----

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| Maryland                                                       |   | 38-3814230                      |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| 721 N. Westover Blvd., Albany, GA                              |   |                                 |
|  (Address of principal executive officers)                |   | (Zip Code)                           |

|  Title of each class:               |   | Name of each exchange on which registered   |
|-----------------------------------------------|--------|-------------------------------------------------------|
|  Common Stock, Par Value $0.01 per share |   | Nasdaq Global Market                             |

|     None |
|------------------------------|
|  (Title of each class)  |

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

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|          Market Area |  Market Share | Market Share Rank | Institutions   in Market |
|-------------------------------------------------------------------|--------------------|------------------------|-----------------------------------------|
| Albany, Georgia MSA                                               | 13.8%              | 3                      | 16                                      |
| Statesboro, Georgia                                               | 2.5                | 6                      | 9                                       |
| Adel, Georgia                                                     | 16.6               | 2                      | 5                                       |
| Baxley, Georgia                                                   | 6.8                | 4                      | 4                                       |
| Hazlehurst, Georgia                                               | 13.3               | 4                      | 4                                       |
| Tattnall County, Georgia                                          | 14.0               | 4                      | 5                                       |
| Ocala, Florida MSA                                                | 0.9                | 19                     | 24                                      |
| Lake City, Florida                                                | 5.2                | 6                      | 7                                       |

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----

|                                                             |   | December 31,           |    |
|------------------------------------------------------------------|--------|------------------------|---------|
|                                                             |   | 2010                   |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                             |   | Amount                 |    |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
|                                                             |   | (Dollars in thousands) |    |
| Real Estate                                                      |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                              |   | $                      | 110,961 |   |   |   | 26.48 | % |   | $ | 81,255 |   |   |   | 24.32 | % |   | $ | 79,727 |   |   |   | 26.26 | % |   | $ | 74,752 |   |   |   | 24.54 | % |   | $ | 73,681 |   |   |   | 26.62 | % |
| Multi-family                                                     |   |                   | 10,770  |   |   |   | 2.57 |   |   |   | 11,650 |   |   |   | 3.49 |   |   |   | 10,719 |   |   |   | 3.54 |   |   |   | 12,297 |   |   |   | 4.04 |   |   |   | 16,913 |   |   |   | 6.11 |   |
| Commercial                                                       |   |                   | 97,482  |   |   |   | 23.27 |   |   |   | 71,013 |   |   |   | 21.25 |   |   |   | 52,477 |   |   |   | 17.35 |   |   |   | 41,630 |   |   |   | 13.66 |   |   |   | 44,496 |   |   |   | 16.08 |   |
| Farmland                                                         |   |                   | 11,775  |   |   |   | 2.81 |   |   |   | 9,013 |   |   |   | 2.70 |   |   |   | 5,744 |   |   |   | 1.90 |   |   |   | 4,818 |   |   |   | 1.58 |   |   |   | 2,642 |   |   |   | 0.95 |   |
| Construction and     development        |   |                   | 22,426  |   |   |   | 5.35 |   |   |   | 28,002 |   |   |   | 8.38 |   |   |   | 43,297 |   |   |   | 14.31 |   |   |   | 51,308 |   |   |   | 16.84 |   |   |   | 32,822 |   |   |   | 11.86 |   |
|    Total real estate loans                        |   |                   | 253,414 |   |   |   | 60.48 |   |   |   | 200,933 |   |   |   | 60.14 |   |   |   | 191,964 |   |   |   | 63.46 |   |   |   | 184,805 |   |   |   | 60.66 |   |   |   | 170,554 |   |   |   | 61.62 |   |
|                                                             |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other loans                                                      |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consumer loans:                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Student                            |   |                   | 629     |   |   |   | 0.15 |   |   |   | 596 |   |   |   | 0.18 |   |   |   | 552 |   |   |   | 0.18 |   |   |   | 594 |   |   |   | 0.20 |   |   |   | 703 |   |   |   | 0.25 |   |
|      Automobile                         |   |                   | 16,399  |   |   |   | 3.91 |   |   |   | 26,698 |   |   |   | 7.99 |   |   |   | 39,753 |   |   |   | 13.14 |   |   |   | 47,718 |   |   |   | 15.66 |   |   |   | 46,331 |   |   |   | 16.74 |   |
|      Home equity                        |   |                   | 16,638  |   |   |   | 3.97 |   |   |   | 17,313 |   |   |   | 5.18 |   |   |   | 18,344 |   |   |   | 6.06 |   |   |   | 17,257 |   |   |   | 5.66 |   |   |   | 16,368 |   |   |   | 5.91 |   |
|      Other                              |   |                   | 8,247   |   |   |   | 1.97 |   |   |   | 7,687 |   |   |   | 2.30 |   |   |   | 9,037 |   |   |   | 2.99 |   |   |   | 9,377 |   |   |   | 3.08 |   |   |   | 8,812 |   |   |   | 3.19 |   |
|    Total consumer loans                           |   |                   | 41,913  |   |   |   | 10.00 |   |   |   | 52,294 |   |   |   | 15.65 |   |   |   | 67,686 |   |   |   | 22.37 |   |   |   | 74,946 |   |   |   | 24.60 |   |   |   | 72,214 |   |   |   | 26.09 |   |
| Commercial business loans                                        |   |                   | 50,195  |   |   |   | 11.98 |   |   |   | 45,785 |   |   |   | 13.70 |   |   |   | 42,838 |   |   |   | 14.17 |   |   |   | 44,922 |   |   |   | 14.74 |   |   |   | 34,008 |   |   |   | 12.29 |   |
|    Total other loans                              |   |                   | 92,108  |   |   |   | 21.98 |   |   |   | 98,079 |   |   |   | 29.35 |   |   |   | 110,524 |   |   |   | 36.54 |   |   |   | 119,868 |   |   |   | 39.34 |   |   |   | 106,222 |   |   |   | 38.38 |   |
|                                                             |   |                   | 345,522 |   |   |   | 82.46 |   |   |   | 299,012 |   |   |   | 89.49 |   |   |   | 302,488 |   |   |   | 100.00 |   |   |   | 304,673 |   |   |   | 100.00 |   |   |   | 276,776 |   |   |   | 100.00 |   |
| Purchased loans, net of fair  market value adjustments |   |                   | 73,475  |   |   |   | 17.54 |   |   |   | 35,126 |   |   |   | 10.51 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Total loans                                    |   |                   | 418,997 |   |   |   | 100.00 | % |   |   | 334,138 |   |   |   | 100.00 | % |   |   | 302,488 |   |   |   | 100.00 | % |   |   | 304,673 |   |   |   | 100.00 | % |   |   | 276,776 |   |   |   | 100.00 | % |
| Less allowance for  loan losses                        |   |                   | 8,101   |   |   |   |   |   |   |   | 6,060 |   |   |   |   |   |   |   | 4,951 |   |   |   |   |   |   |   | 4,416 |   |   |   |   |   |   |   | 4,076 |   |   |   |   |   |
|   Total loans, net                                     |   | $                      | 410,896 |   |   |   |   |   |   | $ | 328,078 |   |   |   |   |   |   | $ | 297,537 |   |   |   |   |   |   | $ | 300,257 |   |   |   |   |   |   | $ | 272,700 |   |   |   |   |   |

----

|                                                                                                            |   | December 31,           |    |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                                                            |   | 2010                   |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                            |   | Amount                 |    |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
|                                                                                                            |   | (Dollars in thousands) |    |
| Fixed-Rate Loans                                                                                                |   |                   |    |
| Real Estate                                                                                                     |   |                   |    |
|      One- to four-family                                                               |   | $                      | 102,626 |   |   |   | 24.49 | % |   | $ | 75,301 |   |   |   | 22.53 | % |   | $ | 72,353 |   |   |   | 23.92 | % |   | $ | 69,841 |   |   |   | 22.92 | % |   | $ | 68,774 |   |   |   | 24.85 | % |
|      Multi-family                                                                      |   |                   | 10,190  |   |   |   | 2.43 |   |   |   | 6,197 |   |   |   | 1.86 |   |   |   | 5,210 |   |   |   | 1.72 |   |   |   | 7,178 |   |   |   | 2.36 |   |   |   | 14,542 |   |   |   | 5.25 |   |
|      Commercial                                                                        |   |                   | 77,033  |   |   |   | 18.39 |   |   |   | 58,300 |   |   |   | 17.45 |   |   |   | 42,084 |   |   |   | 13.91 |   |   |   | 32,634 |   |   |   | 10.71 |   |   |   | 28,109 |   |   |   | 10.16 |   |
|      Farmland                                                                          |   |                   | 8,086   |   |   |   | 1.93 |   |   |   | 4,789 |   |   |   | 1.44 |   |   |   | 2,174 |   |   |   | 0.72 |   |   |   | 3,337 |   |   |   | 1.10 |   |   |   | 670 |   |   |   | 0.24 |   |
|      Construction and         development |   |                   | 12,966  |   |   |   | 3.09 |   |   |   | 8,634 |   |   |   | 2.58 |   |   |   | 8,426 |   |   |   | 2.79 |   |   |   | 13,903 |   |   |   | 4.56 |   |   |   | 14,025 |   |   |   | 5.07 |   |
|      Total real estate loans                                                           |   |                   | 210,901 |   |   |   | 50.33 |   |   |   | 153,221 |   |   |   | 45.86 |   |   |   | 130,247 |   |   |   | 43.06 |   |   |   | 126,893 |   |   |   | 41.65 |   |   |   | 126,120 |   |   |   | 45.57 |   |
| Consumer                                                                                                        |   |                   | 20,021  |   |   |   | 4.78 |   |   |   | 31,130 |   |   |   | 9.32 |   |   |   | 45,168 |   |   |   | 14.93 |   |   |   | 53,618 |   |   |   | 17.60 |   |   |   | 50,629 |   |   |   | 18.29 |   |
| Commercial business                                                                                             |   |                   | 21,964  |   |   |   | 5.24 |   |   |   | 18,975 |   |   |   | 5.68 |   |   |   | 14,218 |   |   |   | 4.70 |   |   |   | 16,482 |   |   |   | 5.41 |   |   |   | 13,505 |   |   |   | 4.88 |   |
|      Total fixed rate loans                                                            |   |                   | 252,886 |   |   |   | 60.35 |   |   |   | 203,326 |   |   |   | 60.86 |   |   |   | 189,633 |   |   |   | 62.69 |   |   |   | 196,993 |   |   |   | 64.66 |   |   |   | 190,254 |   |   |   | 68.74 |   |
|                                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustable -Rate Loans                                                                                          |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real Estate                                                                                                     |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      One- to four-family                                                               |   |                   | 8,335   |   |   |   | 1.99 |   |   |   | 5,954 |   |   |   | 1.79 |   |   |   | 7,374 |   |   |   | 2.44 |   |   |   | 4,911 |   |   |   | 1.61 |   |   |   | 4,907 |   |   |   | 1.77 |   |
|      Multi-family                                                                      |   |                   | 580     |   |   |   | 0.14 |   |   |   | 5,453 |   |   |   | 1.63 |   |   |   | 5,509 |   |   |   | 1.82 |   |   |   | 5,119 |   |   |   | 1.68 |   |   |   | 2,371 |   |   |   | 0.86 |   |
|      Commercial                                                                        |   |                   | 20,449  |   |   |   | 4.88 |   |   |   | 12,713 |   |   |   | 3.80 |   |   |   | 10,393 |   |   |   | 3.44 |   |   |   | 8,996 |   |   |   | 2.95 |   |   |   | 16,387 |   |   |   | 5.92 |   |
|      Farmland                                                                          |   |                   | 3,689   |   |   |   | 0.88 |   |   |   | 4,224 |   |   |   | 1.26 |   |   |   | 3,569 |   |   |   | 1.18 |   |   |   | 1,481 |   |   |   | 0.49 |   |   |   | 1,972 |   |   |   | 0.71 |   |
|      Construction and         development |   |                   | 9,460   |   |   |   | 2.26 |   |   |   | 19,368 |   |   |   | 5.80 |   |   |   | 34,871 |   |   |   | 11.53 |   |   |   | 37,405 |   |   |   | 12.28 |   |   |   | 18,797 |   |   |   | 6.79 |   |
|      Total real estate loans                                                           |   |                   | 45,513  |   |   |   | 10.15 |   |   |   | 47,712 |   |   |   | 14.28 |   |   |   | 61,716 |   |   |   | 20.41 |   |   |   | 57,912 |   |   |   | 19.01 |   |   |   | 44,434 |   |   |   | 16.05 |   |
| Consumer                                                                                                        |   |                   | 21,892  |   |   |   | 5.22 |   |   |   | 21,164 |   |   |   | 6.23 |   |   |   | 22,518 |   |   |   | 7.44 |   |   |   | 21,328 |   |   |   | 7.00 |   |   |   | 21,585 |   |   |   | 7.80 |   |
| Commercial business                                                                                             |   |                   | 28,231  |   |   |   | 6.74 |   |   |   | 26,810 |   |   |   | 8.02 |   |   |   | 28,621 |   |   |   | 9.46 |   |   |   | 28,440 |   |   |   | 9.33 |   |   |   | 20,503 |   |   |   | 7.41 |   |
|      Total adjustable rate       loans              |   |                   | 92,636  |   |   |   | 22.11 |   |   |   | 95,686 |   |   |   | 28.63 |   |   |   | 112,855 |   |   |   | 37.31 |   |   |   | 107,680 |   |   |   | 35.34 |   |   |   | 86,522 |   |   |   | 31.26 |   |
|                                                                                                            |   |                   | 345,522 |   |   |   | 82.46 |   |   |   | 299,012 |   |   |   | 89.49 |   |   |   | 302,488 |   |   |   | 100.00 |   |   |   | 304,673 |   |   |   | 100.00 |   |   |   | 276,776 |   |   |   | 100.00 |   |
| Purchased loans, net of    fair market value    adjustments             |   |                   | 73,475  |   |   |   | 17.54 |   |   |   | 35,126 |   |   |   | 10.51 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|      Total loans                                                                       |   |                   | 418,997 |   |   |   | 100.00 | % |   |   | 334,138 |   |   |   | 100.00 | % |   |   | 302,488 |   |   |   | 100.00 | % |   |   | 304,673 |   |   |   | 100.00 | % |   |   | 276,776 |   |   |   | 100.00 | % |
| Less allowance for    loan losses                                                           |   |                   | 8,101   |   |   |   |   |   |   |   | 6,060 |   |   |   |   |   |   |   | 4,951 |   |   |   |   |   |   |   | 4,416 |   |   |   |   |   |   |   | 4,076 |   |   |   |   |   |
| Total loans, net                                                                                                |   |                   | 410,896 |   |   |   |   |   |   | $ | 328,078 |   |   |   |   |   |   | $ | 297,537 |   |   |   |   |   |   | $ | 300,257 |   |   |   |   |   |   | $ | 272,700 |   |   |   |   |   |

----

|                               |   | One- to Four- Family and Commercial Real Estate |    |   | Construction, Development and Farmland |   |   | Consumer |   |   | Commercial Non-Mortgage |   |   | Total  |   |
|------------------------------------|--------|-------------------------------------------------|---------|--------|----------------------------------------|--------|--------|----------|--------|--------|-------------------------|--------|--------|--------|--------|
| Due DuringYears EndingDecember 31, |   | Amount                                          |    |   | Weighted Average Rate                  |   |   | Amount   |   |   | Weighted Average Rate   |   |   | Amount |   |   | Weighted Average Rate |   |   | Amount |   |   | Weighted Average Rate |   |   | Amount |   |   | Weighted Average Rate |   |
|                               |   | (Dollars in thousands)                          |    |
| 2011(1)                            |   | $                                               | 41,884  |   |                                   |   | 6.21   | %        |   | $      | 21,543                  |   |   |   | 5.60   | % |   | $ | 3,102 |   |   |   | 7.91 | % |   | $ | 25,172 |   |   |   | 5.47 | % |   | $ | 91,701 |   |   |   | 5.92 | % |
| 2012                               |   |                                            | 34,345  |   |                                   |   | 6.22   |     |   |   | 4,808                   |   |   |   | 5.62   |   |   |   | 5,301 |   |   |   | 8.42 |   |   |   | 5,029 |   |   |   | 6.14 |   |   |   | 49,483 |   |   |   | 6.39 |   |
| 2013                               |   |                                            | 57,571  |   |                                   |   | 5.77   |     |   |   | 3,393                   |   |   |   | 5.13   |   |   |   | 7,148 |   |   |   | 7.93 |   |   |   | 8,186 |   |   |   | 5.84 |   |   |   | 76,298 |   |   |   | 5.95 |   |
| 2014 to 2015                       |   |                                            | 24,200  |   |                                   |   | 6.06   |     |   |   | 2,160                   |   |   |   | 6.08   |   |   |   | 8,479 |   |   |   | 6.81 |   |   |   | 6,223 |   |   |   | 6.20 |   |   |   | 41,062 |   |   |   | 6.24 |   |
| 2016 to 2020                       |   |                                            | 23,564  |   |                                   |   | 5.69   |     |   |   | 651                     |   |   |   | 5.70   |   |   |   | 7,065 |   |   |   | 4.50 |   |   |   | 5,585 |   |   |   | 4.44 |   |   |   | 36,865 |   |   |   | 5.27 |   |
| 2021 to 2025                       |   |                                            | 7,934   |   |                                   |   | 4.86   |     |   |   | -                       |   |   |   |   |   |   |   | 10,815 |   |   |   | 3.86 |   |   |   | - |   |   |   |   |   |   |   | 18,749 |   |   |   | 4.28 |   |
| 2026 and following                 |   |                                            | 29,717  |   |                                   |   | 5.10   |     |   |   | 1,647                   |   |   |   | 6.17   |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   | 31,364 |   |   |   | 5.16 |   |
| Total                              |   | $                                               | 219,215 |   |                                   |   | 5.83   |     |   | $      | 34,202                  |   |   |   | 5.61   |   |   | $ | 41,910 |   |   |   | 6.13 |   |   | $ | 50,195 |   |   |   | 5.57 |   |   |   | 345,522 |   |   |   | 5.81 |   |

| (1) | Includes demand loans, loans having no stated maturity and overdraft loans. |
|-----|-----------------------------------------------------------------------------|

