |   |   |       |      |       |     |       |   |   |   |   |   |
|      equity      securities          |   | -             |       |   |            | -         |      |           |   | -      |          |   |   | -                |   |   |       | 9,039,522 |       |     |       | 9,039,522 |   |   |   | 6.27 | % |
| Total                                                         |   | $             | 12,000,000 |   |            | $         | 5,000,000 |           |   | $      | -             |   |   | $                | -      |   |       | $         | 50,376,330 |     |       | $ | 67,376,330 |   |   |   | 4.77 | % |
| Weighted      average yield                                   |   |          | 3.37       | %      |            |      | 4.12      | %              |   |   | -             |   |   |             | -      |   |       |      | 5.18       | %        |       |   | 4.77 | % |   |   |   |   |

|                                                                 |   | Amortized      Cost |       |   | Fair      Value |   |
|----------------------------------------------------------------------|--------|---------------------|------------|--------|-----------------|--------|
|                                                                 |   |                |       |   |            |   |
| Available for sale      securities:                                  |   |                |       |   |            |   |
| U.      S. Government Sponsored Agency Obligations                   |   | $                   | 17,000,000 |   |            | $      | 16,924,648 |   |
| U.      S. Government Agency and sponsored                           |   |                |       |   |            |   |   |   |
|      agency      mortgage-backed securities |   |                | 41,366,808 |   |            |   | 41,325,870 |   |

----

|                             |                                                              | 2007                                                                         | 2006                                                                         | 2005                                                                                                                                                                | 2004                                                                                                                                                                | 2003                                                                                                                                                                |
|----------------------------------|-------------------------------------------------------------------|------------------------------------------------------------------------------|------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                                                              |                                                                         |                                                                         |                                                                                                                                                                |                                                                                                                                                                |                                                                                                                                                                |
| Real      Estate                 |                                                              |                                                                         |                                                                         |                                                                                                                                                                |                                                                                                                                                                |
|                             | Commercial                                                        |  $      233,121,685                       |  $      166,799,341                       |  $      129,178,889                                                                                                              |  $      106,771,441                                                                                                              |  $        96,339,220                                                                                                   |
|                             | Residential                                                       | 110,154,838                                                                  | 91,077,687                                                                   | 77,391,833                                                                                                                                                          | 36,965,661                                                                                                                                                          |            21,772,759                                                                                        |
|                             | Construction                                                      | 254,296,326                                                                  | 173,840,322                                                                  | 107,232,587                                                                                                                                                         | 74,598,919                                                                                                                                                          |            57,122,445                                                                                        |
|                             | Construction      to permanent                                    |            37,701,509 |            29,988,131 |                            - |                            - |                            - |
| Commercial                       | 27,494,531                                                        | 23,997,640                                                                   | 15,591,818                                                                   | 17,562,523                                                                                                                                                          |            15,532,902                                                                                        |
| Consumer      installment        | 1,270,360                                                         | 1,251,300                                                                    | 1,106,648                                                                    | 1,386,709                                                                                                                                                           |              1,861,924                                                                             |
| Consumer      home equity        | 29,154,498                                                        | 26,933,277                                                                   | 39,097,450                                                                   | 30,874,894                                                                                                                                                          |            25,607,775                                                                                        |
| Total      loans                 |          693,193,747 |          513,887,698            |          369,599,225            |          268,160,147                                                                                                   |          218,237,025                                                                                                   |
| Premiums      on purchased loans | 195,805                                                           | 292,543                                                                      | 367,491                                                                      | 313,754                                                                                                                                                             |                            - |
| Net      deferred fees           | (1,830,942)                                                       | (1,665,654)                                                                  | (1,134,604)                                                                  | (1,117,556)                                                                                                                                                         |               (881,822)                                                                       |
| Allowance      for loan losses   | (5,672,620)                                                       | (5,630,432)                                                                  | (4,588,335)                                                                  | (3,481,525)                                                                                                                                                         |            (2,934,675)                                                                                       |
| Loans,      net                  |  $      685,885,990            |  $      506,884,155                       |  $      364,243,777                       |  $      263,874,820                                                                                                              |  $      214,420,528                                                                                                              |

----

|                                 |   |          |    |   | Due      after  |   |    |            |   |   |    |   |
|--------------------------------------|--------|---------------|---------|--------|-----------------|--------|---------|-----------------|--------|--------|---------|--------|
|                                 |   | Due      in   |    |   | one      year   |   |    |            |   |   |    |   |
|                                 |   | one      year |    |   | through         |   |    | Due      after  |   |   |    |   |
| (thousands      of dollars)          |   | or      less  |    |   | five      years |   |    | five      years |   |   | Total   |   |
| Commercial      real estate          |   | $             | 25,973  |   |            | $      | 53,967  |            |   | $      | 153,182 |   |   | $ | 233,122 |   |
| Residential      real estate         |   |          | 3,405   |   |            |   | 4,271   |            |   |   | 102,479 |   |   |   | 110,155 |   |
| Construction      loans              |   |          | 145,062 |   |            |   | 103,684 |            |   |   | 5,550   |   |   |   | 254,296 |   |
| Construction      to permanent loans |   |          | -       |   |            |   | -       |            |   |   | 37,702  |   |   |   | 37,702 |   |
| Commercial      loans                |   |          | 14,053  |   |            |   | 10,255  |            |   |   | 3,187   |   |   |   | 27,495 |   |
| Consumer      installment            |   |          | 1,098   |   |            |   | 172     |            |   |   | -       |   |   |   | 1,270 |   |
| Consumer      home equity            |   |          | 28      |   |            |   | 2,530   |            |   |   | 26,596  |   |   |   | 29,154 |   |
|      Total  |   | $             | 189,619 |   |            | $      | 174,879 |            |   | $      | 328,696 |   |   | $ | 693,194 |   |
|                                 |   |          |    |   |            |   |    |            |   |   |    |   |   |   |   |   |
| Fixed      rate loans                |   | $             | 28,326  |   |            | $      | 33,128  |            |   | $      | 10,866  |   |   | $ | 72,320 |   |
| Variable      rate loans             |   |          | 161,293 |   |            |   | 141,751 |            |   |   | 317,830 |   |   |   | 620,874 |   |
|      Total  |   | $             | 189,619 |   |            | $      | 174,879 |            |   | $      | 328,696 |   |   | $ | 693,194 |   |

----

----

----

|                                       |   | 2007                              |   | 2006   |   | 2005   |   | 2004   |   | 2003   |   |
|--------------------------------------------|--------|-----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                       |   |  (thousands      of dollars) |   |
|                                       |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at beginning of period        |   | $                                 | 5,630  |   |   | $      | 4,588  |   |   | $      | 3,481  |   |   | $ | 2,934 |   |   | $ | 2,372 |   |
| Charge-offs                                |   |                              | (32    | )      |   |   | (1     | )      |   |   | (3     | ) |   |   | (9 | ) |   |   | (1 | ) |
| Recoveries                                 |   |                              | -      |   |   |   | 3      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Net      recoveries (charge-offs)          |   |                              | (32    | )      |   |   | 2      |   |   |   | (3     | ) |   |   | (9 | ) |   |   | (1 | ) |
| Additions      charged to operations       |   |                              | 75     |   |   |   | 1,040  |   |   |   | 1,110  |   |   |   | 556 |   |   |   | 563 |   |
| Balance      at end of period              |   | $                                 | 5,673  |   |   | $      | 5,630  |   |   | $      | 4,588  |   |   | $ | 3,481 |   |   | $ | 2,934 |   |
| Ratio      of net (charge-offs) recoveries |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| during      the period to average loans    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| outstanding      during the period         |   |                              | (0.00  | %)     |   |   | 0.00   | %      |   |   | (0.00  | %) |   |   | (0.01 | %) |   |   | (0.00 | %) |

|                                             |   |                                |   |   |                         |   |   |   |   |   |   |   |   |   |   |   | Percent      of loans in each |   |
|--------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-------------------------------|--------|
| Balance      at end of each                      |   | Amounts      (thousands of dollars) |   |   | category      to total loans |   |
| period      applicable to:                       |   | 2007                                |   | 2006   |                         | 2005   |   | 2004   |   | 2003   |   |   | 2007   |   | 2006   |   | 2005                          |   | 2004 |   | 2003 |   |
| Real      Estate:                                |   |                                |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial                     |   | $                                   | 1,963  |   |                         | $      | 1,943  |   |   | $      | 1,607  |   |   | $      | 1,319  |   |                          | $      | 1,183 |   |   |   | 33.63 | % |   |   | 32.46 | % |   |   | 34.95 | % |   |   | 39.82 | % |   |   | 44.15 | % |
|    Residential                    |   |                                | 296    |   |                         |   | 245    |   |   |   | 511    |   |   |   | 304    |   |                          |   | 230 |   |   |   | 15.89 | % |   |   | 17.72 | % |   |   | 20.94 | % |   |   | 13.78 | % |   |   | 9.98 | % |
|    Construction                   |   |                                | 2,644  |   |                         |   | 2,557  |   |   |   | 1,963  |   |   |   | 1,358  |   |                          |   | 972 |   |   |   | 36.68 | % |   |   | 33.83 | % |   |   | 29.01 | % |   |   | 27.82 | % |   |   | 26.17 | % |
|    Construction      to permanent | 391    |                                |   |   | 441                          |   |   |   | -      |   |   |   | -      |   |   |   | -                             |   |   |   | 5.44 | % |   |   | 5.84 | % |   |   | 0.00 | % |   |   | 0.00 | % |   |   | 0.00 | % |
| Commercial                                       |   |                                | 271    |   |                         |   | 290    |   |   |   | 164    |   |   |   | 185    |   |                          |   | 155 |   |   |   | 3.97 | % |   |   | 4.67 | % |   |   | 4.22 | % |   |   | 6.55 | % |   |   | 7.12 | % |
| Consumer      installment                        |   |                                | 30     |   |                         |   | 31     |   |   |   | 10     |   |   |   | 11     |   |                          |   | 12 |   |   |   | 0.18 | % |   |   | 0.24 | % |   |   | 0.30 | % |   |   | 0.52 | % |   |   | 0.85 | % |
| Consumer      home equity                        |   |                                | 77     |   |                         |   | 72     |   |   |   | 260    |   |   |   | 233    |   |                          |   | 285 |   |   |   | 4.21 | % |   |   | 5.24 | % |   |   | 10.58 | % |   |   | 11.51 | % |   |   | 11.73 | % |
| Unallocated                                      |   |                                | 1      |   |                         |   | 51     |   |   |   | 73     |   |   |   | 71     |   |                          |   | 97 |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |
| Total                                            |   | $                                   | 5,673  |   |                         | $      | 5,630  |   |   | $      | 4,588  |   |   | $      | 3,481  |   |                          | $      | 2,934 |   |   |   | 100.00 | % |   |   | 100.00 | % |   |   | 100.00 | % |   |   | 100.00 | % |   |   | 100.00 | % |

----

|                                                     |   | 2007                        |   | 2006   |   | 2005   |   | 2004   |   | 2003   |   |
|----------------------------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                     |   | (thousands      of dollars) |   |
|                                                     |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      delinquent over 90                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    days      still accruing               |   | $                           | 112    |   |   | $      | 1,897  |   |   | $      | 275    |   |   | $ | 373 |   |   | $ | 165 |   |
| Non-accruing      loans                                  |   |                        | 3,832  |   |   | 2,904  |   |   | 1,935  |   |   | 3,669 |   |   | 150 |   |
|                                                     |   | $                           | 3,944  |   | $      | 4,801  |   | $      | 2,210  |   | $      | 4,042 |   | $ | 315 |   |
|                                                     |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| %      of Total Loans                                    |   |                        | 0.57   | %      |   |   | 0.93   | %      |   |   | 0.60   | % |   |   | 1.51 | % |   |   | 0.14 | % |
| %      of Total Assets                                   |   |                        | 0.49   | %      |   |   | 0.74   | %      |   |   | 0.47   | % |   |   | 1.00 | % |   |   | 0.09 | % |
|                                                     |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Additional      income on non-accrual                    |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    loans      if recognized on an accrual |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    basis                                  |   | $                           | 168    |   |   | $      | 141    |   |   | $      | 6      |   |   | $ | 18 |   |   | $ | 18 |   |

----

|                                                         |   | 2007   |        | 2006   |   | 2005        |        |
|--------------------------------------------------------------|--------|--------|-------------|--------|--------|-------------|-------------|
|                                                         |   |   |        |   |   |        |        |   |   |
| Non-interest      bearing                                    |   | $      | 51,925,991  |   | $      | 56,679,836  |        | $ | 48,797,389 |   |
|                                                         |   |   |        |   |   |        |        |   |   |   |   |   |
| Interest      bearing                                        |   |   |        |   |   |        |        |   |   |   |   |   |
|    Time      certificates, less than $100,000 |   |   | 300,502,281 |   |   |        | 248,414,014 |   |   |   | 168,565,756 |   |
|    Time      certificates, $100,000 or more   |   |   | 231,366,788 |   |   |        | 162,546,807 |   |   |   | 98,440,248 |   |
|    Money      markets                         |   |   | 34,880,837  |   |   |        | 40,935,628  |   |   |   | 57,798,772 |   |
|    Savings                                    |   |   | 34,261,389  |   |   |        | 25,993,452  |   |   |   | 20,089,889 |   |
|    NOW                                        |   |   | 19,462,123  |   |   | 26,881,927  |        |   | 25,383,234 |   |
|    Total      interest bearing                |   |   | 620,473,418 |   |   | 504,771,828 |        |   | 370,277,899 |   |
| Total      deposits                                          |   | $      | 672,399,409 |   | $      | 561,451,664 |        | $ | 419,075,288 |   |

----

|   |                        | $100,000      or                                                                     | Less      than                                                                       |                                                                                 |   |
|--------|-----------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------|
|   |                        | greater                                                                              | $100,000                                                                             | Totals                                                                               |   |
|   |                        | (thousands      of dollars)                                                          |                                                                                 |
|   |                        |                                                                                 |                                                                                 |                                                                                 |   |
|   | Three      months or less   |  $          64,629            |  $          88,553            |  $        153,182                       |   |
|   | Three      to six months    |            120,826            |            142,828            |            263,654            |   |
|   | Six      months to one year |              25,481 |              39,968 |              65,449 |   |
|   | Over      one year          |              20,431 |              29,154 |              49,585 |   |
|   | Total                       |  $        231,367                       |  $        300,503                       |  $        531,870                       |   |

| December      31, 2007                              |     | December      31, 2006 |
|-----------------------------------------------------|----------|------------------------|
|                                                |     |                   | Average |   |   |   |   | Average |
|                                                |     |                   | amount |   |   |   |   | amount |
| Amount                                              | Maturity | Rate                   | outstanding |   | Amount | Maturity | Rate | outstanding |
|                                                |     |                   |   |   |   |   |   |   |
|  $    5,000,000            | 1/3/2008 | 4.520%                 |  $       68,493 |   |  $    5,000,000 | 4/12/2007 | 5.240% |  $   3,630,137 |
|      25,000,000            | 1/4/2008 | 4.380%                 |  $     273,973 |   |        1,000,000 | 4/30/2007 | 2.960% |  $   1,000,000 |
|        7,500,000 | 1/7/2008 | 4.400%                 |           20,548 |   |        2,000,000 | 5/14/2007 | 5.110% |      2,000,000 |
|  $  37,500,000                       |     | 4.403%                 |  $     363,014 |   |  $    8,000,000 |   | 4.923% |  $   6,630,137 |

----

----

|                                                                                                                                                                                                                                                                                                     | Distribution      of Assets, Liabilities and Shareholder's Equity                       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                     | Interest Rates and      Interest Differential and Rate Volume Variance      Analysis(1) |
|                                                                                                                                                                                                                                                                                                     | (thousands      of dollars)                                                             |
|                                                                                                                                                                                                                                                                                                     | 2007                                                                                    |   | 2006 |   | 2005 |   | 2007      vs. 2006 Fluctuations |   | 2006      vs. 2005 Fluctuations |
|                                                                                                                                                                                                                                                                                                     |                                                                                    | Interest |   |   |   | Interest |   |   |   | Interest |   |   | Interest      Income/Expense (3) |   | Interest      Income/Expense (3) |
|                                                                                                                                                                                                                                                                                                     | Average                                                                                 | Income/ | Average |   | Average | Income/ | Average |   | Average | Income/ | Average |   | Due      to Change in: |   | Due      to Change in: |
|                                                                                                                                                                                                                                                                                                     | Balance                                                                                 | Expense | Rate |   | Balance | Expense | Rate |   | Balance | Expense | Rate |   | Volume | Rate | Total |   | Volume | Rate | Total |
| Interest      earning assets:                                                                                                                                                                                                                                                                            |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Loans      (2)                                                                                                                                                                                                                                                                         |  $      598,525                                                                    |  $  46,949 | 7.84% |   |  $  442,612 |  $  34,052 | 7.69% |   |  $  316,058 |  $   21,561 | 6.82% |   |  $  12,220 |  $       677 |  $  12,897 |   |  $      7,789 |  $      4,702 |  $      12,491 |
|    Federal      funds sold and                                                                                                                                                                                                                                                            |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      other      cash equivalents                                                                                                                                                                                                                                                |         40,000                                  |          2,058 | 5.15% |   |           18,661 |             955 | 5.12% |   |          16,777 |            494 | 2.94% |   |         1,097 |                 6 |          1,103 |   |            50 |           411 |           461 |
|    Investments      (4)                                                                                                                                                                                                                                                                   |         67,420                                  |          2,855 | 4.23% |   |         75,869 |         3,003 | 3.96% |   |          87,164 |        3,094 | 3.55% |   |          (324) |             176 |           (148) |   |       (376) |         285 |            (91) |
| Total      interest earning assets                                                                                                                                                                                                                                                                       |  $      705,945                                                                    |  $   51,862 | 7.35% |   |  $  537,142 |  $   38,010 | 7.08% |   |  $  419,999 |  $  25,149 | 5.99% |   |       12,993 |            859 |       13,852 |   |      7,463 |      5,398 |      12,861 |
|                                                                                                                                                                                                                                                                                                     |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash      and due from banks                                                                                                                                                                                                                                                           |            4,155                 |   |   |   |            5,231 |   |   |   |             5,117 |   |   |   |   |   |   |   |   |   |   |
|    Allowance      for loan losses                                                                                                                                                                                                                                                         |          (5,613)                           |   |   |   |         (5,324) |   |   |   |         (3,897) |   |   |   |   |   |   |   |   |   |   |
|    Other      assets                                                                                                                                                                                                                                                                      |           19,813                      |   |   |   |            9,671 |   |   |   |           8,446 |   |   |   |   |   |   |   |   |   |   |
|      Total      Assets                                                                                                                                                                                                                                                          |  $      724,300                                                                    |   |   |   |  $      546,720 |   |   |   |  $      429,665 |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                     |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing liabilities:                                                                                                                                                                                                                                                                       |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Time      certificates                                                                                                                                                                                                                                                                 |  $  483,918                                                              |  $    24,811 | 5.13% |   |  $      325,522 |  $   14,687 | 4.51% |   |  $      224,526 |  $   8,040 | 3.58% |   |  $   7,894 |  $   2,230 |  $   10,124 |   |  $  3,018 |  $      3,629 |  $  6,647 |
|    Savings      accounts                                                                                                                                                                                                                                                                  |         30,657                                  |             747 | 2.44% |   |          23,291 |             435 | 1.87% |   |          21,792 |            277 | 1.27% |   |             159 |             153 |             312 |   |             18 |          140 |           158 |
|    Money      market accounts                                                                                                                                                                                                                                                             |         38,526                                  |             699 | 1.81% |   |         44,876 |             646 | 1.44% |   |         67,943 |            862 | 1.27% |   |            (83) |             136 |              53 |   |       (265) |            49 |         (216) |
|    NOW      accounts                                                                                                                                                                                                                                                                      |          26,612                            |             267 | 1.00% |   |         26,838 |             383 | 1.43% |   |         26,072 |             188 | 0.72% |   |               (3) |            (113) |            (116) |   |              6 |          189 |           195 |
|    FHLB      advances                                                                                                                                                                                                                                                                     |            11,174                |               511 | 4.57% |   |         24,496 |           1,241 | 5.07% |   |          10,422 |            374 | 3.59% |   |          (732) |                 2 |          (730) |   |         346 |          521 |          867 |
|    Subordinated      debt                                                                                                                                                                                                                                                                 |           8,248                       |              691 | 8.38% |   |           8,248 |             673 | 8.16% |   |           8,248 |            528 | 6.40% |   |                  - |               18 |               18 |   |               - |          145 |           145 |
|    Other      borrowings                                                                                                                                                                                                                                                                  |               927 |                 41 | 4.42% |   |                 96 |                  5 | 5.21% |   |                 34 |                  1 | 2.94% |   |              37 |                (1) |              36 |   |               1 |              3 |               4 |
| Total      interest bearing liabilities                                                                                                                                                                                                                                                                  |  $      600,062                                                                    |  $  27,767 | 4.63% |   |  $      453,367 |  $   18,070 | 3.99% |   |  $      359,037 |  $  10,270 | 2.86% |   |        7,272 |        2,425 |        9,697 |   |       3,124 |      4,676 |       7,800 |
|                                                                                                                                                                                                                                                                                                     |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Demand      deposits                                                                                                                                                                                                                                                                   |         52,992                                  |   |   |   |         48,455 |   |   |   |          43,813 |   |   |   |   |   |   |   |   |   |   |
|    Accrued      expenses and                                                                                                                                                                                                                                                              |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         and      other liabilities                                                                                                                                                                                                                               |            5,441                 |   |   |   |            4,418 |   |   |   |           3,380 |   |   |   |   |   |   |   |   |   |   |
|    Shareholder's      equity                                                                                                                                                                                                                                                              |         65,805                                  |   |   |   |         40,480 |   |   |   |         23,435 |   |   |   |   |   |   |   |   |   |   |
| Total      liabilities and equity                                                                                                                                                                                                                                                                        |  $      724,300                                                                    |   |   |   |  $      546,720 |   |   |   |  $      429,665 |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                     |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                                                                                                                                                                                                                                                                                 |                                                                                    |  $  24,095 |   |   |   |  $   19,940 |   |   |   |  $  14,879 |   |   |  $    5,721 |  $  (1,566) |  $    4,155 |   |  $      4,339 |  $    722 |  $   5,061 |
| Interest      margin                                                                                                                                                                                                                                                                                     |                                                                                    |   | 3.41% |   |   |   | 3.71% |   |   |   | 3.54% |   |   |   |   |   |   |   |   |
| Interest      spread                                                                                                                                                                                                                                                                                     |                                                                                    |   | 2.72% |   |   |   | 3.09% |   |   |   | 3.13% |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                     |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)  The rate      volume analysis reflects the changes in net interest income arising from      changes in interest rates and from asset and liability volume, including      mix.  The change in interest attributable to volume includes      changes in interest attributable to mix. |
| (2)  Includes      non-accruing loans                                                                                                                                                                                                                                                               |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (3)       Favorable/(unfavorable) fluctuations.                                                                                                                                                                                                                                                     |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (4)  Yields are      calculated at historical cost and excludes the effects of unrealized gains      or losses on available for sale securities.                                                                                                                                                    |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |

----

|                                  |   | 2007   |   | 2006   |   | 2005   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                  |   |   |   |   |   |   |   |   |   |
| Return      on average assets         |   |   | 0.37   | %      |   |   | 0.44   | % |   |   | 0.33 | % |
| Return      on average equity         |   |   | 4.07   | %      |   |   | 5.97   | % |   |   | 6.00 | % |
| Dividend      payout ratio            |   |   | 32.14  | %      |   |   | 26.12  | % |   |   | 29.81 | % |
| Average      equity to average assets |   |   | 9.09   | %      |   |   | 7.41   | % |   |   | 5.46 | % |
| Basic      income per share           |   | $      | 0.56   |   |   | $      | 0.67   |   |   | $ | 0.52 |   |
| Diluted      income per share         |   | $      | 0.56   |   |   | $      | 0.66   |   |   | $ | 0.51 |   |

----

----

----

----

----

|                                                    |                                                                              | Less      than                                                                                                                                                | One      to                                                                                                                                             | Three      to                                                                                                                                           | Over      five                                                                                                                                          |
|---------------------------------------------------------|-----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                    | Total                                                                             | one      year                                                                                                                                                 | three      years                                                                                                                                        | five      years                                                                                                                                         | years                                                                                                                                                   |
|                                                    |                                                                              |                                                                                                                                                          |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                    |
| Certificates      of deposit                            |  $     531,869,069                                  |  $     482,284,060                                                                                                              |  $     44,903,502                                                                                                         |  $       4,681,507                                                                                              |  $                      -            |
| Junior      subordinated debt owed to                   |                                                                              |                                                                                                                                                          |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                    |
|      unconsolidated      trust |             8,248,000 |                           - |                          - |                          - |           8,248,000                                                                                   |
| FHLB      Advances                                      |           47,500,000            |           37,500,000                                                                                        |                          - |         10,000,000                                                                                              |                          - |
| Securities      sold under agreements                   |                                                                              |                                                                                                                                                          |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                    |
|      to      repurchase        |             7,000,000 |                           - |                          - |                          - |           7,000,000                                                                                   |
| Operating      lease obligations                        |           18,672,250            |             2,542,869                                                                             |           5,020,293                                                                                   |           4,397,047                                                                                   |           6,712,041                                                                                   |
|                                                    |                                                                              |                                                                                                                                                          |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                    |
| Total      contractual obligations                      |  $     613,289,319                                  |  $     522,326,929                                                                                                              |  $     49,923,795                                                                                                         |  $     19,078,554                                                                                                         |  $     21,960,041                                                                                                         |