----

----

----

----

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----

|                                                  |   | Thirty tofifty-ninedays |   |   | Sixty toeighty-nine days |   |   | Totalthirty to eighty-nine days |   |
|-------------------------------------------------------|--------|-------------------------|--------|--------|-------------------------------|--------|--------|--------------------------------------|--------|
|                                                  |   | (Dollars in thousands)  |   |
|                                                  |   |                    |   |   |                          |   |   |                                 |   |
| Delinquent Loans:                                     |   |                    |   |   |                          |   |   |                                 |   |
|     One- to four-family           |   | $                       | 1,283  |   |                          | $      | 38     |                                 |   | $ | 1,321 |   |
|     Multi-family                  |   |                    | -      |   |                          |   |   |                                 |   |   | - |   |
|     Commercial real estate        |   |                    | 220    |   |                          |   |   |                                 |   |   | 220 |   |
|     Farmland                      |   |                    | -      |   |                          |   |   |                                 |   |   |   |   |
|     Construction and development  |   |                    | 295    |   |                          |   | 23     |                                 |   |   | 318 |   |
|     Consumer                      |   |                    | 310    |   |                          |   | 15     |                                 |   |   | 326 |   |
|     Commercial business           |   |                    | 146    |   |                          |   | 169    |                                 |   |   | 314 |   |
|         Total |   | $                       | 2,254  |   |                          | $      | 245    |                                 |   | $ | 2,499 |   |
| Total as a percentage of total loans                  |   |                    | 0.5    | %      |                          |   | 0.1    | %                                    |   |   | 0.6 | % |

|                                                  |   | December 31,           |   |
|-------------------------------------------------------|--------|------------------------|--------|
|                                                  |   | 2010                   |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                  |   | (Dollars in thousands) |   |
| Nonaccruing Loans:                                    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                   |   | $                      | 4,873  |   |   | $ | 1,505 |   |   | $ | 689 |   |   | $ | 373 |   |   | $ | - |   |
| Multi-family                                          |   |                   | 1,770  |   |   |   | 122 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                |   |                   | 1,586  |   |   |   | 236 |   |   |   | 988 |   |   |   | 35 |   |   |   | - |   |
| Construction and development                          |   |                   | 1,423  |   |   |   | 2,863 |   |   |   | 4,882 |   |   |   | 2,357 |   |   |   | 61 |   |
| Consumer                                              |   |                   | 165    |   |   |   | 489 |   |   |   | 575 |   |   |   | 447 |   |   |   | 197 |   |
| Commercial business                                   |   |                   | 127    |   |   |   | 3,248 |   |   |   | 147 |   |   |   | - |   |   |   | - |   |
|      Total nonaccruing loans |   |                   | 9,944  |   |   |   | 8,463 |   |   |   | 7,281 |   |   |   | 3,212 |   |   |   | 258 |   |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed Assets:                                    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                   |   |                   | 468    |   |   |   | 583 |   |   |   | 115 |   |   |   | - |   |   |   | - |   |
| Multi-family                                          |   |                   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                |   |                   | 1,095  |   |   |   | 362 |   |   |   | 284 |   |   |   | 287 |   |   |   | 306 |   |
| Construction and development                          |   |                   | 2,126  |   |   |   | 794 |   |   |   | 1,666 |   |   |   | - |   |   |   | - |   |
| Consumer                                              |   |                   |   |   |   |   | 56 |   |   |   | 55 |   |   |   | 78 |   |   |   | 16 |   |
| Commercial business                                   |   |                   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|      Total foreclosed assets |   |                   | 3,689  |   |   |   | 1,795 |   |   |   | 2,120 |   |   |   | 365 |   |   |   | 322 |   |
| Total nonperforming assets                            |   | $                      | 13,633 |   |   | $ | 10,258 |   |   | $ | 9,401 |   |   | $ | 3,577 |   |   | $ | 580 |   |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total as a percentage of total assets                 |   |                   | 1.80   | % |   |   | 1.79 | % |   |   | 1.87 | % |   |   | 0.76 | % |   |   | 0.14 | % |

----

----

----

|                                                                                  |   | December 31,           |   |
|---------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                  |   | 2010                   |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                                  |   | (Dollars in thousands) |   |
| Balance at beginning of period                                                        |   | $                      | 6,060  |   |   | $ | 4,951 |   |   | $ | 4,416 |   |   | $ | 4,076 |   |   | $ | 3,618 |   |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Charge-offs:                                                                          |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                                                   |   |                   | 1,278  |   |   |   | 494 |   |   |   | 81 |   |   |   | 55 |   |   |   | - |   |
| Multi-family                                                                          |   |                   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                                                |   |                   | 412    |   |   |   | 25 |   |   |   | 773 |   |   |   | 29 |   |   |   | - |   |
| Construction and development                                                          |   |                   | 704    |   |   |   | 3,100 |   |   |   | 1,414 |   |   |   | 435 |   |   |   | 31 |   |
| Consumer                                                                              |   |                   | 488    |   |   |   | 664 |   |   |   | 687 |   |   |   | 398 |   |   |   | 368 |   |
| Commercial business                                                                   |   |                   | 806    |   |   |   | 2,338 |   |   |   | 47 |   |   |   | 116 |   |   |   | - |   |
|                                                                                  |   |                   | 3,686  |   |   |   | 6,621 |   |   |   | 3,002 |   |   |   | 1,033 |   |   |   | 399 |   |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                                           |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                                                   |   |                   | 10     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Multi-family                                                                          |   |                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                                                |   |                   | -      |   |   |   | - |   |   |   | 4 |   |   |   | - |   |   |   | - |   |
| Construction and Development                                                          |   |                   | -      |   |   |   | - |   |   |   | 2 |   |   |   | - |   |   |   | - |   |
| Consumer                                                                              |   |                   | 217    |   |   |   | 180 |   |   |   | 161 |   |   |   | 195 |   |   |   | 162 |   |
| Commercial business                                                                   |   |                   | -      |   |   |   | 50 |   |   |   | 20 |   |   |   | - |   |   |   | - |   |
|                                                                                  |   |                   | 227    |   |   |   | 230 |   |   |   | 187 |   |   |   | 195 |   |   |   | 162 |   |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net charge-offs                                                                       |   |                   | 3,459  |   |   |   | 6,391 |   |   |   | 2,815 |   |   |   | 838 |   |   |   | 237 |   |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision charged to operations                                                       |   |                   | 5,500  |   |   |   | 7,500 |   |   |   | 3,350 |   |   |   | 1,178 |   |   |   | 695 |   |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at end of period                                                              |   | $                      | 8,101  |   |   | $ | 6,060 |   |   | $ | 4,951 |   |   | $ | 4,416 |   |   | $ | 4,076 |   |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of net charge-offs during the period to average loans outstanding during period |   |                   | 0.91   | % |   |   | 2.13 | % |   |   | 1.58 | % |   |   | 0.29 | % |   |   | 0.09 | % |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of net charge-offs during the period to average nonperforming assets            |   |                   | 36.23  | % |   |   | 65.54 | % |   |   | 58.51 | % |   |   | 36.12 | % |   |   | 29.28 | % |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance as a percentage of nonperforming loans                                      |   |                   | 81.47  | % |   |   | 71.61 | % |   |   | 67.99 | % |   |   | 137.49 | % |   |   | 1,582.00 | % |
|                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance as a percentage of total loans (end of period)                              |   |                   | 1.93   | % |   |   | 1.81 | % |   |   | 1.64 | % |   |   | 1.45 | % |   |   | 1.47 | % |

| ____________ |
|--------------|

| (1) | Ratios are on an annualized basis. |
|-----|------------------------------------|

----

|                                                 |   | December 31,                |   |
|------------------------------------------------------|--------|-----------------------------|--------|
|                                                 |   | 2010                        |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                 |   | Amount ofLoan LossAllowance |   |   | Percentof Loansin EachCategoryto TotalLoans |   |   | Amount ofLoan LossAllowance |   |   | Percentof Loansin EachCategoryto TotalLoans |   |   | Amount ofLoan LossAllowance |   |   | Percentof Loansin EachCategoryto TotalLoans |   |   | Amount ofLoan LossAllowance |   |   | Percentof Loansin EachCategoryto TotalLoans |   |   | Amount ofLoan LossAllowance |   |   | Percentof Loansin EachCategoryto TotalLoans |   |
|                                                 |   | (Dollars in thousands)      |   |
|                                                 |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                  |   | $                           | 2,197  |   |   |   | 27.12 | % |   | $ | 1,422 |   |   |   | 24.32 | % |   | $ | 637 |   |   |   | 26.26 | % |   | $ | 553 |   |   |   | 24.54 | % |   | $ | 875 |   |   |   | 26.62 | % |
| Multi-family residential real estate                 |   |                        | 226    |   |   |   | 2.79 |   |   |   | 75 |   |   |   | 3.49 |   |   |   | 69 |   |   |   | 3.54 |   |   |   | 123 |   |   |   | 4.04 |   |   |   | 177 |   |   |   | 6.11 |   |
| Commercial real estate                               |   |                        | 1,351  |   |   |   | 16.68 |   |   |   | 979 |   |   |   | 21.25 |   |   |   | 874 |   |   |   | 17.35 |   |   |   | 847 |   |   |   | 13.66 |   |   |   | 925 |   |   |   | 16.08 |   |
| Construction and development                         |   |                        | 1,977  |   |   |   | 24.40 |   |   |   | 1,419 |   |   |   | 8.38 |   |   |   | 1,275 |   |   |   | 14.31 |   |   |   | 1,616 |   |   |   | 16.84 |   |   |   | 471 |   |   |   | 11.86 |   |
| Farmland                                             |   |                        | 144    |   |   |   | 1.78 |   |   |   | 122 |   |   |   | 2.70 |   |   |   | 72 |   |   |   | 1.90 |   |   |   | 42 |   |   |   | 1.58 |   |   |   | 32 |   |   |   | 0.95 |   |
| Consumer                                             |   |                        | 605    |   |   |   | 7.47 |   |   |   | 850 |   |   |   | 15.65 |   |   |   | 890 |   |   |   | 22.37 |   |   |   | 740 |   |   |   | 24.60 |   |   |   | 791 |   |   |   | 26.09 |   |
| Commercial business                                  |   |                        | 1,601  |   |   |   | 19.76 |   |   |   | 1,193 |   |   |   | 13.70 |   |   |   | 1,134 |   |   |   | 14.17 |   |   |   | 495 |   |   |   | 14.74 |   |   |   | 805 |   |   |   | 12.29 |   |
| Unallocated                                          |   |                        | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Purchased loans net of fair market value adjustments |   |                        | -      |   |   |   |  - |   |   |   | - |   |   |   | 10.51 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                                |   | $                           | 8,101  |   |   |   | 100.00 | % |   | $ | 6,060 |   |   |   | 100.00 | % |   | $ | 4,951 |   |   |   | 100.00 | % |   | $ | 4,416 |   |   |   | 100.00 | % |   | $ | 4,076 |   |   |   | 100.00 | % |

----

|                                                                            |   | December 31,           |    |
|---------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                            |   | 2010                   |    |   | 2009 |   |   | 2008 |   |
|                                                                            |   | CarryingValue          |    |   | % ofTotal |   |   | CarryingValue |   |   | % ofTotal |   |   | CarryingValue |   |   | % ofTotal |   |
|                                                                            |   | (Dollars in thousands) |    |
| Securities available for sale:                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U. S. Government sponsored entity (GSE) securities and U.S. Treasury Securities |   | $                      | 89,032  |   |   |   | 37.35 | % |   | $ | 30,462 |   |   |   | 25.27 | % |   | $ | 21,165 |   |   |   | 18.22 | % |
| Corporate debt securities                                                       |   |                   | 1,700   |   |   |   | 0.71 |   |   |   | 1,910 |   |   |   | 1.58 |   |   |   | 1,789 |   |   |   | 1.54 |   |
| GSE residential mortgage-backed securities                                      |   |                   | 125,336 |   |   |   | 52.58 |   |   |   | 54,537 |   |   |   | 45.26 |   |   |   | 60,927 |   |   |   | 52.46 |   |
| Private label residential mortgage-backed securities                            |   |                   | 2,807   |   |   |   | 1.18 |   |   |   | 3,874 |   |   |   | 3.21 |   |   |   | 4,481 |   |   |   | 3.86 |   |
| State and municipal securities                                                  |   |                   | 19,160  |   |   |   | 8.04 |   |   |   | 29,123 |   |   |   | 24.16 |   |   |   | 27,511 |   |   |   | 23.69 |   |
| Equity and other                                                                |   |                   | 342     |   |   |   | 0.14 |   |   |   | 621 |   |   |   | 0.52 |   |   |   | 268 |   |   |   | 0.23 |   |
|                                                                            |   |                   | 238,377 |   |   |   | 100.00 | % |   | $ | 120,527 |   |   |   | 100.00 | % |   | $ | 116,141 |   |   |   | 100.00 | % |
|                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other earning assets:                                                           |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits with banks                                            |   | $                      | 10,911  |   |   |   | 63.02 | % |   | $ | 43,236 |   |   |   | 74.76 | % |   | $ | 746 |   |   |   | 2.18 | % |
| Federal funds sold                                                              |   |                   | 2,700   |   |   |   | 15.59 |   |   |   | 11,340 |   |   |   | 19.61 |   |   |   | 30,254 |   |   |   | 88.50 |   |
| Federal Home Loan Bank stock                                                    |   |                   | 3,703   |   |   |   | 21.39 |   |   |   | 3,253 |   |   |   | 5.63 |   |   |   | 3,186 |   |   |   | 9.32 |   |
|                                                                            |   | $                      | 17,314  |   |   |   | 100.00 | % |   | $ | 57,829 |   |   |   | 100.00 | % |   | $ | 34,186 |   |   |   | 100.00 | % |

----

|                                |   | Less than One Year     |   |   | One to Five Years |   |   | Over Five to Ten Years |   |   | Over Ten Years |   |   | Total Securities |   |   |     |   |
|-------------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|------------------------|--------|--------|----------------|--------|--------|------------------|--------|--------|----------|--------|
|                                |   | Amortized              |   |   | Weighted          |   |   | Amortized              |   |   | Weighted       |   |   | Amortized        |   |   | Weighted |   |   | Amortized |   |   | Weighted |   |   | Amortized |   |   | Weighted |   |   | Fair |   |
|                                |   | Cost                   |   |   | Average           |   |   | Cost                   |   |   | Average        |   |   | Cost             |   |   | Average  |   |   | Cost |   |   | Average |   |   | Cost |   |   | Average |   |   | Value |   |
|                                |   |                   |   |   | Yield             |   |   |                   |   |   | Yield          |   |   |             |   |   | Yield    |   |   |   |   |   | Yield |   |   |   |   |   | Yield |   |   |   |   |
|                                |   | (Dollars in Thousands) |   |
| Securities Available for Sale: |   |                   |   |   |              |   |   |                   |   |   |           |   |   |             |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury securities            |   | $                      | 24,999 |   |              |   | 0.05   | %                      |   | $      | -              |   |   |             | -      | %      |     | $      | - |   |   |   | - | % |   | $ | - |   |   |   | - |   |   | $ | 24,999 |   |   |   | 0.05 | % |   | $ | 24,998 |   |
| U.S. GSE securities                 |   |                   | 6,000  |   |              |   | 1.83   |                   |   |   | 47,892         |   |   |             | 2.21   |   |     |   | 7,294 |   |   |   | 2.81 |   |   |   | 3,494 |   |   |   | 2.22 |   |   |   | 64,680 |   |   |   | 2.24 | % |   |   | 64,034 |   |
| Corporate debt securities           |   |                   | -      |   |              |   | -      |                   |   |   | 2,170          |   |   |             | 6.64   |   |     |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,170 |   |   |   | 6.64 | % |   |   | 1,700 |   |
| GSE mortgage-backed securities      |   |                   | -      |   |              |   | -      |                   |   |   | -              |   |   |             | -      |   |     |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 125,749 |   |   |   | 2.67 | % |   |   | 125,336 |   |
| Private label mortgage-             |   |                   | -      |   |              |   | -      |                   |   |   | -              |   |   |             | -      |   |     |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,801 |   |   |   | 5.01 | % |   |   | 2,807 |   |
| backed securities                   |   |                   |   |   |              |   |   |                   |   |   |           |   |   |             |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and municipal                 |   |                   | -      |   |              |   | -      |                   |   |   | 4,165          |   |   |             | 5.84   | %      |     |   | 7,163 |   |   |   | 6.22 |   |   |   | 9,314 |   |   |   | 6.30 |   |   |   | 20,642 |   |   |   | 6.18 | % |   |   | 19,160 |   |
| Equity and other                    |   |                   | -      |   |              |   | -      |                   |   |   | -              |   |   |             | -      |   |     |   | - |   |   |   | - |   |   |   | 435 |   |   |   | 5.84 |   |   |   | 435 |   |   |   | 5.84 | % |   |   | 342 |   |
| Total investment securities         |   | $                      | 30,999 |   |              |   | 0.39   | %                      |   |   | 54,227         |   |   |             | 2.67   | %      |     | $      | 14,457 |   |   |   | 4.50 | % |   | $ | 13,243 |   |   |   | 5.21 | % |   | $ | 241,476 |   |   |   | 2.65 | % |   | $ | 238,377 |   |

----

|                         |   | Year Ended December 31, |    |
|------------------------------|--------|-------------------------|---------|
|                         |   | 2010                    |    |   | 2009 |   |   | 2008 |   |
|                         |   | (Dollars in thousands)  |    |
|                         |   |                    |    |   |   |   |   |   |   |
| Opening balance              |   | $                       | 426,607 |   |   | $ | 338,546 |   |   | $ | 330,629 |   |
| Net deposits and withdrawals |   |                    | 103,031 |   |   |   | 81,589 |   |   |   | (1,126 | ) |
| Interest credited            |   |                    | 4,605   |   |   |   | 6,472 |   |   |   | 9,043 |   |
|                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Ending balance               |   | $                       | 534,243 |   |   | $ | 426,607 |   |   | $ | 338,546 |   |
|                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net increase                 |   |                    | 107,636 |   |   | $ | 88,061 |   |   | $ | 7,917 |   |
|                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Percent increase             |   |                    | 25.23   | % |   |   | 26.01 | % |   |   | 2.39 | % |

----

|                                |   | Maturity as of December 31, 2010 |   |
|-------------------------------------|--------|----------------------------------|--------|
|                                |   | Three Monthsor Less              |   |   | Over Three to Six Months |   |   | Over Six to Twelve Months |   |   | Over TwelveMonths |   |   | Total |   |
|                                |   | (Dollars in thousands)           |   |
| Time deposits of less than $100,000 |   | $                                | 16,936 |   |   | $ | 14,969 |   |   | $ | 26,609 |   |   | $ | 29,612 |   |   | $ | 88,126 |   |
| Time deposits of $100,000 or more   |   |                             | 12,823 |   |   |   | 13,038 |   |   |   | 27,177 |   |   |   | 27,876 |   |   |   | 80,914 |   |
| Total time deposits                 |   | $                                | 29,759 |   |   | $ | 28,007 |   |   | $ | 53,786 |   |   | $ | 57,488 |   |   | $ | 169,040 |   |

|                               |   | For the twelve months ended December 31, |    |
|------------------------------------|--------|------------------------------------------|---------|
|                               |   | 2010                                     |    |   |   |   |   | 2009 |   |   |   |   |   | 2008 |   |   |   |   |
|                               |   | Average Balance                          |    |   | Average Rate |   |   | Average Balance |   |   | Average Rate |   |   | Average Balance |   |   | Average Rate |   |
|                               |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing deposits |   | $                                        | 41,446  |   |   |   | N/A |   |   | $ | 20,875 |   |   |   | N/A |   |   | $ | 18,473 |   |   |   | N/A |   |
|                               |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits:         |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand            |   | $                                        | 92,147  |   |   |   | 1.00 | % |   | $ | 50,679 |   |   |   | 1.05 | % |   | $ | 43,102 |   |   |   | 1.12 | % |
| Savings and money market           |   |                                     | 186,870 |   |   |   | 1.09 |   |   |   | 122,453 |   |   |   | 1.27 |   |   |   | 95,822 |   |   |   | 1.45 |   |
| accounts                           |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail time deposits               |   |                                     | 159,366 |   |   |   | 1.6 |   |   |   | 122,332 |   |   |   | 3.1 |   |   |   | 126,120 |   |   |   | 4.18 |   |
| Wholesale time deposits            |   |                                     | 11,293  |   |   |   | 2.29 |   |   |   | 17,981 |   |   |   | 3.32 |   |   |   | 43,215 |   |   |   | 4.35 |   |
| Total interest-bearing deposits    |   | $                                        | 449,676 |   |   |   | 1.28 | % |   | $ | 303,445 |   |   |   | 2.09 | % |   | $ | 308,259 |   |   |   | 2.93 | % |

|                              |   |                   | December 31, |    |
|-----------------------------------|--------|------------------------|--------------|---------|
|                              |   |                   | 2010         |    |   |   |   |   | 2009 |   |   |   |   |   | 2008 |   |   |   |   |
|                              |   |                   | Amount       |    |   | Percent of Total |   |   | Amount |   |   | Percent of Total |   |   | Amount |   |   | Percent of Total |   |
|                              |   |                   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | (Dollars in thousands) |         |
| Transaction and Savings Deposits: |   |                   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing demand       |   |                   | $            | 44,769  |   |   |   | 8.38 | % |   | $ | 28,882 |   |   |   | 6.77 | %  |   | $ | 19,100 |   |   |   | 5.64 | %  |
| Interest bearing demand           |   |                   |         | 109,329 |   |   |   | 20.46 |   |   |   | 67,321 |   |   |   | 15.78 |   |   |   | 46,169 |   |   |   | 13.64 |   |
| Savings and money market          |   |                   |         | 211,105 |   |   |   | 39.52 |   |   |   | 154,740 |   |   |   | 36.27 |   |   |   | 106,641 |   |   |   | 31.5 |   |
| Total non-certificates            |   |                   |         | 365,203 |   |   |   | 68.36 |   |   |   | 250,943 |   |   |   | 58.82 |   |   |   | 171,910 |   |   |   | 50.78 |   |
| Certificates:                     |   |                   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 0.00-1.99%                        |   |                   |         | 85,326  |   |   |   | 15.97 |   |   |   | 77,824 |   |   |   | 18.27 |   |   |   | 1,186 |   |   |   | 0.35 |   |
| 2.00-3.99%                        |   |                   |         | 70,743  |   |   |   | 13.24 |   |   |   | 82,109 |   |   |   | 19.28 |   |   |   | 81,537 |   |   |   | 24.08 |   |
| 4.00-5.99%                        |   |                   |         | 12,586  |   |   |   | 2.36 |   |   |   | 14,636 |   |   |   | 3.43 |   |   |   | 83,540 |   |   |   | 24.68 |   |
| 6.00% and over                    |   |                   |         | 385     |   |   |   | 0.07 |   |   |   | 382 |   |   |   | 0.09 |   |   |   | 371 |   |   |   | 0.11 |   |
| Total certificates                |   |                   |         | 169,040 |   |   |   | 31.64 |   |   |   | 174,951 |   |   |   | 41.08 |   |   |   | 166,634 |   |   |   | 49.22 |   |
|                              |   |                   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits                    |   |                   | $            | 534,243 |   |   |   | 100.00 | % |   | $ | 425,894 |   |   |   | 100.00 | % |   | $ | 338,544 |   |   |   | 100.00 | % |

----

|                                          |   |                   | 0.00-1.99 | %      |   |   | 2.00-3.99 | %      |   |   | 4.00-5.99 | %      |   | 6.00%and over |   |   | Total  |   |    | Percent ofTotal |   |
|-----------------------------------------------|--------|------------------------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|---------------|--------|--------|--------|--------|---------|-----------------|--------|
|                                          |   | (Dollars in thousands) |      |   |   |   |
| Certificates maturing in quarter ending: |   |                   |      |   |   |   |      |   |   |   |      |   |   |          |   |   |   |   |    |            |   |
| March 31, 2011                                |   | $                      | 18,336    |   |   | $      | 9,840     |   |   | $      | 1,726     |   |   | $             | -      |   |   | $      | 29,902  |            |   |   | 17.70 | % |
| June 30, 2011                                 |   |                   | 19,813    |   |   |   | 6,561     |   |   |   | 1,959     |   |   |          | -      |   |   |   | 28,333  |            |   |   | 16.76 |   |
| September 30, 2011                            |   |                   | 20,709    |   |   |   | 8,129     |   |   |   | 1,590     |   |   |          | 385    |   |   |   | 30,813  |            |   |   | 18.23 |   |
| December 31, 2011                             |   |                   | 16,857    |   |   |   | 4,719     |   |   |   | 930       |   |   |          | -      |   |   |   | 22,506  |            |   |   | 13.31 |   |
| March 31, 2012                                |   |                   | 2,103     |   |   |   | 4,954     |   |   |   | 421       |   |   |          | -      |   |   |   | 7,478   |            |   |   | 4.42 |   |
| June 30, 2012                                 |   |                   | 2,958     |   |   |   | 2,550     |   |   |   | 698       |   |   |          | -      |   |   |   | 6,206   |            |   |   | 3.67 |   |
| September 30, 2012                            |   |                   | 1,759     |   |   |   | 3,438     |   |   |   | 793       |   |   |          | -      |   |   |   | 5,990   |            |   |   | 3.54 |   |
| December 31, 2012                             |   |                   | 2,788     |   |   |   | 2,059     |   |   |   | 527       |   |   |          | -      |   |   |   | 5,374   |            |   |   | 3.18 |   |
| March 31, 2013                                |   |                   |      |   |   |   | 2,654     |   |   |   | 165       |   |   |          | -      |   |   |   | 2,819   |            |   |   | 1.67 |   |
| June 30, 2013                                 |   |                   | 1         |   |   |   | 2,754     |   |   |   | 378       |   |   |          | -      |   |   |   | 3,133   |            |   |   | 1.85 |   |
| September 30, 2013                            |   |                   | 2         |   |   |   | 4,909     |   |   |   | 1,504     |   |   |          | -      |   |   |   | 6,415   |            |   |   | 3.79 |   |
| December 31, 2013                             |   |                   | -         |   |   |   | 3,891     |   |   |   | 666       |   |   |          | -      |   |   |   | 4,557   |            |   |   | 2.70 |   |
| Thereafter                                    |   |                   | -         |   |   |   | 14,285    |   |   |   | 1,229     |   |   |          | -      |   |   |   | 15,514  |            |   |   | 9.18 |   |
| Total                                         |   | $                      | 85,326    |   |   | $      | 70,743    |   |   | $      | 12,586    |   |   | $             | 385    |   |   | $      | 169,040 |            |   |   | 100.00 | % |
|                                          |   |                   |      |   |   |   |      |   |   |   |      |   |   |          |   |   |   |   |    |            |   |   |   |   |
| Percent of Total                              |   |                   | 50.47     | %      |   |   | 41.85     | %      |   |   | 7.45      | %      |   |          | 0.23   | %      |   |   | 100.00  | %               |   |   |   |   |

----

|                                                              |   | At or For theYear Ended December 31, |   |
|-------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                              |   | 2010                                 |   |   | 2009 |   |   | 2008 |   |
|                                                              |   | (Dollars in thousands)               |   |
| Maximum Balance:                                                  |   |                                 |   |   |   |   |   |   |   |
|  Federal Home Loan Bank advances                             |   | $                                    | 62,500 |   |   | $ | 52,500 |   |   | $ | 88,000 |   |
|                                                              |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Average Balance:                                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |
|  Federal Home Loan Bank advances                             |   | $                                    | 42,983 |   |   | $ | 47,268 |   |   | $ | 60,800 |   |
|                                                              |   |                                 |   |   |   |   |   |   |   |   |   |   |
|  Average interest rate paid during the period                |   |                                 | 3.70   | % |   |   | 3.87 | % |   |   | 4.09 | % |
|                                                              |   |                                 |   |   |   |   |   |   |   |   |   |   |
| End of Period Balance:                                            |   |                                 |   |   |   |   |   |   |   |   |   |   |
|  Federal Home Loan Bank advances                             |   | $                                    | 62,500 |   |   | $ | 42,500 |   |   | $ | 52,500 |   |
|                                                              |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Weighted average interest rate of Federal Home Loan Bank advances |   |                                 | 2.65   | % |   |   | 3.68 | % |   |   | 3.96 | % |

|                                                                                                      |   | At or For theYear Ended December 31, |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                                                      |   | 2010                                 |   |   | 2009 |   | 2008 |   |
|                                                                                                      |   | (Dollars in thousands)               |   |
| Maximum Balance:                                                                                          |   |                                 |   |   |   |   |   |   |   |
|  Federal funds purchased and securities sold under repurchase agreements                             |   | $                                    | 35,446 |   |   | $ | 53,279 |   |   | $ | 41,497 |   |
|                                                                                                      |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Average Balance:                                                                                          |   |                                 |   |   |   |   |   |   |   |   |   |   |
|  Federal funds purchased and securities sold under repurchase agreements                             |   | $                                    | 34,097 |   |   | $ | 40,112 |   |   | $ | 32,504 |   |
|                                                                                                      |   |                                 |   |   |   |   |   |   |   |   |   |   |
|  Average interest rate paid during the period                                                        |   |                                 | 2.71   | % |   |   | 1.23 | % |   |   | 2.95 | % |
|                                                                                                      |   |                                 |   |   |   |   |   |   |   |   |   |   |
| End of Period Balance:                                                                                    |   |                                 |   |   |   |   |   |   |   |   |   |   |
|  Federal funds purchased and securities sold under repurchase agreements                             |   | $                                    | 32,421 |   |   | $ | 32,843 |   |   | $ | 41,497 |   |
|                                                                                                      |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Weighted average interest rate of Federal funds purchased and securities sold under repurchase agreements |   |                                 | 2.98   | % |   |   | 1.08 | % |   |   | 1.91 | % |

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|                               Location      |   Owned or Leased  | Net Book Value at  December 31, 2010   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|------------------------------------------------------------|
|                                                                                                                                                                                                                       |                              | (In thousands)                                             |
| MAIN OFFICE:                                                                                                                                                                                                               |                              |                                                       |
| 721 North Westover Boulevard                                                                                                                                                                                               |                              |                                                       |
| Albany, GA 31721                                                                                                                                                                                                           | Owned                             | $4,497                                                     |
|                                                                                                                                                                                                                       |                              |                                                       |
| GEORGIA BRANCH OFFICES:                                                                                                                                                                                                    |                              |                                                       |
| Downtown(1)                                                                                                                                                                                                                |                              |                                                       |
| 310 West Oglethorpe Boulevard                                                                                                                                                                                              |                              |                                                       |
| Albany, GA 31701                                                                                                                                                                                                           | Owned                             | 1,080                                                      |
| East Albany                                                                                                                                                                                                                |                              |                                                       |
| 200 Loftus Drive                                                                                                                                                                                                           |                              |                                                       |
| Albany GA 31705                                                                                                                                                                                                            | Owned                             | 663                                                        |
| Slappey                                                                                                                                                                                                                    |                              |                                                       |
| 2801 North Slappey Boulevard                                                                                                                                                                                               |                              |                                                       |
| Albany, GA 31707                                                                                                                                                                                                           | Owned                             | 421                                                        |
| Sylvester                                                                                                                                                                                                                  |                              |                                                       |
| 504 North Main Street                                                                                                                                                                                                      |                              |                                                       |
| Sylvester, GA 31791                                                                                                                                                                                                        | Owned                             | 736                                                        |
| Reidsville                                                                                                                                                                                                                 |                              |                                                       |
| 104 North Main Street                                                                                                                                                                                                      |                              |                                                       |
| Reidsville, Georgia 30453                                                                                                                                                                                                  | Owned                             | 990                                                        |
| Collins                                                                                                                                                                                                                    |                              |                                                       |
| 204 SW Main Street                                                                                                                                                                                                         |                              |                                                       |
| Collins, Georgia 30421                                                                                                                                                                                                     | Owned                             | 123                                                        |
| Adel                                                                                                                                                                                                                       |                              |                                                       |
| 301 W. Fourth Street                                                                                                                                                                                                       |                              |                                                       |
| Adel, Georgia 31620                                                                                                                                                                                                        | Owned                             | 1,169                                                      |
| Baxley                                                                                                                                                                                                                     |                              |                                                       |
| 198 East Parker Street                                                                                                                                                                                                     |                              |                                                       |
| Baxley, Georgia 31513                                                                                                                                                                                                      | Owned                             | 305                                                        |
| Hazlehurst                                                                                                                                                                                                                 |                              |                                                       |
| 22 East Jarman Street                                                                                                                                                                                                      |                              |                                                       |
| Hazlehurst, Georgia 31539                                                                                                                                                                                                  | Owned                             | 232                                                        |
| Statesboro - Main Street                                                                                                                                                                                                   |                              |                                                       |
| 335 South Main Street                                                                                                                                                                                                      |                              |                                                       |
| Statesboro, Georgia 30458                                                                                                                                                                                                  | Owned                             | 1,184                                                      |
| Statesboro - Northside Drive                                                                                                                                                                                               |                              |                                                       |
| 726 Northside Drive                                                                                                                                                                                                        |                              |                                                       |
| Statesboro, Georgia 30458                                                                                                                                                                                                  | Owned                             | 444                                                        |
| Valdosta (3)                                                                                                                                                                                                               |                              |                                                       |
| 103 Roosevelt Drive                                                                                                                                                                                                        |                              |                                                       |
| Valdosta, Georgia 31602                                                                                                                                                                                                    | Leased                            | -                                                          |
| Valdosta  Loan Production Office                                                                                                                                                                                 |                              |                                                       |
| 2935 North Ashley Street                                                                                                                                                                                                   |                              |                                                       |
| Valdosta, Georgia 30253                                                                                                                                                                                                    | Leased                            | -                                                          |
| McDonough  Loan Production Office                                                                                                                                                                                |                              |                                                       |
| 2220 Keys Ferry Court                                                                                                                                                                                                      |                              |                                                       |
| McDonough, Georgia 30253                                                                                                                                                                                                   | Leased                            | -                                                          |
|                                                                                                                                                                                                                       |                              |                                                       |
| FLORIDA BRANCH OFFICES:                                                                                                                                                                                                    |                              |                                                       |
| Ocala-Heath Brook                                                                                                                                                                                                          |                              |                                                       |
| 4726 SW College Road                                                                                                                                                                                                       |                              |                                                       |
| Ocala, Florida 34474                                                                                                                                                                                                       | Owned                             | 3,146                                                      |
| Ocala-Boulevard(2)                                                                                                                                                                                                         |                              |                                                       |
| 1409 East Silver Springs Boulevard                                                                                                                                                                                         |                              |                                                       |
| Ocala, Florida 34470                                                                                                                                                                                                       | Owned                             | 1,880                                                      |
| Lake City                                                                                                                                                                                                                  |                              |                                                       |
| 463 West Duval Street                                                                                                                                                                                                      |                              |                                                       |
| Lake City, FL 32055                                                                                                                                                                                                        | Owned                             | 532                                                        |

----

| (1 | ) | This branch location is held for sale and its carrying value has been adjusted downward to reflect the anticipated sale proceeds.                                                                                                                       |
|----|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2 | ) | The ground at this location is subject to a land lease that expires in 2072 and carries monthly rent of $1,100.  The building at this location is owned by HeritageBank, and the net book value reflects the carrying value for the building. |
| (3 | ) | This branch location is subject to a lease that expires in June 2011 and carries a monthly rent of $3,500.                                                                                                                                              |

|                                           |   | High   |   |   | Low    |   |   | Dividends PaidPer Share(1) |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------------------------|--------|
|                                           |   |   |   |   |   |   |   |                       |   |
| 2010                                           |   |   |   |   |   |   |   |                       |   |
| Fourth quarter (10/01/10 through 12/31/10)     |   | $      | 12.75  |   |   | $      | 9.32   |                       |   | $ | 0.11 |   |
| Third quarter (07/01/2010 through 09/30/2010)  |   |   | 14.07  |   |   |   | 9.53   |                       |   |   | 0.11 |   |
| Second quarter (04/01/2010-06/30/2010)         |   |   | 15.52  |   |   |   | 12.92  |                       |   |   | 0.11 |   |
| First quarter (01/01/2010-03/31/2010)          |   |   | 14.55  |   |   |   | 9.26   |                       |   |   | 0.11 |   |
|                                           |   |   |   |   |   |   |   |                       |   |   |   |   |
| 2009                                           |   |   |   |   |   |   |   |                       |   |   |   |   |
| Fourth quarter (10/1/2009 – 12/31/2009)  |   | $      | 10.55  |   |   | $      | 7.91   |                       |   | $ | 0.10 |   |
| Third quarter (07/01/2009 – 09/30/2009)  |   |   | 12.88  |   |   |   | 9.28   |                       |   |   | 0.10 |   |
| Second quarter (04/01/2009 – 06/30/2009) |   |   | 11.97  |   |   |   | 7.46   |                       |   |   | 0.10 |   |
| First quarter (01/01/2009 – 03/31/2009)  |   |   | 10.74  |   |   |   | 6.06   |                       |   |   | 0.10 |   |
|                                           |   |   |   |   |   |   |   |                       |   |   |   |   |
| 2008                                           |   |   |   |   |   |   |   |                       |   |   |   |   |
| Fourth quarter (10/01/2008 – 12/31/2008) |   | $      | 13.13  |   |   | $      | 9.85   |                       |   | $ | 0.08 |   |
| Third quarter (07/01/2008 – 09/30/2008)  |   |   | 14.32  |   |   |   | 9.73   |                       |   |   | 0.08 |   |
| Second quarter (04/01/2008 – 06/30/2008) |   |   | 14.92  |   |   |   | 13.13  |                       |   |   | 0.08 |   |
| First quarter (01/01/2008 – 03/31/2008)  |   |   | 15.51  |   |   |   | 12.96  |                       |   |   | 0.08 |   |

| ________________1.  All dividends paid by the Predecessor were paid to all stockholders, except Heritage MHC, which waived the dividend. |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|