----

|   | Future      loan commitments             |  $   69,060,424                       |   |
|--------|------------------------------------------|-----------------------------------------------------------|--------|
|   | Unused      lines of credit              |       55,273,450            |   |
|   | Undisbursed      construction loans      |     118,619,531                       |   |
|   | Financial      Standby letters of credit |         1,217,391 |   |
|   |                                     |                                                      |   |
|   | Total      commitments                   |  $      244,170,796                                  |   |

----

|                            | December      31, |
|---------------------------------|-------------------|
|                            | 2007              | 2006 | 2005 |
|                            |              |   |   |
| Total      Risk-Based Capital   | 12.17%            | 15.34% | 12.70% |
| Tier      1 Risk- Based Capital | 11.30%            | 14.22% | 11.45% |
| Leverage      Capital           | 9.42%             | 11.63% | 8.56% |

|                            | December      31, |
|---------------------------------|-------------------|
|                            | 2007              | 2006 | 2005 |
|                            |              |   |   |
| Total      Risk-Based Capital   | 12.03%            | 15.02% | 12.52% |
| Tier      1 Risk- Based Capital | 11.15%            | 13.90% | 11.27% |
| Leverage      Capital           | 9.30%             | 11.37% | 8.42% |

----

----

|                      | Basis     | Interest      Rate   | December      31, |
|---------------------------|-----------|----------------------|-------------------|
|                      | Points    | Risk      Guidelines | 2007              | 2006 |
|                      |      |                 |              |   |
| Gap      percentage total |      | +/-      15%         | -8.33%            | 1.53% |
| Net      interest income  |  200 | +/-      15%         | -1.05%            | 11.22% |
|                      | -200      | +/-      15%         | -0.59%            | -12.04% |
| Net      portfolio value  |  200 | +/-      25%         | -12.60%           | -3.25% |
|                      | -200      | +/-      25%         | 7.35%             | 1.19% |

----

| Net      Interest Income and Economic Value |       |
|---------------------------------------------|------------|
| Summary      Performance                    |       |
|                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2007                      |       |
|                                        |       |   | Net      Interest Income |   | Net      Portfolio Value |   |
| Projected      Interest                     |       |   | Estimated |   |   | $      Change |   |   | %      Change |   |   | Estimated |   |   | $      Change |   |   | %      Change |   |
| Rate      Scenario                          |       |   | Value |   |   | from      Base |   |   | from      Base |   |   | Value |   |   | from      Base |   |   | from      Base |   |
|                                        | +      200 |   |   |   | 24,969 |   |   |   | (265 | ) |   |   | -1.05 | % |   |   | 69,103 |   |   |   | (9,966 | ) |   |   | -12.60 | % |
|                                        | +      100 |   |   |   | 25,138 |   |   |   | (96 | ) |   |   | -0.38 | % |   |   | 73,971 |   |   |   | (5,098 | ) |   |   | -6.45 | % |
| BASE                                        |       |   |   | 25,234 |   |   |   |   |   |   |   |   |   |   |   | 79,069 |   |   |   |   |   |   |   |   |   |
|                                        | -      100 |   |   |   | 25,316 |   |   |   | 82 |   |   |   | 0.32 | % |   |   | 83,213 |   |   |   | 4,144 |   |   |   | 5.24 | % |
|                                        | -      200 |   |   | 25,084 |   |   | (150 | ) |   | -0.59 | % |   |   | 84,881 |   |   | 5,812 |   |   | 7.35 | % |
|                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2006                      |       |
|                                        |       |   |   | Net      Interest Income |   | Net      Portfolio Value |   |
| Projected      Interest                     |       |   | Estimated |   |   | $      Change |   |   | %      Change |   |   | Estimated |   |   | $      Change |   |   | %      Change |   |
| Rate      Scenario                          |       |   | Value |   |   | from      Base |   |   | from      Base |   |   | Value |   |   | from      Base |   |   | from      Base |   |
|                                        | +      200 |   |   |   | 23,940 |   |   |   | 2,415 |   |   |   | 11.22 | % |   |   | 68,230 |   |   |   | (2,290 | ) |   |   | -3.25 | % |
|                                        | +      100 |   |   |   | 22,750 |   |   |   | 1,225 |   |   |   | 5.69 | % |   |   | 69,491 |   |   |   | (1,029 | ) |   |   | -1.46 | % |
| BASE                                        |       |   |   | 21,525 |   |   |   |   |   |   |   |   |   |   |   | 70,520 |   |   |   |   |   |   |   |   |   |
|                                        | -      100 |   |   |   | 20,307 |   |   |   | (1,218 | ) |   |   | -5.66 | % |   |   | 71,533 |   |   |   | 1,013 |   |   |   | 1.44 | % |
|                                        | -      200 |   |   | 18,934 |   |   | (2,591 | ) |   |   | -12.04 | % |   |   | 71,359 |   |   | 839 |   |   | 1.19 | % |

----

|                                              | First                                                                                                                                       | Second                                                                                                                                      | Third                                                                                                                                       | Fourth                                                                                                                                      |
|---------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                              | Quarter                                                                                                                                     | Quarter                                                                                                                                     | Quarter                                                                                                                                     | Quarter                                                                                                                                     |
|                                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| 2007:                                             |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Interest      income                              |  $   11,564,608                                                                                                         |  $   12,994,015                                                                                                         |  $   13,298,154                                                                                                         |  $   14,005,379                                                                                                         |
| Interest      expense                             |         5,963,090                                                                                   |         7,093,024                                                                                   |         7,066,513                                                                                   |         7,644,683                                                                                   |
|    Net      interest income        |         5,601,518                                                                                   |         5,900,991                                                                                   |         6,231,641                                                                                   |         6,360,696                                                                                   |
| Provision      for loan losses                    |                        - |                        - |                        - |              75,000                                                        |
| Noninterest      income                           |            585,014                                                                   |            526,378                                                                   |            465,059                                                                   |            657,465                                                                   |
| Noninterest      expenses                         |         5,343,113                                                                                   |         5,553,020                                                                                   |         5,485,975                                                                                   |         5,656,728                                                                                   |
|    Income      before income taxes |            843,419                                                                   |            874,349                                                                   |         1,210,725                                                                                   |         1,286,433                                                                                   |
| Income      taxes                                 |            327,000                                                                   |            340,000                                                                   |            470,000                                                                   |            400,000                                                                   |
| Net      income                                   |  $        516,419                                                                              |  $        534,349                                                                              |  $        740,725                                                                              |  $        886,433                                                                              |
|                                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Net      income per common share:                 |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Basic                                             |  $              0.11                                             |  $              0.11                                             |  $              0.16                                             |  $              0.19                                             |
| Diluted                                           |                  0.11                                  |                  0.11                                  |                  0.16                                  |                  0.19                                  |
|                                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
|                                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| 2006:                                             |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Interest      income                              |  $     8,040,092                                                                                              |  $     9,152,592                                                                                              |  $     9,856,854                                                                                              |  $   10,959,988                                                                                                         |
| Interest      expense                             |         3,428,785                                                                                   |         4,185,462                                                                                   |         4,821,600                                                                                   |         5,633,801                                                                                   |
|    Net      interest income        |         4,611,307                                                                                   |         4,967,130                                                                                   |         5,035,254                                                                                   |         5,326,187                                                                                   |
| Provision      for loan losses                    |            572,800                                                                   |            350,700                                                                   |            116,500                                                                   |                        - |
| Noninterest      income                           |            630,265                                                                   |            581,329                                                                   |            632,563                                                                   |            514,992                                                                   |
| Noninterest      expenses                         |         4,038,829                                                                                   |         4,394,967                                                                                   |         4,490,679                                                                                   |         4,652,397                                                                                   |
|    Income      before income taxes |            629,943                                                                   |            802,792                                                                   |         1,060,638                                                                                   |         1,188,782                                                                                   |
| Income      taxes                                 |            231,000                                                                   |            295,000                                                                   |            390,000                                                                   |            351,000                                                                   |
| Net      income                                   |  $        398,943                                                                              |  $        507,792                                                                              |  $        670,638                                                                              |  $        837,782                                                                              |
|                                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Net      income per common share:                 |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Basic                                             |  $              0.12                                             |  $              0.16                                             |  $              0.20                                             |  $              0.19                                             |
| Diluted                                           |                  0.12                                  |                  0.16                                  |                  0.20                                  |                  0.18                                  |
|                                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |

----

| Item      9.     | Changes      in and Disagreements with Accountants on Accounting andFinancial Disclosure  |
|--------------------------------------|-----------------------------------------------------------------------------------------------------|
|                                 |                                                                                                |
|                                 | None.                                                                                               |
|                                 |                                                                                                |
| Item    9A.                     | Controls and      Procedures.                                                                  |

----

----

----

----

----

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

| Exhibit      No. | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 2                | Agreement      and Plan of Reorganization dated as of June 28, 1999 between Bancorp and      the Bank (incorporated by reference to Exhibit 2 to Bancorp’s Current      Report on Form 8-K dated December 1, 1999 (Commission File No.      000-29599)).                                                                                                                                                                                                                                   |
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 3(i)             | Certificate      of Incorporation of Bancorp, (incorporated by reference to Exhibit 3(i) to      Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission      File No. 000-29599)).                                                                                                                                                                                                                                                                                        |
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 3(i)(A)          | Certificate      of Amendment of Certificate of Incorporation of Patriot National Bancorp,      Inc. dated July 16, 2004 (incorporated by reference to Exhibit 3(i)(A) to      Bancorp's Annual Report on Form 10-KSB for the year ended December 31,      2004 (Commission File No. 000-29599)).                                                                                                                                                                                                |
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 3(i)(B)          | Certificate      of Amendment of Certificate of Incorporation of Patriot National Bancorp,      Inc. dated June 15, 2006 (incorporated by reference to Exhibit 3(i)(B) to      Bancorp's Quarterly Report on Form 10-Q for the quarter ended      September 30, 2006 (Commission File No.    000-29599)).                                                                                                                                                                              |
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 3(ii)            | Amended      and Restated By-laws of Bancorp (incorporated by reference to Exhibit 3.2      to Bancorp’s Current Report on Form 8-K dated December 26, 2007      (Commission File No. 1-32007)).                                                                                                                                                                                                                                                                                           |
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4                | Reference      is made to the Rights Agreement dated April 19, 2004 by and between      Patriot National Bancorp, Inc. and Registrar and Transfer Company filed as      Exhibit 99.2 to Bancorp’s Report on Form 8-K filed on April 19, 2004, and      the First Amendment to the Rights Agreement dated      January 23, 2008 files as Exhibit 4.1 to Bancorp’s Report on      form 8-K dated January 24, 2008 which are incorporated herein by      reference. |
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10(a)(1)         | 2001      Stock Appreciation Rights Plan of Bancorp (incorporated by reference to      Exhibit 10(a)(1) to Bancorp’s Annual Report on Form 10-KSB for the year      ended December 31, 2001 (Commission File No.      000-29599)).                                                                                                                                                                                                                                               |

----

| Exhibit      No. | Description                                                                                                                                                                                                                                                                                                                                                             |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(3)         | Employment      Agreement, dated as of October 23, 2000, as amended by a First Amendment,      dated as of March 21, 2001, among the Bank, Bancorp and Charles F.      Howell (incorporated by reference to Exhibit 10(a)(4) to Bancorp’s Annual      Report on Form 10-KSB for the year ended December 31, 2000 (Commission      File No. 000-29599)). |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(4)         | Change      of Control Agreement, dated as of January 1, 2007 among      Angelo De Caro, and Patriot National Bank and Bancorp      (incorporated by reference to Exhibit 10(a)(4) to Bancorp's Annual Report      on Form 10-K for the year ended December 31, 2006 (Commission File No.      000-29599)).                                         |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(5)         | Employment      Agreement dated as of January 1, 2008 among Patriot National Bank, Bancorp      and Robert F. O’Connell.                                                                                                                                                                                                                                          |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(6)         | Change      of Control Agreement, dated as of January 1, 2007 among      Robert F. O’Connell and Patriot National Bank and Bancorp      (incorporated by reference to Exhibit 10(a)(6) to Bancorp's Annual Report      on Form 10-K for the year ended December 31, 2006 (Commission File No.      000-29599)).                               |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(8)         | Employment      Agreement dated as of January 1, 2008 between Patriot National Bank and      Marcus Zavattaro.                                                                                                                                                                                                                                                          |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(9)         | License      agreement dated July 1, 2003 between Patriot National Bank and      L. Morris Glucksman (incorporated by reference to Exhibit 10(a)(9) to      Bancorp’s Annual Report on Form 10-KSB for the year ended December 31,      2003 (Commission File No. 000-29599)).                                                                     |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(10)        | Employment      Agreement dated as of January 1, 2007 among Patriot National      Bank, Bancorp and Charles F. Howell (incorporated by reference to Exhibit      10(a)(10) to Bancorp's Annual Report on Form 10-K for the year ended      December 31, 2006 (Commission File No. 000-29599)).                                                                |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(11)        | Change      of Control Agreement, dated as of January 1, 2007 among      Charles F. Howell, Patriot National Bank and Bancorp      (incorporated by reference to Exhibit 10(a)(11) to Bancorp's Annual Report      on Form 10-K for the year ended December 31, 2006 (Commission File No.      000-29599)).                                         |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(12)        | 2005      Director Stock Award Plan (incorporated by reference to Exhibit 10(a)(12)      to Bancorp’s Quarterly Report on Form 10-Q for the quarter ended      June 30, 2006 (Commission File No.  000-295999)).                                                                                                                                        |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(13)        | Change      of Control Agreement, dated as of January 1, 2007 between      Martin G. Noble and Patriot National Bank (incorporated by      reference to Exhibit 10(a)(13) to Bancorp's Annual Report on Form 10-K for      the year ended December 31, 2006 (Commission File No.      000-29599)).                                                  |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(a)(14)        | Change      of Control Agreement, dated as of January 1, 2007 among      Philip W. Wolford, Patriot National Bank and Bancorp      (incorporated by reference to Exhibit 10(a)(14) to Bancorp's Annual Report      on Form 10-K for the year ended December 31, 2006 (Commission File No.      000-29599)).                                         |
|             |                                                                                                                                                                                                                                                                                                                                                                    |
| 10(c)            | 1999      Stock Option Plan of the Bank (incorporated by reference to Exhibit 10(c)      to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission      File No. 000-29599)).                                                                                                                                                                    |