----

|                                                            |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights |    |   | Weighted average exercise price of outstanding options, warrants and rights |   |   | Number of securities remaining available for future issuance under equity compensation plans |   |
|-----------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|---------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------|--------|
| Equity compensation plans approved by security holders          |   |                                                                                        | 416,791 |   |                                                                        | $      | 14.90  |                                                                                         |   |   | 36,446 |   |
| Equity compensation plans not approved by security holders |   |                                                                                        | -       |   |                                                                        |   | -      |                                                                                         |   |   | - |   |
|                                                            |   |                                                                                        |    |   |                                                                        |   |   |                                                                                         |   |   |   |   |
| Total                                                           |   |                                                                                        | 416,791 |   |                                                                        | $      | 14.90  |                                                                                         |   |   | 36,446 |   |

----

----

|                                                                                            |   | December 31,   |    |
|-------------------------------------------------------------------------------------------------|--------|----------------|---------|
|                                                                                            |   | 2010           |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                                            |   | (In thousands) |    |
| Selected Financial Condition Data:                                                              |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                    |   | $              | 755,436 |   |   | $ | 571,948 |   |   | $ | 502,058 |   |   | $ | 468,672 |   |   | $ | 413,330 |   |
| Loans, net                                                                                      |   |           | 410,896 |   |   |   | 328,078 |   |   |   | 297,537 |   |   |   | 300,257 |   |   |   | 272,700 |   |
| Securities available for sale,at fair value:                                                    |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     U.S. government and agency securities and U.S. Treasury Securities |   |           | 89,032  |   |   |   | 30,462 |   |   |   | 21,165 |   |   |   | 14,996 |   |   |   | 29,439 |   |
|     Corporate and other debt securities                                     |   |           | 1,700   |   |   |   | 1,910 |   |   |   | 1,789 |   |   |   | 3,854 |   |   |   | 4,106 |   |
|     Mortgage-backed securities                                              |   |           | 128,143 |   |   |   | 58,410 |   |   |   | 65,408 |   |   |   | 55,598 |   |   |   | 28,044 |   |
|     State and municipal                                                     |   |           | 19,160  |   |   |   | 29,122 |   |   |   | 27,511 |   |   |   | 31,878 |   |   |   | 16,316 |   |
|     Equity and other investments                                            |   |           | 342     |   |   |   | 621 |   |   |   | 268 |   |   |   | 1,540 |   |   |   | 6,667 |   |
| Federal Home Loan Bank stock, at cost                                                      |   |           | 3,703   |   |   |   | 3,253 |   |   |   | 3,186 |   |   |   | 2,970 |   |   |   | 2,499 |   |
| Other equity securities, at cost                                                                |   |           | 1,010   |   |   |   | 1,010 |   |   |   | 1,010 |   |   |   | - |   |   |   | - |   |
| Deposits                                                                                        |   |           | 534,243 |   |   |   | 426,607 |   |   |   | 338,546 |   |   |   | 330,629 |   |   |   | 299,189 |   |
| Federal Home Loan Bank advances                                                                 |   |           | 62,500  |   |   |   | 42,500 |   |   |   | 52,500 |   |   |   | 50,000 |   |   |   | 40,000 |   |
| Federal funds purchased and securities sold under repurchase agreements                         |   |           | 32,421  |   |   |   | 32,843 |   |   |   | 41,497 |   |   |   | 15,288 |   |   |   | 5,531 |   |
| Stockholders’ equity                                                                      |   |           | 119,340 |   |   |   | 60,817 |   |   |   | 62,213 |   |   |   | 65,592 |   |   |   | 62,808 |   |
|                                                                                            |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                             |   | Year Ended December 31, |   |
|----------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                             |   | 2010                    |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                             |   | (In thousands)          |   |
| Selected Operations Data:                                                        |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest income                                                            |   | $                       | 28,439 |   |   | $ | 23,401 |   |   | $ | 27,195 |   |   | $ | 27,997 |   |   | $ | 22,609 |   |
| Total interest expense                                                           |   |                    | 8,274  |   |   |   | 8,794 |   |   |   | 12,494 |   |   |   | 13,462 |   |   |   | 8,377 |   |
| Net interest income                                                              |   |                    | 20,165 |   |   |   | 14,607 |   |   |   | 14,701 |   |   |   | 14,535 |   |   |   | 14,232 |   |
| Provision for loan losses                                                        |   |                    | 5,500  |   |   |   | 7,500 |   |   |   | 3,350 |   |   |   | 1,178 |   |   |   | 695 |   |
|     Net interest income after provision for loan losses |   |                    | 14,665 |   |   |   | 7,107 |   |   |   | 11,351 |   |   |   | 13,357 |   |   |   | 13,537 |   |
| Fees and service charges                                                         |   |                    | 6,177  |   |   |   | 4,953 |   |   |   | 5,245 |   |   |   | 5,129 |   |   |   | 4,121 |   |
| Impairment loss on securities                                                    |   |                    | -      |   |   |   | - |   |   |   | (3,119 | ) |   |   | - |   |   |   | - |   |
| Gain (loss) on sales of investment securities                               |   |                    | 294    |   |   |   | 909 |   |   |   | 235 |   |   |   | (355 | ) |   |   | (59 | ) |
| Life insurance proceeds                                                          |   |                    | 916    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Bargain purchase gain                                                            |   |                    | 2,722  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other noninterest income                                                         |   |                    | 2,375  |   |   |   | 1,925 |   |   |   | 2,227 |   |   |   | 1,916 |   |   |   | 1,548 |   |
|     Total noninterest income                                 |   |                    | 12,484 |   |   |   | 7,787 |   |   |   | 4,588 |   |   |   | 6,690 |   |   |   | 5,610 |   |
| Total noninterest expense                                                        |   |                    | 26,050 |   |   |   | 18,271 |   |   |   | 17,429 |   |   |   | 17,976 |   |   |   | 16,060 |   |
| Income before tax (benefit)                                                      |   |                    | 1,099  |   |   |   | (3,377 | ) |   |   | (1,490 | ) |   |   | 2,071 |   |   |   | 3,086 |   |
|     Income tax provision (benefit)                           |   |                    | (307   | ) |   |   | (1,724 | ) |   |   | (1,228 | ) |   |   | (850 | ) |   |   | 732 |   |
|         Net income (loss)                |   | $                       | 1,406  |   |   | $ | (1,653 | ) |   | $ | (262 | ) |   | $ | 2,921 |   |   | $ | 2,354 |   |

----

|                                                                                                              |   | Year Ended December 31, |      |
|-------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                                                              |   | 2010                    |      |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Selected Financial Ratios and Other Data:                                                                         |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance Ratios:                                                                                               |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                                                                          |   |                    | 0.22      | % |   |   | (0.34 | %) |   |   | (0.05 | %) |   |   | 0.66 | % |   |   | 0.63 | % |
| Return on average equity                                                                                          |   |                    | 2.09      | % |   |   | (2.62 | %) |   |   | (0.41 | %) |   |   | 4.55 | % |   |   | 3.44 | % |
| Dividend payout ratio                                                                                             |   |                    |      |   |   | NM |   |   | NM |   |   |   | 26.12 | % |   |   | 28.64 | % |
| Net interest spread                                                                                               |   |                    | 3.55      | % |   |   | 3.31 | % |   |   | 3.16 | % |   |   | 3.22 | % |   |   | 3.50 | % |
| Net interest margin                                                                                               |   |                    | 3.66      | % |   |   | 3.49 | % |   |   | 3.45 | % |   |   | 3.70 | % |   |   | 4.19 | % |
| Operating expense to average total assets(1)                                                                      |   |                    | 4.04      | % |   |   | 3.72 | % |   |   | 3.55 | % |   |   | 4.05 | % |   |   | 4.29 | % |
| Average interest-earning assets to average interest-bearing liabilities                                           |   |                    | 107.36    | % |   |   | 108.97 | % |   |   | 110.34 | % |   |   | 114.66 | % |   |   | 116.64 | % |
| Efficiency ratio                                                                                                  |   |                    | 79.79     | % |   |   | 81.59 | % |   |   | 90.36 | % |   |   | 84.69 | % |   |   | 80.94 | % |
| Total loans to total deposits                                                                                     |   |                    | 78.43     | % |   |   | 78.32 | % |   |   | 89.35 | % |   |   | 92.15 | % |   |   | 92.51 | % |
|                                                                                                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Asset Quality Ratios:                                                                                             |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming assets to total assets at end of period(1)                                                          |   |                    | 1.83      | % |   |   | 1.81 | % |   |   | 1.87 | % |   |   | 0.76 | % |   |   | 0.14 | % |
| Nonperforming assets to total assets at end of period, excluding purchased loans                                  |   |                    | 1.53      | % |   |   | 1.47 | % |   |   | 1.87 | % |   |   | 0.76 | % |   |   | 0.14 | % |
| Nonperforming assets and troubled debt restructurings to total assets at end of period(1)                         |   |                    | 2.67      | % |   |   | 2.35 | % |   |   | 1.87 | % |   |   | 0.76 | % |   |   | 0.14 | % |
| Nonperforming assets and troubled debt restructurings to total assets at end of period, excluding purchased loans |   |                    | 2.65      | % |   |   | 2.03 | % |   |   | 1.87 | % |   |   | 0.76 | % |   |   | 0.14 | % |
| Nonperforming loans to total loans(1)                                                                             |   |                    | 2.37      | % |   |   | 2.53 | % |   |   | 2.41 | % |   |   | 1.05 | % |   |   | 0.09 | % |
| Nonperforming loans to total loans, excluding purchased loans                                                     |   |                    | 2.34      | % |   |   | 2.42 | % |   |   | 2.41 | % |   |   | 1.05 | % |   |   | 0.09 | % |
| Nonperforming loans and troubled debt restructurings to total loans(1)                                            |   |                    | 3.94      | % |   |   | 3.48 | % |   |   | 2.41 | % |   |   | 1.05 | % |   |   | 0.09 | % |
| Nonperforming loans and troubled debt restructurings to total loans, excluding purchased loans                    |   |                    | 4.24      | % |   |   | 3.49 | % |   |   | 2.41 | % |   |   | 1.05 | % |   |   | 0.09 | % |
| Allowance for loan losses to non-performing loans(1)                                                              |   |                    | 81.47     | % |   |   | 71.61 | % |   |   | 67.99 | % |   |   | 137.49 | % |   |   | 1,582.00 | % |
| Allowance for loan losses to non-performing loans, excluding purchased loans                                      |   |                    | 100.06    | % |   |   | 83.74 | % |   |   | 67.99 | % |   |   | 137.49 | % |   |   | 1,582.00 | % |
| Allowance for loan losses to total loans                                                                          |   |                    | 1.93      | % |   |   | 1.81 | % |   |   | 1.64 | % |   |   | 1.45 | % |   |   | 1.47 | % |
| Allowance for loan losses to total loans, excluding purchased loans                                               |   |                    | 2.34      | % |   |   | 2.07 | % |   |   | 1.64 | % |   |   | 1.45 | % |   |   | 1.47 | % |
| Net charge offs to average loans outstanding(1)                                                                   |   |                    | 0.91      | % |   |   | 2.13 | % |   |   | 1.58 | % |   |   | 0.29 | % |   |   | 0.09 | % |
| Net charge offs to average loans outstanding, excluding purchased loans(1)                                        |   |                    | 1.09      | % |   |   | 7.70 | % |   |   | 1.58 | % |   |   | 0.29 | % |   |   | 0.09 | % |
|                                                                                                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                                                                                                   |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tangible equity to total assets at end of period                                                                  |   |                    | 15.41     | % |   |   | 10.36 | % |   |   | 12.19 | % |   |   | 13.78 | % |   |   | 14.95 | % |
| Equity to total assets at end of period                                                                           |   |                    | 15.80     | % |   |   | 10.63 | % |   |   | 12.39 | % |   |   | 14.00 | % |   |   | 15.22 | % |
| Average equity to average assets                                                                                  |   |                    | 10.46     | % |   |   | 12.84 | % |   |   | 13.05 | % |   |   | 14.47 | % |   |   | 18.29 | % |
|                                                                                                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common Share Data and Other Ratios:                                                                               |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Gross shares outstanding  at year-end(3)                                        |   |                    | 8,710,511 |   |   |   | 9,595,303 |   |   |   | 9,593,628 |   |   |   | 9,586,406 |   |   |   | 9,590,957 |   |
|     Less treasury stock(3)                                                                    |   |                    | -         |   |   |   | 883,843 |   |   |   | 832,253 |   |   |   | 515,967 |   |   |   | 465,039 |   |
|     Net shares outstanding at year-end(3)                                                     |   |                    | 8,710,511 |   |   |   | 8,711,460 |   |   |   | 8,761,375 |   |   |   | 9,070,439 |   |   |   | 9,125,918 |   |
|     Shares owned by Heritage, MHC(2) (3)                                                      |   |                    | -         |   |   |   | 6,591,756 |   |   |   | 6,591,756 |   |   |   | 6,591,756 |   |   |   | 6,591,756 |   |
|     Public shares outstanding(3)                                                              |   |                    | 8,710,511 |   |   |   | 2,119,704 |   |   |   | 2,169,619 |   |   |   | 2,478,683 |   |   |   | 2,534,162 |   |
|     Unearned ESOP shares(3)                                                                   |   |                    | 492,320   |   |   |   | 203,045 |   |   |   | 239,963 |   |   |   | 276,880 |   |   |   | 313,798 |   |
|                                                                                                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Book value per share(3)                                                                   |   | $                       | 14.52     |   |   | $ | 7.14 |   |   | $ | 7.30 |   |   | $ | 7.46 |   |   | $ | 7.13 |   |
|     Tangible book value per share(3)                                                          |   | $                       | 14.17     |   |   | $ | 6.96 |   |   | $ | 7.18 |   |   | $ | 7.35 |   |   | $ | 7.01 |   |
|     Basic income (loss) per share(3)                                                          |   | $                       | 0.17      |   |   | $ | (0.20 | ) |   | $ | (0.03 | ) |   | $ | 0.34 |   |   | $ | 0.26 |   |
|     Diluted income (loss) per share(3)                                                        |   | $                       | 0.17      |   |   | $ | (0.20 | ) |   | $ | (0.03 | ) |   | $ | 0.34 |   |   | $ | 0.26 |   |
|                                                                                                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividends paid on public shares outstanding                                                                  |   | $                       | 690,125   |   |   | $ | 720,775 |   |   | $ | 786,914 |   |   | $ | 762,971 |   |   | $ | 673,936 |   |
| Cash dividends paid to Heritage MHC(2)                                                                            |   |                    | 30,600    |   |   |   | - |   |   |   | - |   |   |   | 42,900 |   |   |   | - |   |
| Cash dividends waived by Heritage MHC                                                                             |   |                    | 2,802,195 |   |   |   | 2,518,040 |   |   |   | 2,203,285 |   |   |   | 1,845,630 |   |   |   | 1,573,775 |   |
| Pro forma cash dividends that would have been paid  without waiver(2)(3)                                |   | $                       | 3,522,920 |   |   | $ | 3,238,765 |   |   | $ | 2,990,199 |   |   | $ | 2,651,501 |   |   | $ | 2,247,711 |   |
| Cash dividends per share (excluding shares held by  Heritag  MHC)(2)(3)                       |   | $                       | 0.43      |   |   | $ | 0.32 |   |   | $ | 0.33 |   |   | $ | 0.29 |   |   | $ | 0.24 |   |
| Pro forma cash dividends per share (on all outstanding share with no waiver by Heritage MHC) (3)             |   | $                       | 0.08      |   |   | $ | 0.08 |   |   | $ | 0.07 |   |   | $ | 0.08 |   |   | $ | 0.07 |   |
|                                                                                                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Data:                                                                                                       |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number of full-service offices                                                                                    |   |                    | 16        |   |   |   | 10 |   |   |   | 8 |   |   |   | 7 |   |   |   | 6 |   |

| ________________1. Purchased loans are recorded in our assets at a discount from the contractual principal value. See Note 2 of the Notes to Consolidated Financial Statements in Item 8. These purchased loans are included in nonperforming loans in the amount of their contractual principal balances when they reach 90 days past due or greater. As of December 31, 2010 and 2009, respectively, $1.9 million and $1.2 million in purchased loans were included in nonperforming loans. We had no purchased loans for the other periods presented.2. Effective November 30, 2010, Heritage MHC was eliminated in the second-step conversion, and all dividends declared from that date will be paid to all stockholders.3. All prior year common share data and per share calculations have been adjusted to reflect the 0.8377 share exchange. |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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|                                         |   | At December 31,        |    |   | Amount |   |    | Percent |   |
|----------------------------------------------|--------|------------------------|---------|--------|--------|--------|---------|---------|--------|
|                                         |   | 2010                   |    |   | 2009   |   |    | Change  |   |   | Change |   |
|                                         |   | (Dollars in thousands) |    |
| Cash and due from banks                      |   | $                      | 28,803  |   |   | $      | 14,922  |    |   | $ | 13,881 |   |   |   | 93.0 | % |
| Interest-bearing deposits in banks           |   |                   | 10,912  |   |   |   | 43,237  |    |   |   | (32,325 | ) |   |   | 74.8 |   |
| Federal funds sold                           |   |                   | 2,700   |   |   |   | 11,340  |    |   |   | (8,640 | ) |   |   | 76.2 |   |
| Securities available for sale, at fair value |   |                   | 238,377 |   |   |   | 120,527 |    |   |   | 117,850 |   |   |   | 97.8 |   |
|   Total                            |   | $                      | 280,792 |   |   | $      | 190,026 |    |   | $ | 90,766 |   |   |   | 47.8 | % |