----

| Exhibit      No. | Description                                                                                                                                                                                                                  |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                                                         |
| 14               | Code      of Conduct for Senior Financial Officers (incorporated by reference to      Exhibit 14 to Bancorp’s Annual Report on Form 10-KSB for the year ended      December 31, 2004 (Commission File No. 000-29599)). |
|             |                                                                                                                                                                                                                         |
| 21               | Subsidiaries      of Bancorp (Incorporated by reference to Exhibit 21 to Bancorp’s Annual      Report on Form 10-KSB for the year ended December 31, 1999 (Commission      File No. 000-29599)).                       |
|             |                                                                                                                                                                                                                         |
| 23               | Consent      of McGladrey & Pullen, LLP.                                                                                                                                                                                 |
|             |                                                                                                                                                                                                                         |
| 31(1)            | Rule      13a-14(a)/15d-14(a) Certification of Chief Executive    Officer                                                                                                                                                    |
|             |                                                                                                                                                                                                                         |
| 31(2)            | Rule      13a-14(a)/15d-14(a) Certification of Chief Financial    Officer                                                                                                                                                    |
|             |                                                                                                                                                                                                                         |
| 32               | Section      1350 Certification                                                                                                                                                                                              |
|             |                                                                                                                                                                                                                         |

----

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

|    /s/  Angelo      De Caro                                           | March 14,      2008 |
|------------------------------------------------------------------------------------------------|---------------------|
| Angelo      De Caro, Chairman, Chief Executive                                                 | Date                |
| Officer      and Director                                                                      |                |
|                                                                                           |                |
|                                                                                           |                |
|   /s/   Robert F.      O’Connell                                | March 14,      2008 |
| Robert      F. O’Connell                                                                 | Date                |
| Senior      Executive Vice President,                                                          |                |
| Chief      Financial Officer and Director                                                      |                |
|                                                                                           |                |
|                                                                                           |                |
|   /s/   Michael A.      Capodanno       | March 14,      2008 |
| Michael      A. Capodanno                                                                      | Date                |
| Senior      Vice President & Controller                                                    |                |
|                                                                                           |                |
|                                                                                           |                |
|   /s/  John J.      Ferguson                                               | March 14,      2008 |
| John      J. Ferguson                                                                          | Date                |
| Director                                                                                       |                |
|                                                                                           |                |
|                                                                                           |                |
|   /s/  Brian      A. Fitzgerald                                            | March 14,      2008 |
| Brian      A. Fitzgerald                                                                       | Date                |
| Director                                                                                       |                |

----

| Form      10 K – Signatures continued                   |                |
|---------------------------------------------------------------|---------------------|
|                                                          |                |
|                                                          |                |
|                                                          |                |
|    /s/   John      A. Geoghegan | March 14,      2008 |
| John      A. Geoghegan                                        | Date                |
| Director                                                      |                |
|                                                          |                |
|                                                          |                |
|   /s/   L. Morris      Glucksman     | March 14,      2008 |
| L.      Morris Glucksman                                      | Date                |
| Director                                                      |                |
|                                                          |                |
|                                                          |                |
|   /s/   Charles F.      Howell       | March 14,      2008 |
| Charles      F. Howell                                        | Date                |
| Director                                                      |                |
|                                                          |                |
|                                                          |                |
|   /s/   Michael      F. Intrieri     | March 14,      2008 |
| Michael      F. Intrieri                                      | Date                |
| Director                                                      |                |
|                                                          |                |
|                                                          |                |
|                                                          |                |
|   /s/   Philip      W. Wolford       | March 14,      2008 |
| Philip      W. Wolford                                        | Date                |
| Director                                                      |                |

----

----

| REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 1           |
|--------------------------------------------------------------|-------------|
|                                                         |        |
|                                                         |        |
| CONSOLIDATED      FINANCIAL STATEMENTS                       |        |
| Consolidated      balance sheets                             | 2           |
| Consolidated      statements of income                       | 3           |
| Consolidated      statements of shareholders’ equity   | 4           |
| Consolidated      statements of cash flows                   | 5 -      6  |
| Notes      to consolidated financial statements              | 7 -      44 |

----

----

| PATRIOT      NATIONAL BANCORP, INC. AND SUBSIDIARY                                        |                                                                                                                                                                |                                                                                                                                                                |
|-------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| CONSOLIDATED      BALANCE SHEETS                                                          |                                                                                                                                                                |                                                                                                                                                                |
| December      31, 2007 and 2006                                                           |                                                                                                                                                                |                                                                                                                                                                |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
|                                                                                      | 2007                                                                                                                                                                | 2006                                                                                                                                                                |
| ASSETS                                                                                    |                                                                                                                                                                |                                                                                                                                                                |
| Cash      and due from banks (Note 2):                                                    |                                                                                                                                                                |                                                                                                                                                                |
| Noninterest      bearing deposits and cash                                                |  $           2,691,841                                                                                  |  $           3,865,468                                                                                  |
| Interest      bearing deposits                                                            |                   68,405                                                  |                     3,202                                       |
| Federal      funds sold                                                                   |             11,000,000                                                                                  |             27,000,000                                                                                  |
| Short-term      investments                                                               |                  251,668                                                       |             24,605,869                                                                                  |
| Cash      and cash equivalents                                                            |             14,011,914                                                                                  |             55,474,539                                                                                  |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| Available      for sale securities (at fair value) (Note 3)                               |             67,290,040                                                                                  |             67,093,135                                                                                  |
| Federal      Reserve Bank stock                                                           |               1,911,700                                                                       |               1,911,700                                                                       |
| Federal      Home Loan Bank stock (Note 8)                                                |               2,656,100                                                                       |               1,217,200                                                                       |
| Loans      receivable (net of allowance for loan losses:  2007      $5,672,620; |                                                                                                                                                                |                                                                                                                                                                |
|  2006      $5,630,432 (Notes 4 and 17)                                               |            685,885,990                                                                                       |            506,884,155                                                                                       |
| Accrued      interest and dividends receivable                                            |               4,576,018                                                                       |               3,542,173                                                                       |
| Premises      and equipment, net (Notes 5 and 9)                                          |               7,805,565                                                                       |               3,690,861                                                                       |
| Deferred      tax asset (Note 10)                                                         |               2,788,024                                                                       |               2,914,562                                                                       |
| Goodwill      and other intangible assets (Note 11)                                       |               1,469,075                                                                       |               1,487,651                                                                       |
| Cash      surrender value of life insurance (Note 12)                                     |             18,193,684                                                                                  |                            - |
| Other      assets (Notes 6 and 8)                                                         |                  942,144                                                       |               1,766,819                                                                       |
| Total      assets                                                                         |  $        807,530,254                                                                                                  |  $        645,982,795                                                                                                  |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| LIABILITIES      AND SHAREHOLDERS' EQUITY                                                 |                                                                                                                                                                |                                                                                                                                                                |
| Liabilities                                                                               |                                                                                                                                                                |                                                                                                                                                                |
| Deposits      (Notes 7 and 17):                                                           |                                                                                                                                                                |                                                                                                                                                                |
| Noninterest      bearing deposits                                                         |  $          51,925,991                                                                                       |  $          56,679,836                                                                                       |
| Interest      bearing deposits                                                            |            620,473,418                                                                                       |            504,771,828                                                                                       |
| Total      deposits                                                                       |            672,399,409                                                                                       |            561,451,664                                                                                       |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| Repurchase      agreements (Note 8)                                                       |               7,000,000                                                                       |                            - |
| Federal      Home Loan Bank borrowings (Note 8)                                           |             47,500,000                                                                                  |               8,000,000                                                                       |
| Junior      subordinated debt owed to unconsolidated trust (Note 8)                       |               8,248,000                                                                       |               8,248,000                                                                       |
| Accrued      expenses and other liabilities                                               |               5,547,478                                                                       |               3,999,786                                                                       |
| Total      liabilities                                                                    |            740,694,887                                                                                       |            581,699,450                                                                                       |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| Commitments      and Contingencies (Notes 8, 9 and 15)                                    |                                                                                                                                                                |                                                                                                                                                                |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| Shareholders'      equity (Notes 13 and 16)                                               |                                                                                                                                                                |                                                                                                                                                                |
| Preferred      stock, no par value; 1,000,000 shares authorized,                          |                                                                                                                                                                |                                                                                                                                                                |
| no      shares issued                                                                     |                            - |                            - |
| Common      stock, $2 par value: 60,000,000 shares authorized; shares                     |                                                                                                                                                                |                                                                                                                                                                |
| issued      and outstanding:  2007 4,746,844; 20064,739,494;                    |               9,493,688                                                                       |               9,478,988                                                                       |
| Additional      paid-in capital                                                           |             49,549,119                                                                                  |             49,463,307                                                                                  |
| Retained      earnings                                                                    |               7,846,060                                                                       |               6,022,012                                                                       |
| Accumulated      other comprehensive loss - net unrealized loss                           |                                                                                                                                                                |                                                                                                                                                                |
| on      available for sale securities, net of taxes                                       |                  (53,500)                                                      |                 (680,962)                                                           |
| Total      shareholders' equity                                                           |             66,835,367                                                                                  |             64,283,345                                                                                  |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| Total      liabilities and shareholders' equity                                           |  $        807,530,254                                                                                                  |  $        645,982,795                                                                                                  |
|                                                                                      |                                                                                                                                                                |                                                                                                                                                                |
| See      Notes to Consolidated Financial Statements.                                      |                                                                                                                                                                |                                                                                                                                                                |

----

| PATRIOT      NATIONAL BANCORP, INC. AND SUBSIDIARY       |                                                                                      |                                                                                                                            |                                                                                                                            |
|----------------------------------------------------------|-------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| CONSOLIDATED      STATEMENTS OF INCOME                   |                                                                                      |                                                                                                                            |                                                                                                                            |
| Years      Ended December 31, 2007, 2006 and 2005        |                                                                                      |                                                                                                                            |                                                                                                                            |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
|                                                     | 2007                                                                                      | 2006                                                                                                                            | 2005                                                                                                                            |
| Interest      and Dividend Income                        |                                                                                      |                                                                                                                            |                                                                                                                            |
| Interest      and fees on loans                          |  $    46,948,772                                                 |  $    34,052,444                                                                                       |  $    21,561,121                                                                                       |
| Interest      on investment securities                   |         2,153,886                                 |         2,541,678                                                                       |         2,750,205                                                                       |
| Dividends      on investment securities                  |         1,667,587                                 |            815,014                                                       |            510,657                                                       |
| Interest      on Federal funds sold                      |         1,079,233                                 |            582,952                                                       |            315,942                                                       |
| Other      interest income                               |              12,679      |              17,438                                            |              10,776                                            |
| Total      interest and dividend income                  |        51,862,157                                      |        38,009,526                                                                            |        25,148,701                                                                            |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Interest      Expense                                    |                                                                                      |                                                                                                                            |                                                                                                                            |
| Interest      on deposits (Note 7)                       |        26,524,400                                      |        16,151,297                                                                            |         9,366,563                                                                       |
| Interest      on Federal Home Loan Bank borrowings       |            511,027                 |         1,240,582                                                                       |            374,315                                                       |
| Interest      on subordinated debt                       |            690,696                 |            672,971                                                       |            527,435                                                       |
| Interest      on other borrowings                        |              41,187      |               4,798                                       |               1,312                                       |
| Total      interest expense                              |        27,767,310                                      |        18,069,648                                                                            |        10,269,625                                                                            |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Net      interest income                                 |        24,094,847                                      |        19,939,878                                                                            |        14,879,076                                                                            |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Provision      for Loan Losses (Note 4)                  |              75,000      |         1,040,000                                                                       |         1,110,000                                                                       |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Net      interest income after provision for loan losses |        24,019,847                                      |        18,899,878                                                                            |        13,769,076                                                                            |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Noninterest      Income                                  |                                                                                      |                                                                                                                            |                                                                                                                            |
| Mortgage      brokerage referral fees                    |            736,195                 |         1,240,545                                                                       |         2,104,065                                                                       |
| Loan      application, inspection and processing fees    |            212,896                 |            300,907                                                       |            402,723                                                       |
| Fees      and service charges                            |            839,311                 |            644,845                                                       |            561,651                                                       |
| Gain      on redemption of investment securities         |               5,000 |                      - |                      - |
| Other      income                                        |            440,513                 |            172,852                                                       |            160,598                                                       |
| Total      noninterest income                            |         2,233,915                                 |         2,359,149                                                                       |         3,229,037                                                                       |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Noninterest      Expenses                                |                                                                                      |                                                                                                                            |                                                                                                                            |
| Salaries      and benefits (Notes 9 and 14)              |        11,851,598                                      |        10,436,127                                                                            |         8,997,255                                                                       |
| Occupancy      and equipment expense, net                |         4,457,770                                 |         2,797,089                                                                       |         2,082,593                                                                       |
| Data      processing and other outside services          |         1,809,795                                 |         1,322,423                                                                       |         1,147,378                                                                       |
| Advertising      and promotional expenses                |            713,246                 |            703,007                                                       |            420,222                                                       |
| Professional      services                               |            704,771                 |            531,611                                                       |            419,921                                                       |
| Loan      administration and processing expenses         |            195,408                 |            163,930                                                       |            190,139                                                       |
| Regulatory      assessments                              |            582,897                 |            184,732                                                       |            155,998                                                       |
| Other      real estate operations (Note 6)               |           (152,009)                     |             (19,715)                                                |                      - |
| Other      operating expenses                            |         1,875,360                                 |         1,457,668                                                                       |         1,220,981                                                                       |
| Total      noninterest expenses                          |        22,038,836                                      |        17,576,872                                                                            |        14,634,487                                                                            |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Income      before income taxes                          |         4,214,926                                 |         3,682,155                                                                       |         2,363,626                                                                       |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Provision      for Income Taxes (Note 10)                |         1,537,000                                 |         1,267,000                                                                       |            957,000                                                       |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Net      income                                          |  $   2,677,926                                                        |  $    2,415,155                                                                                        |  $   1,406,626                                                                                              |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Basic      income per share (Note 13)                    |  $             0.56 |  $            0.67                                             |  $            0.52                                             |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Diluted      income per share (Note 13)                  |  $             0.56 |  $            0.66                                             |  $            0.51                                             |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| Dividends      per share                                 |  $           0.180            |  $           0.175                                                  |  $          0.155                                                        |
|                                                     |                                                                                      |                                                                                                                            |                                                                                                                            |
| See      Notes to Consolidated Financial Statements.     |                                                                                      |                                                                                                                            |                                                                                                                            |

----

| PATRIOT      NATIONAL BANCORP, INC. AND SUBSIDIARY   |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |
|------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| CONSOLIDATED      STATEMENTS OF SHAREHOLDERS' EQUITY |                                                                                                    |                                                                                                          |                                                                                                                |
| Years      Ended December 31, 2007, 2006 and 2005    |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |
|                                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                | Accumulated |   |
|                                                 |                                                                                                    |                                                                                                          | Additional                                                                                                          |                                                                                                                | Other |   |
|                                                 |  Number      of                                                                                    | Common                                                                                                        | Paid-in                                                                                                             | Retained                                                                                                            | Comprehensive |   |
|                                                 |  Shares                                                                                            | Stock                                                                                                         | Capital                                                                                                             | Earnings                                                                                                            | Loss | Total |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Balance      at December 31, 2004                    |     2,486,391                                                                       |  $  4,972,782                                                                                  |  $  11,830,173                                                                                       |  $    3,346,718                                                                            |  $      (393,239) |  $   19,756,434 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Comprehensive      income                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Net      income                                      |                  - |                   - |                    - |        1,406,626                                                                 |                    - |         1,406,626 |
| Unrealized      holding loss on available for        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |
| sale      securities, net of taxes (Note 18)         |                  - |                   - |                    - |                    - |         (710,910) |          (710,910) |
| Total      comprehensive income                      |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |           695,716 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Dividends      ($0.155 per share)                    |                  - |                   - |                    - |         (445,102)                                                           |                    - |          (445,102) |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Issuance      of capital stock (Note 13)             |        744,258                                                       |      1,488,516                                                                       |       9,879,051                                                                       |                    - |                    - |       11,367,567 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Balance      at December 31, 2005                    |     3,230,649                                                                       |      6,461,298                                                                       |      21,709,224                                                                            |        4,308,242                                                                 |       (1,104,149) |       31,374,615 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Comprehensive      income                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Net      income                                      |                  - |                   - |                    - |        2,415,155                                                                 |                    - |         2,415,155 |
| Unrealized      holding gain on available for        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |
| sale      securities, net of taxes (Note 18)         |                  - |                   - |                    - |                    - |          423,187 |           423,187 |
| Total      comprehensive income                      |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |         2,838,342 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Dividends      ($0.175 per share)                    |                  - |                   - |                    - |         (701,385)                                                           |                    - |          (701,385) |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Issuance      of capital stock (Note 13)             |     1,508,845                                                                       |      3,017,690                                                                       |      27,754,083                                                                            |                    - |                    - |       30,771,773 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Balance      at December 31, 2006                    |     4,739,494                                                                       |      9,478,988                                                                       |      49,463,307                                                                            |        6,022,012                                                                 |         (680,962) |       64,283,345 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Comprehensive      income                            |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Net      income                                      |                  - |                   - |                    - |        2,677,926                                                                 |                    - |         2,677,926 |
| Unrealized      holding gain on available for        |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |
| sale      securities, net of taxes (Note 18)         |                  - |                   - |                    - |                    - |          627,462 |           627,462 |
| Total      comprehensive income                      |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |         3,305,388 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Dividends      ($0.180 per share)                    |                  - |                   - |                    - |         (853,878)                                                           |                    - |          (853,878) |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Issuance      of capital stock (Note 13)             |           7,350                                       |          14,700                                                  |            85,812                                            |                    - |                    - |           100,512 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| Balance,      December 31, 2007                      |     4,746,844                                                                       |  $  9,493,688                                                                                  |  $  49,549,119                                                                                       |  $    7,846,060                                                                            |  $       (53,500) |  $   66,835,367 |
|                                                 |                                                                                                    |                                                                                                          |                                                                                                                |                                                                                                                |   |   |
| See      Notes to Consolidated Financial Statements. |                                                                                                    |                                                                                                          |                                                                                                                |

----

| PATRIOT      NATIONAL BANCORP, INC. AND SUBSIDIARY                             |                                                                                                                            |                                                                                                                            |                                                                                                                            |
|--------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| CONSOLIDATED      STATEMENTS OF CASH FLOWS                                     |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Years      Ended December 31, 2007, 2006 and 2005                              |                                                                                                                            |                                                                                                                            |                                                                                                                            |
|                                                                           | 2007                                                                                                                            | 2006                                                                                                                            | 2005                                                                                                                            |
|                                                                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Cash      Flows from Operating Activities                                      |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Net      income                                                                |  $      2,677,926                                                                            |  $      2,415,155                                                                            |  $      1,406,626                                                                            |
| Adjustments      to reconcile net income to net cash provided by               |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| operating      activities:                                                     |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Amortization      and accretion of investment premiums and discounts, net      |            181,727                                                       |            231,541                                                       |            394,827                                                       |
| Amortization      and accretion of purchase loan premiums and discounts, net   |              96,738                                            |              74,948                                            |              72,365                                            |
| Amortization      of core deposit intangible                                   |              18,576                                            |                2,440                                 |                      - |
| Provision      for loan losses                                                 |              75,000                                            |          1,040,000                                                                 |          1,110,000                                                                 |
| Gain      on sale of other real estate owned                                   |             (86,473)                                                |                      - |                      - |
| Gain      on redemption of investment security                                 |               (5,000)                                     |                      - |                      - |
| Depreciation      and amortization of premises and equipment                   |          1,211,775                                                                 |            644,472                                                       |            604,399                                                       |
| Payment      of fees to directors in common stock                              |              49,961                                            |              24,928                                            |              26,250                                            |
| Earnings      on cash surrender value of life insurance                        |           (193,684)                                                           |                      - |                      - |
| Loss      on disposal of bank premises and equipment                           |                3,035                                 |                5,262                                 |                      - |
| Deferred      income taxes                                                     |           (258,035)                                                           |           (498,342)                                                           |           (562,833)                                                           |
| Change      in assets and liabilities:                                         |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Increase      in deferred loan fees                                            |            165,288                                                       |            531,050                                                       |              17,048                                            |
| Increase      in accrued interest and dividends receivable                     |         (1,033,845)                                                                     |         (1,096,756)                                                                     |           (687,078)                                                           |
| Increase      in other assets                                                  |               (9,667)                                     |             (19,022)                                                |           (128,667)                                                           |
| Increase      in accrued expenses and other liabilities                        |          1,547,361                                                                 |            972,477                                                       |            863,861                                                       |
| Net      cash provided by operating activities                                 |          4,440,683                                                                 |          4,328,153                                                                 |          3,116,798                                                                 |
|                                                                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Cash      Flows from Investing Activities                                      |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Purchases      of available for sale securities                                |       (14,947,542)                                                                                |         (2,050,000)                                                                     |       (28,208,359)                                                                                |
| Proceeds      from redemptions of available for sale securities                |          3,005,000                                                                 |                      - |                      - |
| Proceeds      from maturities and calls of available for sale securities       |                      - |          1,000,000                                                                 |          3,000,000                                                                 |
| Principal      repayments on available for sale securities                     |        12,580,945                                                                            |        13,079,953                                                                            |        21,264,308                                                                            |
| Cash      received in conjunction with branch acquisition                      |                      - |          2,586,471                                                                 |                      - |
| Purchase      of Federal Reserve Bank stock                                    |                      - |           (889,400)                                                           |           (329,700)                                                           |
| Purchase      of Federal Home Loan Bank stock                                  |         (1,438,900)                                                                     |         (1,430,500)                                                                     |                      - |
| Proceeds      from repurchase of excess stock by the Federal Home Loan    Bank |                      - |          1,510,000                                                                 |                      - |
| Net      increase in loans                                                     |     (179,338,861)                                                                                           |     (145,120,717)                                                                                           |     (101,568,370)                                                                                           |
| Capital      improvements to other real estate owned                           |           (156,700)                                                           |                      - |                      - |
| Proceeds      from sale of other real estate owned                             |          1,077,515                                                                 |                      - |                      - |
| Purchase      of life insurance                                                |       (18,000,000)                                                                                |                      - |                      - |
| Purchases      of premises and equipment                                       |         (5,329,514)                                                                     |         (1,866,442)                                                                     |           (945,919)                                                           |
| Net      cash used in investing activities                                     |     (202,548,057)                                                                                           |     (133,180,635)                                                                                           |     (106,788,040)                                                                                           |
|                                                                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Cash      Flows from Financing Activities                                      |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Net      (decrease) increase in demand, savings and money market      deposits |         (9,960,503)                                                                     |         (3,663,822)                                                                     |       (11,884,273)                                                                                |
| Net      increase in time certificates of deposit                              |      120,908,248                                                                                       |      142,893,727                                                                                       |        63,954,236                                                                            |
| Proceeds      from FHLB borrowings                                             |      289,471,000                                                                                       |        93,718,000                                                                            |        46,001,000                                                                            |
| Principal      repayments of FHLB borrowings                                   |     (249,971,000)                                                                                           |       (94,718,000)                                                                                |       (45,001,000)                                                                                |
| Increase      in borrowings under repurchase agreements                        |          7,000,000                                                                 |                      - |                      - |
| Proceeds      from issuance of common stock                                    |              50,551                                            |        30,746,845                                                                            |        11,341,317                                                                            |
| Dividends      paid on common stock                                            |           (853,547)                                                           |           (617,334)                                                           |           (402,899)                                                           |
| Net      cash provided by financing activities                                 |      156,644,749                                                                                       |      168,359,416                                                                                       |        64,008,381                                                                            |
|                                                                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Net      increase (decrease) in cash and cash equivalents                      |       (41,462,625)                                                                                |        39,506,934                                                                            |       (39,662,861)                                                                                |
|                                                                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Cash      and cash equivalents                                                 |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Beginning                                                                      |        55,474,539                                                                            |        15,967,605                                                                            |        55,630,466                                                                            |
|                                                                           |                                                                                                                            |                                                                                                                            |                                                                                                                            |
| Ending                                                                         |  $    14,011,914                                                                                       |  $    55,474,539                                                                                       |  $    15,967,605                                                                                       |