----

|                                                  |   | At December 31,        |    |   | Amount |   |    | Percent |   |
|-------------------------------------------------------|--------|------------------------|---------|--------|--------|--------|---------|---------|--------|
|                                                  |   | 2010                   |    |   | 2009   |   |    | Change  |   |   | Change |   |
|                                                  |   | (Dollars in thousands) |    |
| Residential mortgages                                 |   | $                      | 110,961 |   |   | $      | 81,255  |    |   | $ | 29,706 |   |   |   | 36.56 | % |
| Multifamily                                           |   |                   | 10,770  |   |   |   | 11,650  |    |   |   | (880 | ) |   |   | (7.55 | ) |
| Commercial real estate                                |   |                   | 97,482  |   |   |   | 71,014  |    |   |   | 26,469 |   |   |   | 37.27 |   |
| Farmland                                              |   |                   | 11,775  |   |   |   | 9,013   |    |   |   | 2,762 |   |   |   | 30.64 |   |
| Construction and land                                 |   |                   | 22,426  |   |   |   | 28,003  |    |   |   | (5,576 | ) |   |   | (19.91 | ) |
| Home equity                                           |   |                   | 16,638  |   |   |   | 17,313  |    |   |   | (675 | ) |   |   | (3.90 | ) |
| Consumer                                              |   |                   | 25,275  |   |   |   | 34,981  |    |   |   | (9,706 | ) |   |   | (27.75 | ) |
| Commercial business                                   |   |                   | 50,195  |   |   |   | 45,785  |    |   |   | 4,410 |   |   |   | 9.63 |   |
| Purchased loans, net of fair market value adjustments |   |                   | 73,475  |   |   |   | 35,126  |    |   |   | 38,349 |   |   |   | 109.18 |   |
|   Total                                     |   | $                      | 418,997 |   |   | $      | 334,138 |    |   | $ | 84,859 |   |   |   | 25.4 | % |

----

|               |   | Non-performing Assets at December 31, |   |
|--------------------|--------|---------------------------------------|--------|
|               |   | 2010                                  |   |   | 2009 |   |   | AmountChange |   |   | PercentChange |   |
|               |   | (Dollars in thousands)                |   |
| Non-accruing loans |   | $                                     | 9,944  |   |   | $ | 8,463 |   |   | $ | 1,481 |   |   |   | 17.5 | % |
| Foreclosed assets  |   |                                  | 3,689  |   |   |   | 1,795 |   |   |   | 1,894 |   |   |   | 105.5 |   |
| Total              |   | $                                     | 13,633 |   |   | $ | 10,258 |   |   | $ | 3,375 |   |   |   | 32.9 | % |

----

|                                              |   | At and For the Year Ended |   |
|---------------------------------------------------|--------|---------------------------|--------|
|                                              |   | December 31,2010          |   |   | December 31,2009 |   |
|                                              |   | (Dollars in thousands)    |   |
| Allowance for loan losses to total loans          |   |                      | 1.93   | % |   |   | 1.81 | % |
| Allowance for loan losses to average loans        |   |                      | 2.13   |   |   |   | 2.02 |   |
| Allowance for loan losses to non-performing loans |   |                      | 81.47  |   |   |   | 71.61 |   |
|                                              |   |                      |   |   |   |   |   |   |
| Loans 30 to 89 days past due and still accruing   |   | $                         | 2,499  |   |   | $ | 3,247 |   |
|                                              |   |                      |   |   |   |   |   |   |
| Nonaccrual loans                                  |   | $                         | 9,944  |   |   | $ | 8,463 |   |
| Loans 90 days past due and still accruing         |   |                      | -      |   |   |   | - |   |
| Total non-performing loans                        |   |                      | 9,944  |   |   |   | 8,463 |   |
| Other real estate owned and repossessed assets    |   |                      | 3,689  |   |   |   | 1,795 |   |
| Total non-performing assets                       |   | $                         | 13,633 |   |   | $ | 10,258 |   |
|                                              |   |                      |   |   |   |   |   |   |
| Non-performing loans to total loans               |   |                      | 2.37   | % |   |   | 2.53 | % |
| Non-performing assets to total assets             |   |                      | 1.83   |   |   |   | 1.81 |   |
| Net charge-offs to average loans (annualized)     |   |                      | 0.91   |   |   |   | 2.13 |   |
| Net charge-offs                                   |   | $                         | 3,459  |   |   | $ | 6,391 |   |

----

|                                              |   | At and For the year ended |   |
|---------------------------------------------------|--------|---------------------------|--------|
|                                              |   | December 31,2010          |   |   | December 31,2009 |   |
|                                              |   | (Dollars in thousands)    |   |
| Allowance for loan losses to total loans          |   |                      | 2.34   | % |   |   | 2.07 | % |
| Allowance for loan losses to non-performing loans |   |                      | 100.06 |   |   |   | 83.74 |   |
|                                              |   |                      |   |   |   |   |   |   |
| Loans 30 to 89 days past due and still accruing   |   | $                         | 1,561  |   |   | $ | 1,826 |   |
|                                              |   |                      |   |   |   |   |   |   |
| Nonaccrual loans                                  |   | $                         | 8,096  |   |   | $ | 7,237 |   |
| Loans 90 days past due and still accruing         |   |                      | -      |   |   |   | - |   |
| Total non-performing loans                        |   |                      | 8,096  |   |   |   | 7,237 |   |
| Other real estate owned and repossessed assets    |   |                      | 3,453  |   |   |   | 1,190 |   |
| Total non-performing assets                       |   | $                         | 11,549 |   |   | $ | 8,427 |   |
|                                              |   |                      |   |   |   |   |   |   |
| Non-performing loans to total loans               |   |                      | 2.34   | % |   |   | 2.42 | % |
| Non-performing assets to total assets             |   |                      | 1.53   |   |   |   | 1.47 |   |
| Net charge-offs to average loans                  |   |                      | 1.09   |   |   |   | 2.19 |   |
| Net charge-offs                                   |   | $                         | 3,459  |   |   | $ | 6,391 |   |

----

|                   |   | As of December 31, 2010 |    |   | As of December 31, 2009 |   |
|------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|                   |   | Amount                  |    |   | Wtd. Avg.Rate           |   |   | Amount |   |   | Wtd. Avg.Rate |   |
| Checking (noninterest) |   | $                       | 44,769  |   |                    | $      | 0.00 | % |   | $ | 28,882 |   |   |   | 0.00 | % |
| NOW (interest)         |   |                    | 109,329 |   |                    |   | 1.00 |   |   |   | 67,322 |   |   |   | 1.05 |   |
| Savings                |   |                    | 48,762  |   |                    |   | 0.22 |   |   |   | 39,761 |   |   |   | 0.21 |   |
| Money Market           |   |                    | 162,343 |   |                    |   | 1.38 |   |   |   | 115,691 |   |   |   | 1.72 |   |
| Certificates           |   |                    | 169,040 |   |                    |   | 1.65 |   |   |   | 174,950 |   |   |   | 3.13 |   |
| Total                  |   | $                       | 534,243 |   |                    |   | 1.28 |   |   | $ | 426,606 |   |   |   | 2.06 |   |

----

|                                                                               |   | Year Ended December 31,   |    |
|------------------------------------------------------------------------------------|--------|---------------------------|---------|
|                                                                               |   | 2010                      |    |   | 2009 |   |   | 2008 |   |
|                                                                               |   | AverageOutstandingBalance |    |   | InterestEarned/Paid |   |   | Yield/Rate |   |   | AverageOutstandingBalance |   |   | InterestEarned/Paid |   |   | Yield/Rate |   |   | AverageOutstandingBalance |   |   | InterestEarned/Paid |   |   | Yield/Rate |   |
|                                                                               |   | (Dollars in thousands)    |    |
| Interest-Earning Assets:                                                           |   |                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                              |   | $                         | 379,461 |   |   | $ | 23,800 |   |   |   | 6.28 | % |   | $ | 299,399 |   |   | $ | 18,555 |   |   |   | 6.21 | % |   | $ | 310,985 |   |   | $ | 20,882 |   |   |   | 6.70 | % |
| Loans Held for Sale                                                                |   |                      | 235     |   |   |   | 10 |   |   |   | 4.26 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Taxable investment securities                                                      |   |                      | 118,204 |   |   |   | 3,495 |   |   |   | 2.96 |   |   |   | 84,455 |   |   |   | 3,604 |   |   |   | 4.27 |   |   |   | 88,896 |   |   |   | 4,890 |   |   |   | 5.50 |   |
| Tax-exempt investment securities                                                   |   |                      | 24,097  |   |   |   | 960 |   |   |   | 3.98 |   |   |   | 29,883 |   |   |   | 1,174 |   |   |   | 5.95 |   |   |   | 28,255 |   |   |   | 1,176 |   |   |   | 6.30 |   |
| Federal funds sold                                                                 |   |                      | 17,472  |   |   |   | 45 |   |   |   | 0.26 |   |   |   | 21,102 |   |   |   | 54 |   |   |   | 0.25 |   |   |   | 14,316 |   |   |   | 232 |   |   |   | 1.62 |   |
| Interest-bearing   deposits with banks                              |   |                      | 26,075  |   |   |   | 129 |   |   |   | 0.50 |   |   |   | 1,931 |   |   |   | 14 |   |   |   | 0.72 |   |   |   | 630 |   |   |   | 15 |   |   |   | 2.44 |   |
| Total interest- earning assets                                                |   |                      | 565,544 |   |   |   | 28,439 |   |   |   | 5.03 |   |   |   | 436,770 |   |   |   | 23,401 |   |   |   | 5.50 |   |   |   | 443,082 |   |   |   | 27,195 |   |   |   | 6.26 |   |
|                                                                               |   |                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Liabilities:                                                      |   |                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand                                                            |   |                      | 92,147  |   |   |   | 917 |   |   |   | 1.00 |   |   |   | 50,679 |   |   |   | 534 |   |   |   | 1.05 |   |   |   | 43,102 |   |   |   | 486 |   |   |   | 1.12 |   |
| Savings and money market                                                           |   |                      | 186,870 |   |   |   | 2,030 |   |   |   | 1.09 |   |   |   | 122,453 |   |   |   | 1,553 |   |   |   | 1.27 |   |   |   | 95,822 |   |   |   | 1,390 |   |   |   | 1.46 |   |
| Retail time deposits                                                               |   |                      | 159,366 |   |   |   | 2,554 |   |   |   | 1.60 |   |   |   | 122,332 |   |   |   | 3,788 |   |   |   | 3.10 |   |   |   | 126,120 |   |   |   | 5,283 |   |   |   | 4.18 |   |
| Wholesale time   deposits                                           |   |                      | 11,293  |   |   |   | 258 |   |   |   | 2.29 |   |   |   | 17,981 |   |   |   | 597 |   |   |   | 3.32 |   |   |   | 43,215 |   |   |   | 1,884 |   |   |   | 4.35 |   |
| Borrowings                                                                         |   |                      | 77,081  |   |   |   | 2,515 |   |   |   | 3.26 |   |   |   | 87,380 |   |   |   | 2,322 |   |   |   | 2.66 |   |   |   | 93,304 |   |   |   | 3,451 |   |   |   | 3.69 |   |
| Total interest- bearing liabilities                                           |   |                      | 526,757 |   |   |   | 8,274 |   |   |   | 1.57 |   |   |   | 400,825 |   |   |   | 8,794 |   |   |   | 2.19 |   |   |   | 401,563 |   |   |   | 12,494 |   |   |   | 3.10 |   |
|                                                                               |   |                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                |   |                      |    |   |   | $ | 20,165 |   |   |   |   |   |   |   |   |   |   | $ | 14,607 |   |   |   |   |   |   |   |   |   |   | $ | 14,701 |   |   |   |   |   |
| Net interest rate   spread                                          |   |                      |    |   |   |   |   |   |   |   | 3.55 | % |   |   |   |   |   |   |   |   |   |   | 3.31 | % |   |   |   |   |   |   |   |   |   |   | 3.16 | % |
| Net earning assets                                                                 |   | $                         | 38,787  |   |   |   |   |   |   |   |   |   |   | $ | 35,945 |   |   |   |   |   |   |   |   |   |   | $ | 41,519 |   |   |   |   |   |   |   |   |   |
| Net interest margin                                                                |   |                      |    |   |   |   |   |   |   |   | 3.66 | % |   |   |   |   |   |   |   |   |   |   | 3.49 | % |   |   |   |   |   |   |   |   |   |   | 3.45 | % |
|                                                                               |   |                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average interest-earning assets to average interest- bearing liabilities |   |                      | 1.07    | x |   |   |   |   |   |   |   |   |   |   | 1.09 | x |   |   |   |   |   |   |   |   |   |   | 1.10 | x |   |   |   |   |   |   |   |   |

----

|                                 |   | Year Ended December 31,   |   |   | Year Ended December 31, |   |   | Year Ended December 31,   |   |
|--------------------------------------|--------|---------------------------|--------|--------|-------------------------|--------|--------|---------------------------|--------|
|                                 |   | 2010 vs. 2009             |   |   | 2009 vs. 2008           |   |   | 2008 vs. 2007             |   |
|                                 |   | Increase (Decrease)Due to |   |   | TotalIncrease           |   |   | Increase (Decrease)Due to |   |   | TotalIncrease |   |   | Increase (Decrease)Due to |   |   | TotalIncrease |   |
|                                 |   | Volume                    |   |   | Rate                    |   |   | (Decrease)                |   |   | Volume |   |   | Rate |   |   | (Decrease) |   |   | Volume |   |   | Rate |   |   | (Decrease) |   |
|                                 |   | (Dollars in thousands)    |   |
| Interest-earning assets:             |   |                      |   |   |                    |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                |   | $                         | 4,827  |   |                    | $      | 417    |                      |   |  $ | 5,244 |   |   | $ | (592 | ) |   | $ | (1,735 | ) |   | $ | (2,327 | ) |   | $ | 1,687 |   |   | $ | (2,965 | ) |   | $ | (1,278 | ) |
| Loans held for sale                  |   |                      | 10     |   |                    |   | -      |                      |   |   | 10 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable investment securities        |   |                      | 1,012  |   |                    |   | (1,121 | )                         |   |   | (109 | ) |   |   | (266 | ) |   |   | (1,020 | ) |   |   | (1,286 | ) |   |   | 245 |   |   |   | 425 |   |   |   | 670 |   |
| Tax exempt investment securities     |   |                      | (245   | )      |                    |   | 31     |                      |   |   | (214 | ) |   |   | 6 |   |   |   | (8 | ) |   |   | (2 | ) |   |   | 102 |   |   |   | 30 |   |   |   | 132 |   |
| Federal funds sold                   |   |                      | (10    | )      |                    |   | 2      |                      |   |   | (8 | ) |   |   | 77 |   |   |   | (255 | ) |   |   | (178 | ) |   |   | 152 |   |   |   | (464 | ) |   |   | (312 | ) |
| Interest bearing deposits with banks |   |                      | 121    |   |                    |   | (6     | )                         |   |   | 115 |   |   |   | 15 |   |   |   | (16 | ) |   |   | (1 | ) |   |   | (931 | ) |   |   | 917 |   |   |   | (14 | ) |
|                                 |   |                      |   |   |                    |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets        |   | $                         | 5,715  |   |                    | $      | (677   | )                         |   | $ | 5,038 |   |   | $ | (760 | ) |   | $ | (3,034 | ) |   |   | (3,794 | ) |   | $ | 1,255 |   |   | $ | (2,057 | ) |   |   | (802 | ) |
|                                 |   |                      |   |   |                    |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:        |   |                      |   |   |                    |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 |   |                      |   |   |                    |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand              |   |                      | 410    |   |                    |   | (27    | )                         |   |   | 383 |   |   | $ | 81 |   |   | $ | (33 | ) |   | $ | 48 |   |   | $ | 63 |   |   | $ | 55 |   |   |   | 118 |   |
| Savings and money market             |   |                      | 968    |   |                    |   | (490   | )                         |   |   | 478 |   |   |   | 509 |   |   |   | (346 | ) |   |   | 163 |   |   |   | (805 | ) |   |   | (1,212 | ) |   |   | (2,017 | ) |
| Retail time deposits                 |   |                      | (162   | )      |                    |   | (1,072 | )                         |   |   | (1,234 | ) |   |   | (148 | ) |   |   | (1,347 | ) |   |   | (1,495 | ) |   |   | (97 | ) |   |   | (927 | ) |   |   | (1,024 | ) |
| Wholesale time deposits              |   |                      | (187   | )      |                    |   | (154   | )                         |   |   | (341 | ) |   |   | (877 | ) |   |   | (410 | ) |   |   | (1,287 | ) |   |   | (1,289 | ) |   |   | 2,397 |   |   |   | 1,108 |   |
| Borrowings                           |   |                      | (146   | )      |                    |   | 340    |                      |   |   | 194 |   |   |   | (432 | ) |   |   | (697 | ) |   |   | (1,129 | ) |   |   | 1,372 |   |   |   | (525 | ) |   |   | 847 |   |
|                                 |   |                      |   |   |                    |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities   |   | $                         | 883    |   |                    |   | (1,403 | )                         |   |   | (520 | ) |   | $ | (867 | ) |   | $ | (2,833 | ) |   |   | (3,700 | ) |   | $ | (756 | ) |   | $ | (212 | ) |   |   | (968 | ) |
|                                 |   |                      |   |   |                    |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                  |   |                      |   |   |                    |   |   |                      |   |   | 5,558 |   |   |   |   |   |   |   |   |   |   | $ | (94 | ) |   |   |   |   |   |   |   |   |   | $ | 166 |   |

----

----

----

|                                                                   |   | YearEnded December 30, |   |   |   |   |   |
|------------------------------------------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|
|                                                                   |   | 2010                   |   |   | 2009   |   | $ Chg  |   |   | % Chg |
|                                                                   |   | (Dollars in thousands) |
|                                                                   |   |                   |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                                    |   | $                      | 4,113  |   |   | $      | 3,547  |   |   | $ | 566 |   |   |   | 16.0 | % |
| Other service charges, commissions and fees                            |   |                   | 2,064  |   |   |   | 1,406  |   |   |   | 658 |   |   |   | 46.9 | % |
| Brokerage fees                                                         |   |                   | 1,070  |   |   |   | 914    |   |   |   | 156 |   |   |   | 17.1 | % |
| Mortgage origination fees                                              |   |                   | 606    |   |   |   | 345    |   |   |   | 261 |   |   |   | 75.7 | % |
| Bank-owned life insurance                                              |   |                   | 610    |   |   |   | 621    |   |   |   | (11 | ) |   |   | (1.8 | )% |
| Life insurance proceeds                                                |   |                   | 916    |   |   |   | -      |   |   |   | 916 |   |   |   | 100 | % |
| Other                                                                  |   |                   | 88     |   |   |   | 45     |   |   |   | 43 |   |   |   | 95.5 | % |
|     Total noninterest income                       |   | $                      | 9,467  |   |   | $      | 6,878  |   |   | $ | 2,589 |   |   |   | 37.6 | % |
| Noninterest income as a percentage of average assets (annualized) |   |                   | 1.5    | %      |   |   | 1.4    | % |   |   |   |   |   |   |

----

|                                                     |   | Year Ended             |   |   |   |   |   |   |   |
|----------------------------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                     |   | December 31,           |   |   |   |   |   |   |   |
|                                                     |   | 2010                   |   |   | 2009   |   |   | $ Chg  |   |   | % Chg |   |
|                                                     |   | (Dollars in thousands) |   |
|                                                     |   |                   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                           |   | $                      | 12,676 |   |   | $      | 8,899  |   |   | $ | 3,777 |   |   |   | 42.40 | % |
| Equipment                                                |   |                   | 1,131  |   |   |   | 985    |   |   |   | 146 |   |   |   | 14.80 | % |
| Occupancy                                                |   |                   | 1,511  |   |   |   | 1,198  |   |   |   | 313 |   |   |   | 26.12 | % |
| Advertising and marketing                                |   |                   | 593    |   |   |   | 439    |   |   |   | 154 |   |   |   | 35.10 | % |
| Legal and accounting                                     |   |                   | 616    |   |   |   | 493    |   |   |   | 123 |   |   |   | 24.90 | % |
| Directors fees and retirement                            |   |                   | 563    |   |   |   | 553    |   |   |   | 11 |   |   |   | 2.00 | % |
| Consulting and other professional fees                   |   |                   | 364    |   |   |   | 297    |   |   |   | 67 |   |   |   | 22.60 | % |
| Telecommunications                                       |   |                   | 517    |   |   |   | 239    |   |   |   | 278 |   |   |   | 116.30 | % |
| Supplies                                                 |   |                   | 351    |   |   |   | 177    |   |   |   | 174 |   |   |   | 98.30 | % |
| Data processing fees                                     |   |                   | 2,190  |   |   |   | 1,606  |   |   |   | 584 |   |   |   | 36.40 | % |
| (Gain) loss on sales and write-downs of other            |   |                   | (17    | )      |   |   | 422    |   |   |   | (439 | )  |   |   | 104.00 | % |
|   real estate owned                            |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed asset expenses                                |   |                   | 1,013  |   |   |   | 257    |   |   |   | 756 |   |   |   | 294.20 | % |
| FDIC insurance and other regulatory fees                 |   |                   | 924    |   |   |   | 872    |   |   |   | 51 |   |   |   | 5.80 | % |
| Impairment loss of premise held for sale                 |   |                   | -      |   |   |   | 502    |   |   |   | (502 | )  |   |   | N/A |   |
| Impairment loss on intangible asset                      |   |                   | 1,000  |   |   |   | -      |   |   |   | 1,000 |   |   |   | N/A |   |
| Other operating                                          |   |                   | 2,618  |   |   |   | 1,332  |   |   |   | 1,286 |   |   |   | 96.50 | % |
|      Total noninterest expenses |   | $                      | 26,049 |   |   | $      | 18,271 |   |   | $ | 7,778 |   |   |   | 42.60 | % |
| Noninterest expenses as a percentage of                  |   |                   | 4.00   | %      |   |   | 3.70   | %      |   |   |   |   |   |   |   |   |
|  average assets                                     |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Efficiency ratio                                         |   |                   | 79.80  | %      |   |   | 81.60  | %      |   |   |   |   |   |   |   |   |

----

----

----

|                                                         |   | For the years endedDecember 31, |   |   |   |   |   |   |   |
|--------------------------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                         |   | 2009                            |   |   | 2008   |   |   | $ Chg  |   |   | % Chg |   |
|                                                         |   | (Dollars in thousands)          |   |
|                                                         |   |                            |   |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                          |   | $                               | 3,547  |   |   | $      | 3,958  |   |   | $ | (411 | ) |   |   | (10.4 | )% |
| Other service charges, commissions and fees                  |   |                            | 1,406  |   |   |   | 1,288  |   |   |   | 118 |   |   |   | 9.2 |   |
| Brokerage fees                                               |   |                            | 914    |   |   |   | 1,030  |   |   |   | (116 | ) |   |   | (11.3 | ) |
| Mortgage origination fees                                    |   |                            | 345    |   |   |   | 400    |   |   |   | (55 | ) |   |   | (13.8 | ) |
| Bank owned life insurance                                    |   |                            | 621    |   |   |   | 495    |   |   |   | 126 |   |   |   | 25.5 |   |
| Other                                                        |   |                            | 45     |   |   |   | 301    |   |   |   | (256 | ) |   |   | (85.1 | ) |
|       Total noninterest income |   | $                               | 6,878  |   |   | $      | 7,472  |   |   | $ | (594 | ) |   |   | (7.9 | ) |
| Noninterest income as a percentage of average assets         |   |                            | 1.4    | %      |   |   | 1.5    | %      |   |   |   |   |   |   |   |   |

----

|                                                           |   | For the Years EndedDecember 31, |   |   |   |   |   |   |   |
|----------------------------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                           |   | 2009                            |   |   | 2008   |   |   | $ Chg  |   |   | % Chg |   |
|                                                           |   | (Dollars in thousands)          |   |
|                                                           |   |                            |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                 |   | $                               | 8,899  |   |   | $      | 8,987  |   |   | $ | (88 | ) |   |   | (1.0 | )% |
| Equipment                                                      |   |                            | 985    |   |   |   | 1,217  |   |   |   | (232 | ) |   |   | (19.1 | ) |
| Occupancy                                                      |   |                            | 1,198  |   |   |   | 1,204  |   |   |   | (6 | ) |   |   | (0.5 | ) |
| Advertising and marketing                                      |   |                            | 439    |   |   |   | 496    |   |   |   | (57 | ) |   |   | (11.5 | ) |
| Legal and accounting                                           |   |                            | 493    |   |   |   | 528    |   |   |   | (35 | ) |   |   | (6.6 | ) |
| Directors fees and retirement                                  |   |                            | 553    |   |   |   | 552    |   |   |   | 1 |   |   |   | 0.2 |   |
| Consulting and other professional fees                         |   |                            | 297    |   |   |   | 318    |   |   |   | (21 | ) |   |   | (6.6 | ) |
| Telecommunications                                             |   |                            | 239    |   |   |   | 258    |   |   |   | (19 | ) |   |   | (7.4 | ) |
| Supplies                                                       |   |                            | 177    |   |   |   | 177    |   |   |   | - |   |   |   | - |   |
| Data processing fees                                           |   |                            | 1,606  |   |   |   | 1,300  |   |   |   | 306 |   |   |   | 23.5 |   |
| Loss on sale and write-downs of other real estate owned        |   |                            | 422    |   |   |   | 386    |   |   |   | 36 |   |   |   | 9.3 |   |
| Foreclosed asset expenses                                      |   |                            | 257    |   |   |   | 229    |   |   |   | 28 |   |   |   | 12.2 |   |
| FDIC insurance and other regulatory fees                       |   |                            | 872    |   |   |   | 267    |   |   |   | 605 |   |   |   | 226.6 |   |
| Impairment loss on premises held for sale                      |   |                            | 502    |   |   |   | -      |   |   |   | (502 | ) |   | NM |   |
| Other operating                                                |   |                            | 1,332  |   |   |   | 1,510  |   |   |   | (178 | ) |   |   | (11.8 | ) |
|       Total noninterest expenses |   | $                               | 18,271 |   |   | $      | 17,429 |   |   | $ | 842 |   |   |   | 4.8 |   |
| Noninterest expenses as a percentage of average assets         |   |                            | 3.7    | %      |   |   | 3.6    | %      |   |   |   |   |   |   |   |   |

----

----

----

|                                                                       |   | December 31, 2010 |   |
|----------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                       |   | Less thanOne Year |   |   | One throughThree Years |   |   | Four throughFive Years |   |   | After FiveYears |   |   | Total |   |
|                                                                       |   | (In thousands)    |   |
| Contractual obligations:                                                   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal Home Loan Bank advances                                            |   |              | 27,500 |   |   |   |   |   |   | 10,000 |   |   |   | 25,000 |   |   |   | 62,500 |   |
| Repurchase agreement                                                       |   |              | 13     |   |   |   | 5,000 |   |   |   | 5,000 |   |   |   | 20,000 |   |   |   | 30,013 |   |
| Other borrowings                                                           |   |              | 2,408  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,408 |   |
| Operating leases (premises)                                                |   |              | 316    |   |   |   | 334 |   |   |   | 94 |   |   |   | 743 |   |   |   | 1,487 |   |
| Total advances and operating leases                                        |   |              | 30,237 |   |   |   | 5,334 |   |   |   | 15,094 |   |   |   | 45,743 |   |   |   | 96,408 |   |
|                                                                       |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Off-balance sheet loan commitments:                                        |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Undisbursed portions of loans closed                                       |   |              | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commitments to originate loans                                             |   |              | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Unused lines of credit                                                     |   |              | 23,286 |   |   |   | 3,140 |   |   |   | 2,145 |   |   |   | 12,800 |   |   |   | 41,371 |   |
| Total loan commitments                                                     |   |              | 23,286 |   |   |   | 3,140 |   |   |   | 2,145 |   |   |   | 12,800 |   |   |   | 41,371 |   |
|     Total contractual obligations and loan commitments |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 137,779 |   |

----

|                                                |   | Actual                 |    |   | For CapitalAdequacyPurposes |   |   | Minimum Required to be Well-Capitalized UnderPrompt CorrectiveAction Provisions |   |
|-----------------------------------------------------|--------|------------------------|---------|--------|-----------------------------|--------|--------|---------------------------------------------------------------------------------|--------|
|                                                |   | Amount                 |    |   | Ratio                       |   |   | Amount                                                                          |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                                |   | (Dollars in Thousands) |    |
| Total Capital to Risk-Weighted Assets:              |   |                   |    |   |                        |   |   |                                                                            |   |   |   |   |   |   |   |   |   |   |
|      Heritage Consolidated |   | $                      | 120,189 |   |                        |   | 26.4   | %                                                                               |   | $ | 36,465 |   |   |   | 8.0 | % |   |   | N/A |   |   |   | - |   |
|      HeritageBank          |   | $                      | 88,712  |   |                        |   | 19.9   | %                                                                               |   | $ | 35,739 |   |   |   | 8.0 | % |   | $ | 44,674 |   |   |   | 10.0 | % |
|                                                |   |                   |    |   |                        |   |   |                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital to Risk-Weighted Assets:             |   |                   |    |   |                        |   |   |                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Heritage Consolidated |   | $                      | 114,560 |   |                        |   | 25.1   | %                                                                               |   | $ | 18,234 |   |   |   | 4.0 | % |   |   | N/A |   |   |   | - |   |
|      HeritageBank          |   | $                      | 83,083  |   |                        |   | 18.6   | %                                                                               |   | $ | 17,870 |   |   |   | 4.0 | % |   | $ | 26,805 |   |   |   | 6.0 | % |
|                                                |   |                   |    |   |                        |   |   |                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital to Average Total Assets:             |   |                   |    |   |                        |   |   |                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Heritage Consolidated |   | $                      | 114,560 |   |                        |   | 16.1   | %                                                                               |   | $ | 28,508 |   |   |   | 4.0 | % |   |   | N/A |   |   |   | - |   |
|      HeritageBank          |   | $                      | 83,083  |   |                        |   | 12.1   | %                                                                               |   | $ | 27,436 |   |   |   | 4.0 |   |   | $ | 34,294 |   |   |   | 5.0 | % |

----

|   | · | limiting the percentage of long-term, fixed-rate loans within our portfolio; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | originating a mix of variable-rate and shorter term fixed-rate loans; |
|--------|--------|-----------------------------------------------------------------------|

|   | · | originating prime-based home equity lines of credit; |
|--------|--------|------------------------------------------------------|

|   | · | managing deposit relationships for stability and a lower cost of funds position; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | using Federal Home Loan Bank advances and other funding sources to align maturities and repricing terms of funding sources with loans; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | continuing the origination of consumer loans. |
|--------|--------|-----------------------------------------------|

----

----

|                                           |   | December 31, 2010            |     |
|------------------------------------------------|--------|------------------------------|----------|
|                                           |   | Maturing or Repricing Within |     |
|                                           |   | Zero to Three Months         |     |   | Three Months to One Year |   |   | One to Five Years |   |   | Over Five Years |   |   | Total |   |
|                                           |   | (Dollars in thousands)       |     |
|                                           |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Earning assets:                                |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term assets                              |   |                         | 10,911   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 10,911 |   |
| Investment securities                          |   |                         | 37,034   |   |   |   | 53,748 |   |   |   | 112,269 |   |   |   | 35,326 |   |   |   | 238,377 |   |
| Loans held for sale                            |   |                         | 225      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 225 |   |
| Loans                                          |   |                         | 134,225  |   |   |   | 60,349 |   |   |   | 172,754 |   |   |   | 51,669 |   |   |   | 418,997 |   |
|                                           |   |                         | 182,395  |   |   |   | 114,097 |   |   |   | 285,023 |   |   |   | 86,995 |   |   |   | 668,510 |   |
|                                           |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                  |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits               |   |                         | (98,364  | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (98,364 | ) |
| Savings and money market                       |   |                         | (213,115 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (213,115 | ) |
| Time deposits                                  |   |                         | (32,054  | ) |   |   | (81,443 | ) |   |   | (55,443 | ) |   |   | (9,054 | ) |   |   | (177,994 | ) |
| Other borrowings                               |   |                         | (32,421  | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (32,421 | ) |
| Federal Home Loan Bank advances                |   |                         | -        |   |   |   | (27,500 | ) |   |   | (10,000 | ) |   |   | (25,000 | ) |   |   | (62,500 | ) |
|                                           |   |                         | (375,954 | ) |   |   | (98,943 | ) |   |   | (65,443 | ) |   |   | (34,054 | ) |   |   | (584,394 | ) |
|                                           |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate sensitivity gap                  |   |                         | (193,559 | ) |   |   | 25,154 |   |   |   | 219,580 |   |   |   | 52,941 |   |   |   | 104,116 |   |
| Cumulative interest rate sensitivity gap       |   |                         | (193,559 | ) |   |   | (168,405 | ) |   |   | 51,175 |   |   |   | 104,116 |   |   |   |   |   |
| Interest rate sensitivity gap ratio            |   |                         | (0.49    | ) |   |   | (1.28 | ) |   |   | (4.36 | ) |   |   | (2.55 | ) |   |   |   |   |
| Cumulative interest rate sensitivity gap ratio |   |                         | (0.49    | ) |   |   | (0.64 | ) |   |   | (1.10 | ) |   |   | (1.18 | ) |   |   |   |   |

| Market Rate Change    | Effect on Net Interest Income |
|-----------------------|-------------------------------|
| +400                  | -11.0%                        |
| +300                  | -13.8%                        |
| +200                  | -9.0%                         |
| +100                  | -4.8%                         |
|    -50 | -0.8%                         |

----

|                                                                                                        |   |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|
| Report of Independent Registered Public Accounting Firm                                                     |   | F-2    |
|                                                                                                        |   |   |
| Consolidated Balance Sheets at December 31, 2010 and 2009                                                   |   | F-3    |
|                                                                                                        |   |   |
| Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008                  |   | F-4    |
|                                                                                                        |   |   |
| Consolidated Statements of Comprehensive Income (Loss) for the Years ended December 31, 2010, 2009 and 2008 |   | F-6    |
|                                                                                                        |   |   |
| Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2010, 2009 and 2008        |   | F-7    |
|                                                                                                        |   |   |
| Consolidated Statements of Cash Flows for the Years ended December 31, 2010, 2009 and 2008                  |   | F-9    |
|                                                                                                        |   |   |
| Notes to Consolidated Financial Statements                                                                  |   | F-11   |