----

| PATRIOT      NATIONAL BANCORP, INC. AND SUBSIDIARY                                                 |                                                                                                                            |                                                                 |                                                                                                                            |
|----------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| CONSOLIDATED      STATEMENTS OF CASH FLOWS, Continued                                              |                                                                                                                            |                                                                 |                                                                                                                            |
| Years      Ended December 31, 2007, 2006 and 2005                                                  |                                                                                                                            |                                                                 |                                                                                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
|                                                                                               | 2007                                                                                                                            | 2006                                                                 | 2005                                                                                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| Supplemental      Disclosures of Cash Flow Information                                             |                                                                                                                            |                                                                 |                                                                                                                            |
| Cash      paid for:                                                                                |                                                                                                                            |                                                                 |                                                                                                                            |
| Interest                                                                                           |  $    27,654,868                                                                                       |  $    17,932,039                            |  $    10,265,152                                                                                       |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| Income      taxes                                                                                  |  $      1,607,055                                                                            |  $      1,914,020                 |  $      1,234,761                                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| Supplemental      Disclosure of Noncash Investing and Financing                                    |                                                                                                                            |                                                                 |                                                                                                                            |
| Activities                                                                                         |                                                                                                                            |                                                                 |                                                                                                                            |
| Unrealized      holding gains (losses) on available for sale securities                            |                                                                                                                            |                                                                 |                                                                                                                            |
| arising      during the period                                                                     |  $      1,012,035                                                                            |  $         682,562 |  $     (1,146,631)                                                                                |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| Accrued      dividends declared on common stock                                                    |  $         213,608                                                            |  $         213,277 |  $         129,226                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| Transfer      of loan to other real estate owned                                                   | $                   -            |  $         834,341 |  $                   -      |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| Details      of branch acquisition:                                                                |                                                                                                                            |                                                                 |                                                                                                                            |
|           Fair      value of assets acquired     |  $                   -      |  $         560,000 |                      - |
|           Fair      value of liabilities assumed |                      - |         (3,146,471)          |                      - |
|          Net      cash received                       |  $                   -      |  $     (2,586,471)                     |  $                   -      |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
|                                                                                               |                                                                                                                            |                                                                 |                                                                                                                            |
| See      Notes to Consolidated Financial Statements.                                               |                                                                                                                            |                                                                 |                                                                                                                            |

----

----

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

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

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

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

|   | 2007                                                   | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | FairValue                       |
|--------|--------------------------------------------------------|---------------|----------------------|-----------------------|---------------------------------|
|   |                                                   |          |                 |                  |                            |   |   |   |   |
|   | U.S.      Government sponsored agency      obligations | $             | 17,000,000           | $                     | -      | $ | (75,352) | $ | 16,924,648 |
|   | Mortgage-backed      securities                        |          | 41,336,808           |                  | 177,547                         |   | (188,485) |   | 41,325,870 |
|   |                                                   |          | 58,336,808           |                  | 177,547                         |   | (263,837) |   | 58,250,518 |
|   | Money      market preferred equity      securities     |          | 9,039,522            |                  | -      |   | -      |   | 9,039,522 |
|   |                                                   | $             | 67,376,330           | $                     | 177,547                         | $ | (263,837) | $ | 67,290,040 |

|   | 2006                                                   | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | FairValue                       |
|--------|--------------------------------------------------------|---------------|----------------------|-----------------------|---------------------------------|
|   |                                                   |          |                 |                  |                            |   |   |   |   |
|   | U.S.      Government sponsored agency      obligations | $             | 16,999,984           | $                     | -      | $ | (433,162) | $ | 16,566,822 |
|   | Mortgage-backed      securities                        |          | 44,141,476           |                  | 32,805                          |   | (697,968) |   | 43,476,313 |
|   |                                                   |          | 61,141,460           |                  | 32,805                          |   | (1,131,130) |   | 60,043,135 |
|   | Money      market preferred equity      securities     |          | 7,050,000            |                  | -      |   | -      |   | 7,050,000 |
|   |                                                   | $             | 68,191,460           | $                     | 32,805                          | $ | (1,131,130) | $ | 67,093,135 |

----

----

|   | 2007   | Less      Than 12 Months |           | 12      Months or More |      | Total          |
|--------|--------|--------------------------|----------------|------------------------|-----------|----------------|
|   |   | FairValue                | UnrealizedLoss |                   | FairValue | UnrealizedLoss |   | FairValue | UnrealizedLoss |

|   | U.S.      Government sponsored  |   |      |   |   |   |   |       |   |      |   |   |       |
|--------|---------------------------------|--------|-----------|--------|--------|--------|--------|------------|--------|-----------|--------|--------|------------|
|   | agency      obligations         | $      | 1,999,375 |   | (625)  |   | $      | 13,925,273 | $      | (74,727)  |   | $      | 15,924,648 | $ | (75,352) |
|   | Mortgage-backed      securities |   | -         |   | -      |   |   | 14,916,970 |   | (188,485) |   |   | 14,916,970 |   | (188,485) |
|   | Totals                          | $      | 1,999,375 | $      | (625)  |   | $      | 28,842,243 | $      | (263,212) |   | $      | 30,841,618 | $ | (263,837) |

|   | 2006   | Less      Than 12 Months |           | 12      Months or More |      | Total          |
|--------|--------|--------------------------|----------------|------------------------|-----------|----------------|
|   |   | FairValue                | UnrealizedLoss |                   | FairValue | UnrealizedLoss |   | FairValue | UnrealizedLoss |

|   | U.S.      Government sponsored  |   |      |   |    |   |   |       |   |        |   |   |       |   |
|--------|---------------------------------|--------|-----------|--------|---------|--------|--------|------------|--------|-------------|--------|--------|------------|--------|
|   | agency      obligations         | $      | -         | $      | -       |   | $      | 16,566,822 | $      | (433,162)   |   | $      | 16,566,822 | $      | (433,162) |
|   | Mortgage-backed      securities |   | 1,117,429 |   | (2,423) |   |   | 35,262,041 |   | (695,545)   |   |   | 36,379,470 |   | (697,968) |
|   | Totals                          | $      | 1,117,429 | $      | (2,423) |   | $      | 51,828,863 | $      | (1,128,707) |   | $      | 52,946,292 | $      | (1,131,130) |

----

----

|   |                            |   | Amortized  |   | Fair       |
|--------|---------------------------------|--------|------------|--------|------------|
|   |                            |   | Cost       |   | Value      |
|   | Maturity:                       |   |       |   |       |
|   | 1-5      years                  | $      | 17,000,000 | $      | 16,924,648 |
|   | Mortgage-backed      securities |   | 41,336,808 |   | 41,325,870 |
|   | Total                           | $      | 58,336,808 | $      | 58,250,518 |

| Note      4. | Loans      Receivable and Allowance for LoanLosses |
|--------------|----------------------------------------------------|

|   |                             |   | 2007        |   | 2006        |
|--------|----------------------------------|--------|-------------|--------|-------------|
|   |                             |   |        |   |        |
|   | Real      estate:                |   |        |   |        |
|   | Commercial                       | $      | 233,121,685 | $      | 166,799,341 |
|   | Residential                      |   | 110,154,838 |   | 91,077,687  |
|   | Construction                     |   | 254,296,326 |   | 173,840,322 |
|   | Construction      to permanent   |   | 37,701,509  |   | 29,988,131  |
|   | Commercial                       |   | 27,494,531  |   | 23,997,640  |
|   | Consumer      installment        |   | 1,270,360   |   | 1,251,300   |
|   | Consumer      home equity        |   | 29,154,498  |   | 26,933,277  |
|   | Total      loans                 |   | 693,193,747 |   | 513,887,698 |
|   |                             |   |        |   |        |
|   | Premiums      on purchased loans |   | 195,805     |   | 292,543     |
|   | Net      deferred loan fees      |   | (1,830,942) |   | (1,665,654) |
|   | Allowance      for loan losses   |   | (5,672,620) |   | (5,630,432) |
|   | Loans      receivable, net       | $      | 685,885,990 | $      | 506,884,155 |

----

----

|   |                            |   | 2007                            |   | 2006      |   | 2005                            |
|--------|---------------------------------|--------|---------------------------------|--------|-----------|--------|---------------------------------|
|   |                            |   |                            |   |      |   |                            |
|   | Balance,      beginning of year | $      | 5,630,432                       | $      | 4,588,335 | $      | 3,481,525                       |
|   | Provision      for loan losses  |   | 75,000                          |   | 1,040,000 |   | 1,110,000                       |
|   | Recoveries      of loans        |   |                            |   |      |   |                            |
|   | previously      charged-off     |   | -      |   | 3,190     |   | -      |
|   | Loans      charged-off          |   | (32,812)                        |   | (1,093)   |   | (3,190)                         |
|   | Balance,      end of year       | $      | 5,672,620                       | $      | 5,630,432 | $      | 4,588,335                       |

|   |                                                                                          |   | 2007      |   | 2006      |
|--------|-----------------------------------------------------------------------------------------------|--------|-----------|--------|-----------|
|   |                                                                                          |   |      |   |      |
|   | Impaired      loans receivable for which there is a related allowance for      credit losses  | $      | 1,332,359 | $      | 1,422,359 |
|   |                                                                                          |   |      |   |      |
|   | Impaired      loans receivable for which there is no related allowance      for credit losses | $      | 2,499,281 | $      | 1,481,656 |
|   |                                                                                          |   |      |   |      |
|   | Allowance      for credit losses related to impaired loans                                    | $      | 250,000   | $      | 250,000   |
|   |                                                                                          |   |      |   |      |
|   | Average      recorded investment in impaired loans                                            | $      | 3,149,223 | $      | 4,394,509 |

----

----

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

|   |                                                |   | 2007        |   | 2006        |
|--------|-----------------------------------------------------|--------|-------------|--------|-------------|
|   |                                                |   |        |   |        |
|   | Construction      in progress                       | $      | 9,750       | $      | 803,149     |
|   | Leasehold      improvements                         |   | 6,951,026   |   | 2,676,805   |
|   | Furniture,      equipment and software              |   | 5,115,177   |   | 3,408,419   |
|   |                                                |   | 12,075,953  |   | 6,888,373   |
|   | Less      accumulated depreciation and amortization |   | (4,270,388) |   | (3,197,512) |
|   |                                                | $      | 7,805,565   | $      | 3,690,861   |

----

----

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

|                                             |   | 2007     |   | 2006                            |
|--------------------------------------------------|--------|----------|--------|---------------------------------|
| Gain      on sale of other real estate           | $      | 86,473   | $      | -      |
| Rental      income from other real estate owned  |   | 91,931   |   | 20,458                          |
| Expenses      of holding other real estate owned |   | (26,395) |   | (743)                           |
| Income      from other real estate operations    | $      | 152,009  | $      | 19,715                          |

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

|   |                                       |   | 2007        |   | 2006        |
|--------|--------------------------------------------|--------|-------------|--------|-------------|
|   |                                       |   |        |   |        |
|   | Noninterest      bearing                   | $      | 51,925,991  | $      | 56,679,836  |
|   | Interest      bearing:                     |   |        |   |        |
|   | Time      certificates, less than $100,000 |   | 300,502,281 |   | 248,414,014 |
|   | Time      certificates, $100,000 or more   |   | 231,366,788 |   | 162,546,807 |
|   | Money      market                          |   | 34,880,837  |   | 40,935,628  |
|   | Savings                                    |   | 34,261,389  |   | 25,993,452  |
|   | NOW                                        |   | 19,462,123  |   | 26,881,927  |
|   | Total      interest bearing                |   | 620,473,418 |   | 504,771,828 |
|   | Total      deposits                        | $      | 672,399,409 | $      | 561,451,664 |

----

----

|   | Due      within: |   |        |   |
|--------|------------------|--------|-------------|--------|
|   | 1      year      | $      | 482,284,060 |   |
|   | 1-2      years   |   | 27,672,918  |   |
|   | 2-3      years   |   | 17,230,584  |   |
|   | 3-4      years   |   | 2,898,863   |   |
|   | 4-5      years   |   | 1,782,644   |   |
|   |             | $      | 531,869,069 |   |

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

----

----

----

----

|   |                  |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                    |
|--------|-----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                  | Fixed                                                                                                                                                   | Floating                                                                                                                                                |                                                                                                                                                    |
|   |                  | Rate                                                                                                                                                    | Rate                                                                                                                                                    | Total                                                                                                                                                   |
|   |                  |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                    |
|   | 2008                  |  $  37,500,000                                                                                                                           |  $                      -            |  $  37,500,000                                                                                                                           |
|   | 2009                  |                          - |                          - |                          - |
|   | 2010                  |                          - |                          - |                          - |
|   | 2011                  |                          - |                          - |                          - |
|   | 2012                  |       10,000,000                                                                                                          |                          - |       10,000,000                                                                                                          |
|   | Thereafter            |         7,000,000                                                                                               |         8,248,000                                                                                               |       15,248,000                                                                                                          |
|   | Total      borrowings |  $  54,500,000                                                                                                                           |  $     8,248,000                                                                                                          |  $  62,748,000                                                                                                                           |