----

----

|                                                                                                                                        |   | December 31, |        |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|
|                                                                                                                                        |   | 2010         |        |   | 2009 |   |
| Assets                                                                                                                                      |   |         |        |   |   |   |
|                                                                                                                                        |   |         |        |   |   |   |
| Cash and due from banks                                                                                                                     |   | $            | 28,802,742  |   |   | $ | 14,921,517 |   |
| Interest-bearing deposits in banks                                                                                                          |   |         | 10,911,460  |   |   |   | 43,236,287 |   |
| Federal funds sold                                                                                                                          |   |         | 2,700,000   |   |   |   | 11,340,000 |   |
| Securities available for sale, at fair value                                                                                                |   |         | 238,376,902 |   |   |   | 120,526,900 |   |
| Federal Home Loan Bank Stock, at cost                                                                                                       |   |         | 3,703,400   |   |   |   | 3,253,400 |   |
| Other equity securities, at cost                                                                                                            |   |         | 1,010,000   |   |   |   | 1,010,000 |   |
| Loans held for sale                                                                                                                         |   |         | 224,500     |   |   |   | - |   |
|                                                                                                                                        |   |         |        |   |   |   |   |   |
| Loans                                                                                                                                       |   |         | 418,996,996 |   |   |   | 334,138,932 |   |
| Less allowance for loan losses                                                                                                              |   |         | 8,101,445   |   |   |   | 6,060,460 |   |
| Loans, net                                                                                                                                  |   |         | 410,895,551 |   |   |   | 328,078,472 |   |
|                                                                                                                                        |   |         |        |   |   |   |   |   |
| Premises and equipment, net                                                                                                                 |   |         | 21,411,630  |   |   |   | 15,590,120 |   |
| Premises held for sale                                                                                                                      |   |         | 1,080,000   |   |   |   | 1,080,000 |   |
| Accrued interest receivable                                                                                                                 |   |         | 2,907,050   |   |   |   | 2,799,375 |   |
| Foreclosed assets                                                                                                                           |   |         | 3,688,727   |   |   |   | 1,795,544 |   |
| Goodwill and intangible assets                                                                                                              |   |         | 2,912,423   |   |   |   | 1,570,832 |   |
| Cash surrender value of bank owned life insurance                                                                                           |   |         | 15,023,828  |   |   |   | 14,756,771 |   |
| Other assets                                                                                                                                |   |         | 11,788,073  |   |   |   | 11,988,301 |   |
|                                                                                                                                        |   |         |        |   |   |   |   |   |
|                                                                                                                                        |   | $            | 755,436,286 |   |   | $ | 571,947,519 |   |
|                                                                                                                                        |   |         |        |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                                                                        |   |         |        |   |   |   |   |   |
|                                                                                                                                        |   |         |        |   |   |   |   |   |
| Deposits                                                                                                                                    |   |         |        |   |   |   |   |   |
| Noninterest-bearing                                                                                                                         |   | $            | 44,769,144  |   |   | $ | 28,881,905 |   |
| Interest-bearing                                                                                                                            |   |         | 489,473,815 |   |   |   | 397,724,617 |   |
| Total deposits                                                                                                                              |   |         | 534,242,959 |   |   |   | 426,606,522 |   |
| Federal funds purchased and securities sold under repurchase agreements                                                                     |   |         | 32,421,482  |   |   |   | 32,843,465 |   |
| Other borrowings                                                                                                                            |   |         | 62,500,000  |   |   |   | 42,500,000 |   |
| Accrued interest payable                                                                                                                    |   |         | 702,495     |   |   |   | 706,321 |   |
| Other liabilities                                                                                                                           |   |         | 6,229,438   |   |   |   | 8,474,370 |   |
| Total liabilities                                                                                                                           |   |         | 636,096,374 |   |   |   | 511,130,678 |   |
|                                                                                                                                        |   |         |        |   |   |   |   |   |
| Commitments and contingencies                                                                                                               |   |         |        |   |   |   |   |   |
|                                                                                                                                        |   |         |        |   |   |   |   |   |
| Stockholders' equity                                                                                                                        |   |         |        |   |   |   |   |   |
| Preferred stock, par value; $0.01; 5,000,000 and 1,000,000 shares authorized; none issued, respectively                                     |   |         | -           |   |   |   | - |   |
| Common stock, par value $0.01; 45,000,000 and 25,000,000 shares authorized; 8,710,511  and 11,454,344 shares issued, respectively |   |         | 87,106      |   |   |   | 114,543 |   |
| Capital surplus                                                                                                                             |   |         | 88,876,137  |   |   |   | 40,609,551 |   |
| Retained earnings                                                                                                                           |   |         | 39,535,922  |   |   |   | 38,984,165 |   |
| Accumulated other comprehensive loss, net of tax of $2,609,457 and $1,591,489                                                               |   |         | (3,914,186  | ) |   |   | (2,387,234 | ) |
| Unearned employee stock ownership plan (ESOP) shares, 492,320 and 242,385 shares                                                            |   |         | (5,245,067  | ) |   |   | (2,423,850 | ) |
|                                                                                                                                        |   |         | 119,339,912 |   |   |   | 74,897,175 |   |
| Treasury stock, at cost, - and 1,055,084 shares                                                                                             |   |         | -           |   |   |   | (14,080,334 | ) |
| Total stockholders' equity                                                                                                                  |   |         | 119,339,912 |   |   |   | 60,816,841 |   |
|                                                                                                                                        |   | $            | 755,436,286 |   |   | $ | 571,947,519 |   |

----

|                                                            |   | Years Ended December 31, |       |
|-----------------------------------------------------------------|--------|--------------------------|------------|
|                                                            |   | 2010                     |       |   | 2009 |   |   | 2008 |   |
|                                                            |   |                     |       |   |   |   |   |   |   |
| Interest income                                                 |   |                     |       |   |   |   |   |   |   |
| Interest and fees on loans                                      |   | $                        | 23,809,819 |   |   | $ | 18,555,397 |   |   | $ | 20,881,600 |   |
| Interest on taxable securities                                  |   |                     | 3,495,200  |   |   |   | 3,603,871 |   |   |   | 4,890,165 |   |
| Interest on nontaxable securities                               |   |                     | 959,640    |   |   |   | 1,174,043 |   |   |   | 1,175,720 |   |
| Interest on federal funds sold                                  |   |                     | 45,257     |   |   |   | 53,629 |   |   |   | 232,456 |   |
| Interest on deposits in other banks                             |   |                     | 129,275    |   |   |   | 13,870 |   |   |   | 15,424 |   |
|                                                            |   |                     | 28,439,191 |   |   |   | 23,400,810 |   |   |   | 27,195,365 |   |
| Interest expense                                                |   |                     |       |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                            |   |                     | 5,759,328  |   |   |   | 6,471,521 |   |   |   | 9,042,782 |   |
| Interest on other borrowings                                    |   |                     | 2,514,931  |   |   |   | 2,321,842 |   |   |   | 3,451,560 |   |
|                                                            |   |                     | 8,274,259  |   |   |   | 8,793,363 |   |   |   | 12,494,342 |   |
|                                                            |   |                     |       |   |   |   |   |   |   |   |   |   |
| Net interest income                                             |   |                     | 20,164,932 |   |   |   | 14,607,447 |   |   |   | 14,701,023 |   |
| Provision for loan losses                                       |   |                     | 5,500,000  |   |   |   | 7,500,000 |   |   |   | 3,350,000 |   |
| Net interest income after provision for loan losses             |   |                     | 14,664,932 |   |   |   | 7,107,447 |   |   |   | 11,351,023 |   |
|                                                            |   |                     |       |   |   |   |   |   |   |   |   |   |
| Noninterest income                                              |   |                     |       |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                             |   |                     | 4,112,557  |   |   |   | 3,546,681 |   |   |   | 3,957,589 |   |
| Other service charges, commissions and fees                     |   |                     | 2,064,479  |   |   |   | 1,405,938 |   |   |   | 1,287,591 |   |
| Brokerage fees                                                  |   |                     | 1,069,983  |   |   |   | 914,041 |   |   |   | 1,029,980 |   |
| Mortgage origination fees                                       |   |                     | 606,556    |   |   |   | 344,576 |   |   |   | 400,044 |   |
| Bank owned life insurance                                       |   |                     | 610,375    |   |   |   | 620,652 |   |   |   | 495,492 |   |
| Gain on bank owned life insurance                               |   |                     | 915,957    |   |   |   | - |   |   |   | - |   |
| Impairment loss on securities available for sale                |   |                     | -          |   |   |   | - |   |   |   | (3,119,181 | ) |
| Gain on sales of securities                                     |   |                     | 293,791    |   |   |   | 908,877 |   |   |   | 234,676 |   |
| Bargain purchase gain                                           |   |                     | 2,722,063  |   |   |   | - |   |   |   | - |   |
| Other                                                           |   |                     | 87,657     |   |   |   | 45,885 |   |   |   | 301,308 |   |
|                                                            |   |                     | 12,483,418 |   |   |   | 7,786,650 |   |   |   | 4,587,499 |   |
| Noninterest expense                                             |   |                     |       |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                  |   |                     | 12,675,636 |   |   |   | 8,898,984 |   |   |   | 8,987,913 |   |
| Equipment                                                       |   |                     | 1,130,500  |   |   |   | 984,985 |   |   |   | 1,217,142 |   |
| Occupancy                                                       |   |                     | 1,511,463  |   |   |   | 1,197,823 |   |   |   | 1,204,156 |   |
| Data processing fees                                            |   |                     | 2,190,497  |   |   |   | 1,605,510 |   |   |   | 1,299,963 |   |
| Directors fees and retirement                                   |   |                     | 563,312    |   |   |   | 553,428 |   |   |   | 552,289 |   |
| Consulting and other professional fees                          |   |                     | 363,652    |   |   |   | 296,975 |   |   |   | 317,957 |   |
| Advertising and marketing                                       |   |                     | 592,974    |   |   |   | 439,032 |   |   |   | 496,124 |   |
| Legal and accounting                                            |   |                     | 616,110    |   |   |   | 493,118 |   |   |   | 528,085 |   |
| Telecommunications                                              |   |                     | 517,276    |   |   |   | 239,073 |   |   |   | 257,617 |   |
| Supplies                                                        |   |                     | 349,772    |   |   |   | 176,521 |   |   |   | 176,973 |   |
| FDIC insurance and other regulatory fees                        |   |                     | 924,129    |   |   |   | 871,622 |   |   |   | 267,475 |   |
| (Gain) loss on sales and write-downs of other real estate owned |   |                     | (17,512    | ) |   |   | 422,100 |   |   |   | 386,317 |   |
| Foreclosed asset and collection expenses                        |   |                     | 1,013,075  |   |   |   | 256,671 |   |   |   | 229,039 |   |
| Impairment loss on intangible asset                             |   |                     | 1,000,000  |   |   |   | - |   |   |   | - |   |
| Impairment loss on premises held for sale                       |   |                     | -          |   |   |   | 502,469 |   |   |   | - |   |
| Other operating                                                 |   |                     | 2,618,230  |   |   |   | 1,332,431 |   |   |   | 1,507,808 |   |
|                                                            |   |                     | 26,049,114 |   |   |   | 18,270,742 |   |   |   | 17,428,858 |   |

----

| HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARY |                     |
|-----------------------------------------------|--------------------------|
|                                          |                     |
| CONSOLIDATED STATEMENTS OF OPERATIONS         |                     |
|                                          |                     |
|                                          |                     |
|                                          | Years Ended December 31, |   |
|                                          | 2010                     |   | 2009 |   | 2008 |   |
|                                          |                     |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes             |                     | $ | 1,099,236 |   |   | $ | (3,376,645 | ) |   | $ | (1,490,336 | ) |
|                                          |                     |   |   |   |   |   |   |   |   |   |   |   |
| Applicable income tax benefits                |                     |   | (306,638 | ) |   |   | (1,724,326 | ) |   |   | (1,227,976 | ) |
|                                          |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                             |                     | $ | 1,405,874 |   |   | $ | (1,652,319 | ) |   | $ | (262,360 | ) |
|                                          |                     |   |   |   |   |   |   |   |   |   |   |   |
| Basic income (loss) per share                 |                     | $ | 0.17 |   |   | $ | (0.20 | ) |   | $ | (0.03 | ) |
|                                          |                     |   |   |   |   |   |   |   |   |   |   |   |
| Diluted income (loss)  per share    |                     | $ | 0.17 |   |   | $ | (0.20 | ) |   | $ | (0.03 | ) |

----

|                                                                                                                                                                     |   | Years Ended December 31, |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|------------|
|                                                                                                                                                                     |   | 2010                     |       |   | 2009 |   |   | 2008 |   |
|                                                                                                                                                                     |   |                     |       |   |   |   |   |   |   |
|                                                                                                                                                                     |   |                     |       |   |   |   |   |   |   |
| Net income (loss)                                                                                                                                                        |   | $                        | 1,405,874  |   |   | $ | (1,652,319 | ) |   | $ | (262,360 | ) |
|                                                                                                                                                                     |   |                     |       |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss):                                                                                                                                       |   |                     |       |   |   |   |   |   |   |   |   |   |
| Net realized gain on termination of cash flow hedge during the period,net of tax of $510,078                                                                             |   |                     | -          |   |   |   | - |   |   |   | 765,117 |   |
| Elimination of unrealized gain on cash  flow hedge terminated during the period, net of tax of $156,558                                                        |   |                     | -          |   |   |   | - |   |   |   | (234,838 | ) |
| Accretion of realized gain on terminated  cash flow hedge, net of tax of $140,747 and $64,018                                                                  |   |                     | (211,120   | ) |   |   | (211,120 | ) |   |   | (96,027 | ) |
| Net unrealized holding gains (losses)  arising during period, net of tax (benefit) of $694,927; ($671,983); $994,469                                           |   |                     | (1,042,391 | ) |   |   | 1,007,973 |   |   |   | (1,491,704 | ) |
| Reclassification adjustment for (gains)  losses and securities impairment included in net income (loss), net of tax (benefit) $117,516; $363,551; ($1,153,802) |   |                     | (176,274   | ) |   |   | (545,326 | ) |   |   | 1,730,703 |   |
| Adjustment to recognize funded status of  pension plan, net of tax (benefit) of $64,778, ($31,248) and $37,028                                                 |   |                     | (97,167    | ) |   |   | 46,872 |   |   |   | (55,542 | ) |
|                                                                                                                                                                     |   |                     |       |   |   |   |   |   |   |   |   |   |
| Total other comprehensive income (loss)                                                                                                                                  |   |                     | (1,526,952 | ) |   |   | 298,399 |   |   |   | 617,709 |   |
|                                                                                                                                                                     |   |                     |       |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss)                                                                                                                                              |   | $                        | (121,078   | ) |   | $ | (1,353,920 | ) |   | $ | 355,349 |   |

----

| HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARY                           |   |
|-------------------------------------------------------------------------|--------|
|                                                                    |   |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                         |   |
|                                                                    |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   | Common Stock |   |   | Capital |   |   | Retained |   |   | Unearned ESOP |   |   | Treasury |   |   | Other Comprehensive |   |   |   |   |
|                                                                    |   | Shares |   |   | Par Value |   |   | Surplus |   |   | Earnings |   |   | Shares |   |   | Stock |   |   | Income |   |   | Total |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2007                                              |   |   | 11,443,723 |   |   | $ | 114,437 |   |   | $ | 39,009,323 |   |   | $ | 42,406,483 |   |   | $ | (3,305,250 | ) |   | $ | (9,329,501 | ) |   | $ | (3,303,342 | ) |   | $ | 65,592,150 |   |
| Net loss                                                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (262,360 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (262,360 | ) |
| Cash dividend declared, $0.28 per share                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (786,914 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (786,914 | ) |
| Stock-based compensation expense                                        |   |   | - |   |   |   | - |   |   |   | 809,086 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 809,086 |   |
| Repurchase of 377,894 shares of stock for the treasury             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,244,715 | ) |   |   | - |   |   |   | (4,244,715 | ) |
| Issuance of 330 shares of common stock from the treasury           |   |   | - |   |   |   | - |   |   |   | (836 | ) |   |   | - |   |   |   | - |   |   |   | 4,403 |   |   |   | - |   |   |   | 3,567 |   |
| Forfeiture of restricted shares of common stock                    |   |   | (884 | ) |   |   | (9 | ) |   |   | 9 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|     Issuance of restricted shares of common stock        |   |   | 9,505 |   |   |   | 95 |   |   |   | (95 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other comprehensive income                                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 617,709 |   |   |   | 617,709 |   |
| Tax benefit shortfall from stock- based compensation plans         |   |   | - |   |   |   | - |   |   |   | (3,432 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (3,432 | ) |
| ESOP shares earned, 44,070 shares                                       |   |   | - |   |   |   | - |   |   |   | 47,182 |   |   |   | - |   |   |   | 440,700 |   |   |   | - |   |   |   | - |   |   |   | 487,882 |   |
| Balance, December 31, 2008                                              |   |   | 11,452,344 |   |   | $ | 114,523 |   |   | $ | 39,861,237 |   |   |  $ | 41,357,209 |   |   | $ | (2,864,550 | ) |   | $ | (13,569,813 | ) |   | $ | (2,685,633 | ) |   | $ | 62,212,973 |   |
| Net loss                                                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,652,319 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,652,319 | ) |
| Cash dividend declared,  $0.32 per share                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (720,725 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (720,725 | ) |
| Stock-based compensation expense                                        |   |   | - |   |   |   | - |   |   |   | 807,402 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 807,402 |   |
|   Repurchase of 62,026 shares of  stock for the treasury |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (516,426 | ) |   |   | - |   |   |   | (516,426 | ) |
| Issuance of 440 shares of common stock from the treasury                |   |   | - |   |   |   | - |   |   |   | (2,602 | ) |   |   | - |   |   |   | - |   |   |   | 5,905 |   |   |   | - |   |   |   | 3,303 |   |
| Issuance of restricted shares of common stock                      |   |   | 2,000 |   |   |   | 20 |   |   |   | (20 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other comprehensive income                                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 298,399 |   |   |   | 298,399 |   |
| Tax benefit shortfall from stock-based compensation plans               |   |   | - |   |   |   | - |   |   |   | (58,494 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (58,494 | ) |
| ESOP shares earned, 44,070 shares                                       |   |   | - |   |   |   | - |   |   |   | (73,946 | ) |   |   | - |   |   |   | 440,700 |   |   |   | - |   |   |   | - |   |   |   | 366,754 |   |
| Tax benefit on ESOP expense                                             |   |   | - |   |   |   | - |   |   |   | 75,974 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 75,974 |   |
| Balance, December 31, 2009                                              |   |   | 11,454,344 |   |   | $ | 114,543 |   |   | $ | 40,609,551 |   |   |  $ | 38,984,165 |   |   | $ | (2,423,850 | ) |   | $ | (14,080,334 | ) |   | $ | (2,387,234 | ) |   | $ | 60,816,841 |   |