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

----

----

|   | Years      EndingDecember      31, |   |   | Amount     |   |
|--------|------------------------------------|--------|--------|------------|--------|
|   |                               |   |   |       |   |
|   | 2008                               |   | $      | 2,542,869  |   |
|   | 2009                               |   |   | 2,507,012  |   |
|   | 2010                               |   |   | 2,513,281  |   |
|   | 2011                               |   |   | 2,370,766  |   |
|   | 2012                               |   |   | 2,026,281  |   |
|   | Thereafter                         |   |   | 6,712,041  |   |
|   |                               |   | $      | 18,672,250 |   |

----

----

----

----

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

|     |    |                                                | 2007                                                           | 2006                                                           | 2005                                                    |
|----------|---------|-----------------------------------------------------|----------------------------------------------------------------|----------------------------------------------------------------|---------------------------------------------------------|
|     |    |                                                |                                                           |                                                           |                                                    |
| Current  |    |                                                |                                                           |                                                           |
|     | Federal |  $   1,335,303                  |  $   1,408,384                             |  $   1,211,403                             |
|     | State   |                                                |         459,732        |         356,958        |         308,430 |
|     |    | Total                                               |      1,795,035                        |      1,765,342                        |      1,519,833                 |
|     |    |                                                |                                                           |                                                           |                                                    |
| Deferred |    |                                                |                                                           |                                                           |
|     | Federal |        (208,350) |        (402,384)            |        (454,457)            |
|     | State   |                                                |          (49,685) |          (95,958) |        (108,376)     |
|     |    | Total                                               |        (258,035)            |        (498,342)            |        (562,833)     |
|     |    |                                                |                                                           |                                                           |                                                    |
|     |    | Provision      for income taxes                     |  $   1,537,000                             |  $   1,267,000                             |  $     957,000            |

|                                              |                                                               |                                                                                                                | 2007                                                                                                                | 2006                                                                                                                | 2005                                         |
|---------------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|----------------------------------------------|
|                                              |                                                               |                                                                                                                |                                                                                                                |                                                                                                                |                                         |
| Provision      for income taxes at                |                                                               |                                                                                                                |                                                                                                                |
|                                              | statutory      Federal rate                                        |  $   1,433,100                                                                                  |  $   1,251,900                                                                                  |  $     803,600                                                                        |
| State      taxes, net of Federal benefit          |         231,800            |         200,100                                                             |         117,000                                                             |
| Dividends      received deduction                 |        (122,600)                |          (77,500)                                                      |          (68,500)                                                      |
| Nondeductible      expenses                       |           56,300 |           56,300                                                  |           38,600                                                  |
| Amortization      of goodwill                     |          (11,100)     |                    - |                    - |
| Change      in cash surrender value               |                                                               |                                                                                                                |                                                                                                                |
|                                              | of      life insurance                                             |          (77,400)                                                      |                    - |                    - |
| Over      (under) accrual of income tax provision |           21,880 |        (159,489)                                                                 |           86,800                                                  |
| Other                                             |                                                               |             5,020                                       |            (4,311)                                           |          (20,500)                                                      |
|                                              |                                                               | Total      provision for income taxes                                                                               |  $   1,537,000                                                                                  |  $   1,267,000                                                                                  |  $     957,000 |

----

----

|                          |                           |                                                               |                                                                          |                                                                                                                |                               |
|-------------------------------|--------------------------------|--------------------------------------------------------------------|-------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|------------------------------------|
|                          |                           |                                                               |                                                                          | 2007                                                                                                                | 2006                               |
|                          |                           |                                                               |                                                                          |                                                                                                                |                               |
| Deferred      tax assets:     |                           |                                                               |
|                          | Allowance      for loan losses |  $   2,209,485                                 |  $   2,193,055                                            |
|                          | Nonaccrual      interest       |           77,222 |           55,015            |
|                          | Investment      securities     |           32,790 |         417,363                       |
|                          | Premises      and equipment    |         391,724            |         302,847                       |
|                          | Accrued      expenses          |         124,239            |           28,382            |
|                          | Other                          |                                                               |             4,956 |                    - |
|                          |                           | Gross      deferred tax assets                                     |      2,840,416                                       |      2,996,662                                                                             |
|                          |                           |                                                               |                                                                          |                                                                                                                |                               |
| Deferred      tax liabilities |                           |                                                               |
|                          | Tax      bad debt recapture    |           49,580 |           63,746            |
|                          | Other                          |                                                               |             2,812 |           18,354                                                  |
|                          |                           | Gross      deferred tax liabilities                                |           52,392            |           82,100                                                  |
|                          |                           |                                                               |                                                                          |                                                                                                                |                               |
|                          |                           |                                                               | Deferred      tax asset, net                                                  |  $   2,788,024                                                                                  |  $   2,914,562 |

|                                                          |                                                |                                                |                                                | 2007                                     | 2006                                     | 2005   |
|---------------------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|------------------------------------------|------------------------------------------|--------|
|                                                          |                                                |                                                |                                                |                                     |                                     |   |
| Deferred      tax provision (benefit) allocated to equity     |  $     384,573        |  $     259,375        |  $    (435,721)            |
|                                                          |                                                |                                                |                                                |                                     |                                     |   |
| Deferred      tax provision (benefit) allocated to operations |        (258,035) |        (498,342) |        (562,833) |
|                                                          |                                                |                                                |                                                |                                     |                                     |   |
|                                                          |                                                | Total      deferred tax benefit                     |  $     126,538        |  $    (238,967) |  $    (998,554) |

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

----

----

|   |                                                 |   | 2007      |   | 2006      |
|--------|------------------------------------------------------|--------|-----------|--------|-----------|
|   |                                                 |   |      |   |      |
|   | Goodwill                                             | $      | 1,365,491 | $      | 1,365,491 |
|   |                                                 |   |      |   |      |
|   | Core      deposit intangible                         |   | 124,600   |   | 124,600   |
|   |    Less      accumulated amortization |   | 21,016    |   | 2,440     |
|   |                                                 |   | 103,584   |   | 122,160   |
|   | Total      goodwill and other intangible assets      | $      | 1,469,075 | $      | 1,487,651 |

|   | Years      EndingDecember      31, |   |  Amount                                      |   |
|--------|------------------------------------|--------|---------------------------------------------------|--------|
|   |                               |   |                                              |   |
|   | 2008                               |   | $            17,684 |   |
|   | 2009                               |   | 16,793                                            |   |
|   | 2010                               |   | 15,903                                            |   |
|   | 2011                               |   | 15,012                                            |   |
|   | 2012                               |   | 14,122                                            |   |
|   | Thereafter                         |   | 24,070                                            |   |
|   |                               |   | $          103,584            |   |

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

----

----

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

----

----

|   |                                         | 2007      |
|--------|----------------------------------------------|-----------|
|   |                                         | NetIncome | Shares | Per      ShareAmount |
|   | Basic      Income Per Share                  |      |   |   |   |   |
|   | Income      available to common shareholders | $         | 2,677,926 | 4,742,609 | $ | 0.56 |
|   |                                         |      |   |   |   |   |
|   | Effect      of Dilutive Securities           |      |   |   |   |   |
|   | Stock      options outstanding               |      | -      | 32,652 |   | -      |
|   |                                         |      |   |   |   |   |
|   | Diluted      Income Per Share                |      |   |   |   |   |
|   | Income      available to common shareholders |      |   |   |   |   |
|   | plus      assumed conversions                | $         | 2,677,926 | 4,775,261 | $ | 0.56 |

|   |                                         | 2006      |
|--------|----------------------------------------------|-----------|
|   |                                         | NetIncome | Shares | Per      ShareAmount |
|   | Basic      Income Per Share                  |      |   |   |   |   |
|   | Income      available to common shareholders | $         | 2,415,155 | 3,621,250 | $ | 0.67 |
|   |                                         |      |   |   |   |   |
|   | Effect      of Dilutive Securities           |      |   |   |   |   |
|   | Stock      options outstanding               |      | -      | 41,897 |   | (0.01) |
|   |                                         |      |   |   |   |   |
|   | Diluted      Income Per Share                |      |   |   |   |   |
|   | Income      available to common shareholders |      |   |   |   |   |
|   | plus      assumed conversions                | $         | 2,415,155 | 3,663,147 | $ | 0.66 |

----

----

|   |                                         | 2005      |
|--------|----------------------------------------------|-----------|
|   |                                         | NetIncome | Shares | Per      ShareAmount |
|   | Basic      Income Per Share                  |      |   |   |   |   |
|   | Income      available to common shareholders | $         | 1,406,626 | 2,696,676 | $ | 0.52 |
|   |                                         |      |   |   |   |   |
|   | Effect      of Dilutive Securities           |      |   |   |   |   |
|   | Stock      options outstanding               |      | -      | 42,042 |   | (0.01) |
|   |                                         |      |   |   |   |   |
|   | Diluted      Income Per Share                |      |   |   |   |   |
|   | Income      available to common shareholders |      |   |   |   |   |
|   | plus      assumed conversions                | $         | 1,406,626 | 2,738,718 | $ | 0.51 |

|   | 2007 |   | 2006 |   | 2005 |
|--------|------|--------|------|--------|------|

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

| Outstanding      at beginning   |   |   |   |   |   |   |   |   |    |   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| of      year                    | 65,000 | $      | 10.13  |   | 73,000 | $      | 10.13  |   | 110,000 | $      | 10.13  |
| Exercised                       | 5,000  |   | 10.11  |   | 8,000  |   | 10.11  |   | 37,000  |   | 10.15  |
| Outstanding      at end of year | 60,000 |   | 10.13  |   | 65,000 |   | 10.13  |   | 73,000  |   | 10.13  |
|                            |   |   |   |   |   |   |   |   |    |   |   |
| Exercisable      at end of year | 60,000 |   | 10.13  |   | 65,000 |   | 10.13  |   | 73,000  |   | 10.13  |

----

----

----

----

----

----

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

| Note      15. | Financial      Instruments With Off-Balance-SheetRisk |
|---------------|-------------------------------------------------------|

|   |                                     |   | 2007        |   | 2006        |
|--------|------------------------------------------|--------|-------------|--------|-------------|
|   |                                     |   |        |   |        |
|   | Commitments      to extend credit:       |   |        |   |        |
|   | Future      loan commitments             | $      | 69,060,424  | $      | 54,134,247  |
|   | Unused      lines of credit              |   | 55,273,450  |   | 43,900,007  |
|   | Undisbursed      construction loans      |   | 118,619,531 |   | 97,977,899  |
|   | Financial      standby letters of credit |   | 1,217,391   |   | 264,483     |
|   |                                     | $      | 244,170,796 | $      | 196,276,636 |

----

----

| Note      16. | Regulatory      Matters |
|---------------|-------------------------|

----

----

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

|   | 2007                                          |   | Amount                    | Ratio  |   | Amount               | Ratio  |   | Amount                      | Ratio  |
|--------|-----------------------------------------------|--------|---------------------------|--------|--------|----------------------|--------|--------|-----------------------------|--------|
|   |                                          |   |                      |   |   |                 |   |   |                        |   |
|   | The      Company:                             |   |                      |   |   |                 |   |   |                        |   |
|   |                                          |   |                      |   |   |                 |   |   |                        |   |
|   | Total      Capital (to Risk Weighted Assets)  |   | $        79,093 | 12.17% |   | $   51,992 | 8.00%  |   | $    N/A     | N/A    |
|   | Tier      I Capital (to Risk Weighted Assets) |   | 73,420                    | 11.30% |   | 25,989               | 4.00%  |   |          N/A | N/A    |
|   | Tier      I Capital (Average Assets)          |   | 73,420                    | 9.42%  |   | 31,176               | 4.00%  |   |          N/A | N/A    |

|   | The      Bank:                                |   |                      |   |   |                      |   |   |                      |   |
|--------|-----------------------------------------------|--------|---------------------------|--------|--------|---------------------------|--------|--------|---------------------------|--------|
|   |                                          |   |                      |   |   |                      |   |   |                      |   |
|   | Total      Capital (to Risk Weighted Assets)  |   | $        78,111 | 12.03% |   | $        51,944 | 8.00%  |   | $        64,930 | 10.00% |
|   | Tier      I Capital (to Risk Weighted Assets) |   | 72,438                    | 11.15% |   | 25,987                    | 4.00%  |   | 38,980                    | 6.00%  |
|   | Tier      I Capital (to Average Assets)       |   | 72,438                    | 9.30%  |   | 31,156                    | 4.00%  |   | 38,945                    | 5.00%  |

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

|   | 2006                                          |   | Amount                    | Ratio  |   | Amount                    | Ratio  |   | Amount          | Ratio  |
|--------|-----------------------------------------------|--------|---------------------------|--------|--------|---------------------------|--------|--------|-----------------|--------|
|   |                                          |   |                      |   |   |                      |   |   |            |   |
|   | The      Company:                             |   |                      |   |   |                      |   |   |            |   |
|   |                                          |   |                      |   |   |                      |   |   |            |   |
|   | Total      Capital (to Risk Weighted Assets)  |   | $        77,107 | 15.34% |   | $        40,212 | 8.00%  |   | $      N/A      | N/A    |
|   | Tier      I Capital (to Risk Weighted Assets) |   | 71,477                    | 14.22% |   | 20,106                    | 4.00%  |   |   N/A | N/A    |
|   | Tier      I Capital (Average Assets)          |   | 71,477                    | 11.63% |   | 24,584                    | 4.00%  |   |   N/A | N/A    |

|   | The      Bank:                                |   |                      |   |   |                      |   |   |                      |   |
|--------|-----------------------------------------------|--------|---------------------------|--------|--------|---------------------------|--------|--------|---------------------------|--------|
|   |                                          |   |                      |   |   |                      |   |   |                      |   |
|   | Total      Capital (to Risk Weighted Assets)  |   | $        75,499 | 15.02% |   | $        40,213 | 8.00%  |   | $        50,266 | 10.00% |
|   | Tier      I Capital (to Risk Weighted Assets) |   | 69,869                    | 13.90% |   | 20,106                    | 4.00%  |   | 30,159                    | 6.00%  |
|   | Tier      I Capital (to Average Assets)       |   | 69,869                    | 11.37% |   | 24,580                    | 4.00%  |   | 30,725                    | 5.00%  |

----

----

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

|   |                            |   | 2007      |   | 2006      |
|--------|---------------------------------|--------|-----------|--------|-----------|
|   |                            |   |      |   |      |
|   | Balance,      beginning of year | $      | 51,181    | $      | 153,394   |
|   | Additional      loans           |   | 1,172,123 |   | 4,612     |
|   | Repayments                      |   | (331,699) |   | (106,825) |
|   | Balance,      end of year       | $      | 891,605   | $      | 51,181    |

----

----

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

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

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

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

|   |   | 2006 |
|--------|--------|------|

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

|   | Unrealized      holding gains arising during period | $      | 682,562                         | $      | (259,375)                       | $      | 423,187                         |
|--------|-----------------------------------------------------|--------|---------------------------------|--------|---------------------------------|--------|---------------------------------|
|   |                                                |   |                            |   |                            |   |                            |
|   | Add      reclassification adjustment for gains      |   |                            |   |                            |   |                            |
|   | recognized      in net income                       |   | -      |   | -      |   | -      |
|   |                                                |   |                            |   |                            |   |                            |
|   | Unrealized      holding gain on available for sale  |   |                            |   |                            |   |                            |
|   | securities,      net of taxes                       | $      | 682,562                         | $      | (259,375)                       | $      | 423,187                         |

|   |   | 2005 |
|--------|--------|------|

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

|   | Unrealized      holding losses arising during period | $      | (1,146,631)                     | $      | 435,721                         | $      | (710,910)                       |
|--------|------------------------------------------------------|--------|---------------------------------|--------|---------------------------------|--------|---------------------------------|
|   |                                                 |   |                            |   |                            |   |                            |
|   | Add      reclassification adjustment for gains       |   |                            |   |                            |   |                            |
|   | recognized      in net income                        |   | -      |   | -      |   | -      |
|   |                                                 |   |                            |   |                            |   |                            |
|   | Unrealized      holding loss on available for sale   |   |                            |   |                            |   |                            |
|   | securities,      net of taxes                        | $      | (1,146,631)                     | $      | 435,721                         | $      | (710,910)                       |

----

----

| Note      19. | Fair      Value of Financial Instruments and Interest Rate  Risk |
|---------------|------------------------------------------------------------------|

----

----

|                                                      |                                                                                         |                                                                                         |   |                                                                                                                |                                                                                                                |
|-----------------------------------------------------------|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|
|                                                      | 2007                                                                                         |                                                                                         | 2006   |
|                                                      | Recorded                                                                                     |                                                                                         |   | Recorded                                                                                                            |                                                                                                                |
|                                                      | Book                                                                                         |                                                                                         |   | Book                                                                                                                |                                                                                                                |
|                                                      | Balance                                                                                      | Fair      Value                                                                              |   | Balance                                                                                                             | Fair      Value                                                                                                     |
| Financial      Assets:                                    |                                                                                         |                                                                                         |   |                                                                                                                |                                                                                                                |
| Cash      and noninterest bearing deposits due from banks |  $      2,692                                             |  $      2,692                                             |   |  $      3,865                                                                    |  $      3,865                                                                    |
| Interest      bearing deposits due from banks             |                68 |                68 |   |                   3       |                   3       |
| Federal      funds sold                                   |        11,000                                             |        11,000                                             |   |        27,000                                                                    |        27,000                                                                    |
| Short-term      investments                               |              252            |              252            |   |        24,606                                                                    |        24,606                                                                    |
| Available      for sale securities                        |        67,290                                             |        67,290                                             |   |        67,093                                                                    |        67,093                                                                    |
| Federal      Reserve Bank stock                           |           1,912                            |           1,912                            |   |           1,912                                                   |           1,912                                                   |
| Federal      Home Loan Bank stock                         |           2,656                            |           2,656                            |   |           1,217                                                   |           1,217                                                   |
| Loans      receivable, net                                |      685,886                                                        |      662,375                                                        |   |      506,884                                                                               |      474,079                                                                               |
| Accrued      interest receivable                          |           4,576                            |           4,576                            |   |           3,542                                                   |           3,542                                                   |
|                                                      |                                                                                         |                                                                                         |   |                                                                                                                |                                                                                                                |
| Financial      Liabilities:                               |                                                                                         |                                                                                         |   |                                                                                                                |                                                                                                                |
| Demand      deposits                                      |  $    51,926                                                        |  $    51,926                                                        |   |  $    56,680                                                                               |  $    56,680                                                                               |
| Savings      deposits                                     |        34,261                                             |        34,261                                             |   |        25,993                                                                    |        25,993                                                                    |
| Money      market deposits                                |        34,881                                             |        34,881                                             |   |        40,936                                                                    |        40,936                                                                    |
| NOW      accounts                                         |        19,462                                             |        19,462                                             |   |        26,882                                                                    |        26,882                                                                    |
| Time      deposits                                        |      531,869                                                        |      533,646                                                        |   |      410,961                                                                               |      413,951                                                                               |
| FHLB      borrowings                                      |        47,500                                             |        47,599                                             |   |           8,000                                                   |           7,981                                                   |
| Securities      sold under repurchase agreements          |           7,000                            |           7,271                            |   |                    - |                    - |
| Subordinated      debt                                    |           8,248                            |           8,248                            |   |           8,248                                                   |           8,248                                                   |
| Accrued      interest payable                             |              295            |              295            |   |              182                                   |              182                                   |

----

----

| Note      20. | Segment      Reporting |
|---------------|------------------------|

----

----

| BALANCE      SHEETS                             |                                                                                                                                  |                                                                                                                                  |   |
|-------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|--------|
| December      31, 2007 and 2006                 |                                                                                                                                  |                                                                                                                                  |   |
|                                            |                                                                                                                                  |                                                                                                                                  |   |
|                                            |                                                                                                                                  |                                                                                                                                  |   |
|                                            | 2007                                                                                                                                  | 2006                                                                                                                                  |   |
| ASSETS                                          |                                                                                                                                  |                                                                                                                                  |   |
| Cash      and due from banks                    |  $                  725,879            |  $               1,369,758                            |   |
| Investment      in subsidiaries                 |                 74,179,498                            |                 70,979,561                            |   |
| Other      assets                               |                      450,326 |                      454,729 |   |
| Total      assets                               |  $             75,355,703                                       |  $             72,804,048                                       |   |
|                                            |                                                                                                                                  |                                                                                                                                  |   |
| LIABILITIES      AND SHAREHOLDERS' EQUITY       |                                                                                                                                  |                                                                                                                                  |   |
| Borrowings                                      |                   8,248,000                 |                   8,248,000                 |   |
| Accrued      expenses and other liabilities     |                      272,336 |                      272,703 |   |
| Shareholders'      equity                       |                 66,835,367                            |                 64,283,345                            |   |
| Total      liabilities and shareholders' equity |  $             75,355,703                                       |  $             72,804,048                                       |   |

| STATEMENTS      OF INCOME                               |                                                                                                   |                                                                                                   |                                                                                                   |
|---------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|
| Years      Ended December 31, 2007, 2006 and 2005       |                                                                                                   |                                                                                                   |                                                                                                   |
|                                                    |                                                                                                   |                                                                                                   |                                                                                                   |
|                                                    | 2007                                                                                                   | 2006                                                                                                   | 2005                                                                                                   |
| Revenues                                                |                                                                                                   |                                                                                                   |                                                                                                   |
| Dividends      from subsidiary bank                     |  $           897,381                       |  $        1,182,946                                       |  $           733,144                       |
| Total      revenue                                      |               897,381            |            1,182,946                            |               733,144            |
|                                                    |                                                                                                   |                                                                                                   |                                                                                                   |
| Expenses                                                |                                                                                                   |                                                                                                   |                                                                                                   |
| Interest      on subordinated debt                      |               711,967            |               693,699            |               543,657            |
| Other      expenses                                     |                 30,000 |                 30,000 |                 30,000 |
| Total      expenses                                     |               741,967            |               723,699            |               573,657            |
|                                                    |                                                                                                   |                                                                                                   |                                                                                                   |
| Income      before equity in undistributed              |                                                                                                   |                                                                                                   |                                                                                                   |
|     net      income of subsidiaries |               155,414            |               459,247            |               159,487            |
|                                                    |                                                                                                   |                                                                                                   |                                                                                                   |
| Equity      in undistributed net income of subsidiaries |            2,522,512                            |            1,955,909                            |            1,247,140                            |
|                                                    |                                                                                                   |                                                                                                   |                                                                                                   |
| Net      income                                         |  $        2,677,926                                       |  $        2,415,156                                       |  $        1,406,627                                       |

----

----

| STATEMENTS      OF CASH FLOWS                                      |                                                                                                                                        |                                                                                                  |                                                                                       |
|--------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|
| Years      Ended December 31, 2007, 2006 and 2005                  |                                                                                                                                        |                                                                                                  |                                                                                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
|                                                               | 2007                                                                                                                                        | 2006                                                                                                  | 2005                                                                                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Cash      Flows from Operating Activities                          |                                                                                                                                        |                                                                                                  |                                                                                       |
| Net      income                                                    |  $      2,677,926                                                                                        |  $      2,415,156                                                  |  $      1,406,627                                       |
| Adjustments      to reconcile net income to net cash provided by   |                                                                                                                                        |                                                                                                  |                                                                                       |
| operating      activities:                                         |                                                                                                                                        |                                                                                                  |                                                                                       |
| Undistributed      income of subsidiaries                          |        (2,522,512)                                                                                       |        (1,955,909)                                                 |        (1,247,140)                                      |
| Payment      of fees to directors in common stock                  |               49,961                                                  |               24,928            |               26,250 |
| Change      in assets and liabilities:                             |                        - |                                                                                                  |                                                                                       |
| Decrease      (increase) in other assets                           |                 4,403                                       |                 6,159 |             (84,682)           |
| (Decrease)      Increase in accrued expenses and other liabilities |                  (700)                                 |               18,884            |               32,709 |
| Net      cash provided by operating activities                     |             209,078                                                             |             509,218                       |             133,764            |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Cash      Flows from Investing Activities                          |                                                                                                                                        |                                                                                                  |                                                                                       |
| Net      investment in bank subsidiary                             |             (49,961)                                                            |      (29,624,933)                                                            |      (10,992,131)                                                 |
| Net      cash used in investing activities                         |             (49,961)                                                            |      (29,624,933)                                                            |      (10,992,131)                                                 |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Cash      Flows from Financing Activities                          |                                                                                                                                        |                                                                                                  |                                                                                       |
| Proceeds      from issuance of common stock                        |               50,551                                                  |        30,746,845                                                  |        11,341,317                                       |
| Dividends      paid on common stock                                |           (853,547)                                                                       |           (617,334)                                 |           (402,899)                      |
| Net      cash provided by financing activities                     |           (802,996)                                                                       |        30,129,511                                                  |        10,938,418                                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Net      increase (decrease) in cash and cash equivalents          |           (643,879)                                                                       |          1,013,796                                       |               80,051 |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Cash      and cash equivalents                                     |                                                                                                                                        |                                                                                                  |                                                                                       |
| Beginning                                                          |          1,369,758                                                                             |             355,962                       |             275,911            |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Ending                                                             |  $         725,879                                                                        |  $      1,369,758                                                  |  $         355,962                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Supplemental      Disclosures of Cash Flow Information             |                                                                                                                                        |                                                                                                  |                                                                                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Cash      paid for interest                                        |  $         712,665                                                                        |  $         692,536                                  |  $         540,949                       |
|                                                               |                                                                                                                                        |                                                                                                  |                                                                                       |
| Accrued      dividends declared on common stock                    |  $         213,608                                                                        |  $         213,277                                  |  $         129,226                       |

----