----

| HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARY               |
|-------------------------------------------------------------|
|                                                        |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued) |
|                                                        |   |   |   |

|                                                                           |   |   | Common Stock |   |   |   |  Capital |   |   |   | Retained    |   |   |   | Unearned ESOP |   |   |   |   Treasury |   |   |   | Accumulated OtherComprehensive |   |   |   |       |   |
|--------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|---------------|--------|--------|--------|-------------|--------|--------|--------|---------------|--------|--------|--------|----------------------|--------|--------|--------|--------------------------------|--------|--------|--------|------------|--------|
|                                                                           |   |   | Shares       |   |   |   | Par Value     |   |   |   | Surplus     |   |   |   | Earnings      |   |   |   | Shares               |   |   |   | Stock                          |   |   |   | Loss       |   |   |   | Total |   |
| Balance, December 31, 2009                                                     |   |   | 11,454,344   |   |   | $      | 114,543       |   |   | $      | 40,609,551  |   |   | $      | 38,984,165    |   |   | $      | (2,423,850           | )      |   | $      | (14,080,334                    | )      |   | $      | (2,387,234 | )      |   | $ | 60,816,841 |   |
| Net income                                                                     |   |   | -            |   |   |   | -             |   |   |   | -           |   |   |   | 1,405,874     |   |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | 1,405,874 |   |
| Cash dividend declared,  $0.36 per share                                  |   |   | -            |   |   |   | -             |   |   |   | -           |   |   |   | (854,117      | )      |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | (854,117 | ) |
| Stock-based compensation expense                                               |   |   | -            |   |   |   | -             |   |   |   | 809,653     |   |   |   | -             |   |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | 809,653 |   |
| Repurchase of 1,578 shares of stock for the treasury                      |   |   | -            |   |   |   | -             |   |   |   | -           |   |   |   | -             |   |   |   | -                    |   |   |   | (18,904                        | )      |   |   | -          |   |   |   | (18,904 | ) |
| Issuance of 1,075 shares of common stock from the treasury                |   |   | -            |   |   |   | -             |   |   |   | (3,506      | )      |   |   | -             |   |   |   | -                    |   |   |   | 14,343                         |   |   |   | -          |   |   |   | 10,837 |   |
| Items relating to conversion and stock offering:                          |   |   |         |   |   |   |          |   |   |   |        |   |   |   |          |   |   |   |                 |   |   |   |                           |   |   |   |       |   |   |   |   |   |
| Merger of Heritage MHC                                                         |   |   | (7,868,875   | )      |   |   | (78,689       | )      |   |   | 101,932     |   |   |   | -             |   |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | 23,243 |   |
| Treasury stock retired                                                         |   |   | (1,055,587   | )      |   |   | (10,556       | )      |   |   | (14,074,339 | )      |   |   | -             |   |   |   | -                    |   |   |   | 14,084,895                     |   |   |   | -          |   |   |   | - |   |
| Common stock exchanged for cash in lieu of issuing fractional shares |   |   | (411,127     | )      |   |   | (4,110        | )      |   |   | 4,110       |   |   |   | -             |   |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | - |   |
| Proceeds from stock offering, net offering expenses ($4,458,503)          |   |   | 6,591,756    |   |   |   | 65,918        |   |   |   | 61,393,139  |   |   |   | -             |   |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | 61,459,057 |   |
| Purchase of ESOP shares (327,677)                                         |   |   | -            |   |   |   | -             |   |   |   | -           |   |   |   | -             |   |   |   | (3,276,770           | )      |   |   | -                              |   |   |   | -          |   |   |   | (3,276,770 | ) |
| Other comprehensive loss                                                       |   |   | -            |   |   |   | -             |   |   |   | -           |   |   |   | -             |   |   |   | -                    |   |   |   | -                              |   |   |   | (1,526,952 | )      |   |   | (1,526,952 | ) |
| Tax benefit from stock- based compensation plans                          |   |   | -            |   |   |   | -             |   |   |   | (14,417     | )      |   |   | -             |   |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | (14,417 | ) |
| ESOP shares earned, 38,403 shares                                              |   |   | -            |   |   |   | -             |   |   |   | 3,626       |   |   |   | -             |   |   |   | 455,553              |   |   |   | -                              |   |   |   | -          |   |   |   | 459,179 |   |
| Tax benefit on ESOP expense                                                    |   |   | -            |   |   |   | -             |   |   |   | 46,388      |   |   |   | -             |   |   |   | -                    |   |   |   | -                              |   |   |   | -          |   |   |   | 46,388 |   |
| Balance, December 31, 2010                                                     |   |   | 8,710,511    |   |   | $      | 87,106        |   |   | $      | 88,876,137  |   |   | $      | 39,535,922    |   |   | $      | (5,245,067           | )      |   | $      | -                              |   |   | $      | (3,914,186 | )      |   | $ | 119,339,912 |   |

----

|                                                                                     |   | Years Ended December 31, |         |
|------------------------------------------------------------------------------------------|--------|--------------------------|--------------|
|                                                                                     |   | 2010                     |         |   | 2009 |   |   | 2008 |   |
|                                                                                     |   |                     |         |   |   |   |   |   |   |
| OPERATING ACTIVITIES                                                                     |   | $                        | 1,405,874    |   |   | $ | (1,652,319 | ) |   | $ | (262,360 | ) |
| Net income (loss)                                                                        |   |                     |         |   |   |   |   |   |   |   |   |   |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |   |                     |         |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                            |   |                     | 946,286      |   |   |   | 911,587 |   |   |   | 964,205 |   |
| Amortization of deposit intangibles                                                      |   |                     | 275,875      |   |   |   | - |   |   |   | - |   |
| Impairment loss on intangible assets                                                     |   |                     | 1,000,000    |   |   |   | - |   |   |   | - |   |
| Impairment loss on premises held for sale                                                |   |                     | -            |   |   |   | 502,469 |   |   |   | - |   |
| Provision for loan losses                                                                |   |                     | 5,500,000    |   |   |   | 7,500,000 |   |   |   | 3,350,000 |   |
| ESOP compensation expense                                                                |   |                     | 459,179      |   |   |   | 366,754 |   |   |   | 487,882 |   |
| Provision for deferred taxes                                                             |   |                     | (652,873     | ) |   |   | (699,010 | ) |   |   | (1,926,940 | ) |
| Stock-based compensation expense                                                         |   |                     | 809,653      |   |   |   | 807,402 |   |   |   | 809,086 |   |
| Net gain on termination of cash flow hedge                                               |   |                     | -            |   |   |   | - |   |   |   | 1,275,195 |   |
| Accretion of gain on termination of cash flow hedge                                      |   |                     | (351,866     | ) |   |   | (351,867 | ) |   |   | (160,045 | ) |
| Impairment losses on securities available for sale                                       |   |                     | -            |   |   |   | - |   |   |   | 3,119,181 |   |
| Gain on sales of securities available for sale                                           |   |                     | (293,791     | ) |   |   | (908,877 | ) |   |   | (234,676 | ) |
| (Gain) loss on sales and write-downs of other real estate owned                          |   |                     | (17,512      | ) |   |   | 422,100 |   |   |   | 386,317 |   |
| Net (gain) loss on sales or disposal of premises and equipment                           |   |                     | (3,617       | ) |   |   | (12,064 | ) |   |   | 865 |   |
| Increase in bank owned life insurance                                                    |   |                     | (267,057     | ) |   |   | (620,652 | ) |   |   | (495,472 | ) |
| Excess tax benefit related to stock-based compensation plans                             |   |                     | 14,417       |   |   |   | 58,494 |   |   |   | 3,432 |   |
| Excess tax expense related to ESOP                                                       |   |                     | (46,388      | ) |   |   | (75,974 | ) |   |   | - |   |
| (Increase) decrease in interest receivable                                               |   |                     | 115,402      |   |   |   | (44,055 | ) |   |   | 431,030 |   |
| Increase (decrease) in interest payable                                                  |   |                     | (43,134      | ) |   |   | (501,498 | ) |   |   | 97,690 |   |
| (Increase) decrease in taxes receivable                                                  |   |                     | 1,608,321    |   |   |   | (878,411 | ) |   |   | 695,099 |   |
| (Increase) decrease in prepaid FDIC assessment                                           |   |                     | 836,434      |   |   |   | (2,020,181 | ) |   |   | - |   |
| Gain on bank owned life insurance                                                        |   |                     | (915,957     | ) |   |   | - |   |   |   | - |   |
| Bargain purchase gain                                                                    |   |                     | (2,722,063   | ) |   |   | - |   |   |   | - |   |
| Net other operating activities                                                           |   |                     | (2,010,614   | ) |   |   | (367,301 | ) |   |   | (83,939 | ) |
| Total adjustments                                                                        |   |                     | 4,240,695    |   |   |   | 4,088,916 |   |   |   | 8,718,910 |   |
|                                                                                     |   |                     |         |   |   |   |   |   |   |   |   |   |
| Net cash provided by operating activities                                                |   |                     | 5,646,569    |   |   |   | 2,436,597 |   |   |   | 8,456,550 |   |
|                                                                                     |   |                     |         |   |   |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES                                                                     |   |                     |         |   |   |   |   |   |   |   |   |   |
| (Increase) decrease in interest-bearing deposits in banks                                |   |                     | 32,324,827   |   |   |   | (42,490,529 | ) |   |   | (365,797 | ) |
| Purchases of securities available for sale                                               |   |                     | (256,281,260 | ) |   |   | (97,885,273 | ) |   |   | (64,161,362 | ) |
| Proceeds from maturities of securities available for sale                                |   |                     | 100,128,082  |   |   |   | 31,400,213 |   |   |   | 15,985,014 |   |
| Proceeds from sales of securities available for sale                                     |   |                     | 36,565,857   |   |   |   | 64,814,421 |   |   |   | 37,416,842 |   |
| Purchase of bank owned life insurance                                                    |   |                     | -            |   |   |   | - |   |   |   | (5,000,000 | ) |
| Increase in Federal Home Loan Bank stock                                                 |   |                     | (450,000     | ) |   |   | (67,600 | ) |   |   | (216,100 | ) |
| Purchase of other equity securities                                                      |   |                     | -            |   |   |   | - |   |   |   | (1,010,000 | ) |
| (Increase) decrease in federal funds sold                                                |   |                     | 8,640,000    |   |   |   | 18,914,000 |   |   |   | (15,749,000 | ) |
| Decrease in loans, net                                                                   |   |                     | (40,083,365  | ) |   |   | (3,548,886 | ) |   |   | (3,906,118 | ) |
| Purchases of premises and equipment                                                      |   |                     | (3,333,599   | ) |   |   | (691,749 | ) |   |   | (2,950,733 | ) |
| Net cash received from acquisition activity                                              |   |                     | 40,552,942   |   |   |   | 61,446,617 |   |   |   | - |   |
| Proceeds from sales of premises and equipment                                            |   |                     | 17,261       |   |   |   | 12,745 |   |   |   | - |   |
| Proceeds from sales of other real estate owned                                           |   |                     | 2,628,085    |   |   |   | 1,220,206 |   |   |   | 1,112,341 |   |
|                                                                                     |   |                     |         |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) investing activities                                      |   |                     | (79,291,170  | ) |   |   | 33,124,165 |   |   |   | (38,844,913 | ) |

----

|                                                                      |   | Years Ended December 31, |       |
|---------------------------------------------------------------------------|--------|--------------------------|------------|
|                                                                      |   | 2010                     |       |   | 2009 |   |   | 2008 |   |
|                                                                      |   |                     |       |   |   |   |   |   |   |
| FINANCING ACTIVITIES                                                      |   |                     |       |   |   |   |   |   |   |
| Increase (decrease) in deposits                                           |   | $                        | 10,572,492 |   |   | $ | (9,634,666 | ) |   | $ | 7,916,584 |   |
| Increase (decrease) in federal funds purchased and securities sold under  |   |                     |       |   |   |   |   |   |   |   |   |   |
| repurchase agreements                                                     |   |                     | (421,983   | ) |   |   | (8,654,026 | ) |   |   | 26,209,039 |   |
| Proceeds from other borrowings                                            |   |                     | 20,000,000 |   |   |   | - |   |   |   | 46,000,000 |   |
| Repayment of other borrowings                                             |   |                     | -          |   |   |   | (11,293,787 | ) |   |   | (43,500,000 | ) |
| Excess tax benefit related to stock-based compensation plans              |   |                     | (14,417    | ) |   |   | (58,494 | ) |   |   | (3,432 | ) |
| Excess tax related to ESOP                                                |   |                     | 46,388     |   |   |   | 75,974 |   |   |   | - |   |
| Purchase of treasury shares, net                                          |   |                     | (8,067     | ) |   |   | (513,123 | ) |   |   | (4,241,148 | ) |
| Net proceeds from common stock offering and reorganization                |   |                     | 61,482,300 |   |   |   | - |   |   |   | - |   |
| Purchase of common shares for ESOP                                        |   |                     | (3,276,770 | ) |   |   | - |   |   |   | - |   |
| Dividends paid to stockholders                                            |   |                     | (854,117   | ) |   |   | (720,725 | ) |   |   | (786,914 | ) |
|                                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) financing activities                       |   |                     | 87,525,826 |   |   |   | (30,798,847 | ) |   |   | 31,594,129 |   |
|                                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| Net increase in cash and due from banks                                   |   |                     | 13,881,225 |   |   |   | 4,761,915 |   |   |   | 1,205,766 |   |
|                                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| Cash and due from banks at beginning of year                              |   |                     | 14,921,517 |   |   |   | 10,159,602 |   |   |   | 8,953,836 |   |
|                                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| Cash and due from banks at end of year                                    |   | $                        | 28,802,742 |   |   | $ | 14,921,517 |   |   | $ | 10,159,602 |   |
|                                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                         |   |                     |       |   |   |   |   |   |   |   |   |   |
| Cash paid (received) during the year for:                                 |   |                     |       |   |   |   |   |   |   |   |   |   |
| Interest                                                                  |   | $                        | 8,278,085  |   |   | $ | 9,132,084 |   |   | $ | 12,396,652 |   |
| Income taxes paid (received)                                              |   | $                        | (806,619   | ) |   | $ | 64,821 |   |   | $ | 7,300 |   |
|                                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| NONCASH TRANSACTIONS                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in unrealized losses on securities available for sale |   | $                        | 1,299,068  |   |   | $ | (771,078 | ) |   | $ | (398,332 | ) |
| Decrease in unrealized gain on terminated cash flow hedges                |   | $                        | -          |   |   | $ | - |   |   | $ | 391,396 |   |
| Principal balances of loans transferred to other real estate owned        |   | $                        | 4,559,863  |   |   | $ | 716,084 |   |   | $ | 3,276,417 |   |
| Pension liability increase (decrease)                                     |   | $                        | 97,167     |   |   | $ | (78,120 | ) |   | $ | 92,570 |   |

----

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----

|                    |   |  Years    |
|-------------------------|--------|----------------|
|                    |   |           |
| Buildings               |   |   40 |
| Furniture and equipment |   |  3-7      |

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----

| (dollars in thousands)       |   | As Recordedby HeritageFinancialGroup |   |   | Adjusted Fair Value |   |      | As Recordedby HeritageFinancialGroup |   |
|------------------------------|--------|--------------------------------------|--------|--------|---------------------|--------|-----------|--------------------------------------|--------|
| Assets                       |   |                                 |   |   |                |   |      |                                 |   |
| Cash and cash equivalents    |   | $                                    | 40,562 |   |                | $      | -         |                                 |   | $ | 40,562 |   |
| Premises and equipment       |   |                                 | 3,448  |   |                |   | -         |                                 |   |   | 3,448 |   |
| Loans                        |   |                                 | 51,792 |   |                |   | (749      | ) (a)                                |   |   | 51,043 |   |
| Core deposit intangibles     |   |                                 | 1,130  |   |                |   | 781  | (b)                                  |   |   | 1,911 |   |
| Other assets                 |   |                                 | 245    |   |                |   | (63       | )                                    |   |   | 182 |   |
| Total Assets                 |   | $                                    | 97,177 |   |                | $      | ( 31      | )                                    |   | $ | 97,146 |   |
|                         |   |                                 |   |   |                |   |      |                                 |   |   |   |   |
| Liabilities                  |   |                                 |   |   |                |   |      |                                 |   |   |   |   |
| Noninterest-bearing deposits |   | $                                    | 15,564 |   |                | $      | -         |                                 |   | $ | 15,564 |   |
| Interest-bearing deposits    |   |                                 | 81,557 |   |                |   | (31       | ) (c)                                |   |   | 81,526 |   |
| Other liabilities            |   |                                 | 56     |   |                |   | -         |                                 |   |   | 56 |   |
| Total Liabilities            |   | $                                    | 97,177 |   |                | $      | (31       | )                                    |   | $ | 97,146 |   |

|   | (a) | The adjustment represents a refinement to the fair market value of the loans assumed in the transaction. |
|--------|-----|----------------------------------------------------------------------------------------------------------|

|   | (b) | The adjustment represents a refinement to the value of the core deposit intangible assumed in the acquisition.  The core deposit intangible was recorded as an identifiable intangible asset and will be amortized over the average life of the related deposit portfolio, estimated to be seven years. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The adjustment represents a refinement to fair value of the CD's acquired and will be amortized to reduce interest expense over the average life of the portfolio. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                         |   | As Recordedby HeritageFinancialGroup |   |   | AdjustedFairValue |   |   | As Recordedby HeritageFinancialGroup |   |
|------------------------------|--------|--------------------------------------|--------|--------|-------------------|--------|--------|--------------------------------------|--------|
| Assets                       |   | (dollars in thousands)               |   |
| Cash and cash equivalents    |   | $                                    | 31,904 |   |              | $      | -      |                                 |   | $ | 31,904 |   |
| Investment securities        |   |                                 | 1,036  |   |              |   | -      |                                 |   |   | 1,036 |   |
| Loans                        |   |                                 | 24,874 |   |              |   | 2,655  | (a)                                  |   |   | 27,529 |   |
| Foreclosed assets            |   |                                 | 601    |   |              |   | -      |                                 |   |   | 601 |   |
| Core deposit intangibles     |   |                                 | 159    |   |              |   | 104    | (b)                                  |   |   | 263 |   |
| Due from the FDIC            |   |                                 | 1,108  |   |              |   | -      |                                 |   |   | 1,108 |   |
| Other assets                 |   |                                 | 600    |   |              |   | -      |                                 |   |   | 600 |   |
| Total Assets                 |   | $                                    | 60,282 |   |              | $      | 2,759  |                                 |   | $ | 63,041 |   |
|                         |   |                                 |   |   |              |   |   |                                 |   |   |   |   |
| Liabilities                  |   |                                 |   |   |              |   |   |                                 |   |   |   |   |
| Noninterest-bearing deposits |   | $                                    | 4,661  |   |              | $      | -      |                                 |   | $ | 4,661 |   |
| Interest-bearing deposits    |   |                                 | 51,876 |   |              |   | 100    | (c)                                  |   |   | 51,976 |   |
| Borrowings                   |   |                                 | 1,294  |   |              |   | -      |                                 |   |   | 1,294 |   |
| Accrual for expenses         |   |                                 | 2,315  |   |              |   | 2,659  |                                 |   |   | 4,974 |   |
| Other liabilities            |   |                                 | 136    |   |              |   | -      |                                 |   |   | 136 |   |
| Total Liabilities            |   | $                                    | 60,282 |   |              | $      | 2,759  |                                 |   | $ | 63,041 |   |

|   | (a) | The adjustment represents a refinement to the fair market value of the loans assumed in the transaction. |
|--------|-----|----------------------------------------------------------------------------------------------------------|

|   | (b) | The adjustment represents a refinement to the value of the core deposit intangible assumed in the acquisition.  The core deposit intangible was recorded as an identifiable intangible asset and will be amortized over the average life of the related deposit portfolio, estimated to be seven years. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The adjustment represents a refinement to fair value of the CD's acquired and will be amortized to reduce interest expense over the average life of the portfolio. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                         |   | As Recordedby HeritageFinancialGroup |   |   | Fair Valueand OtherAdjustments |   |      | As Recordedby HeritageFinancialGroup |   |
|------------------------------|--------|--------------------------------------|--------|--------|--------------------------------|--------|-----------|--------------------------------------|--------|
| Assets                       |   | (dollars in thousands)               |   |
| Cash and cash equivalents    |   | $                                    | 29,542 |   |                           | $      | -         |                                 |   | $ | 29,542 |   |
| Premises and equipment       |   |                                 | 592    |   |                           |   | -         |                                 |   |   | 592 |   |
| Loans                        |   |                                 | 10,706 |   |                           |   | (451      | )  (a)                          |   |   | 10,255 |   |
| Core deposit intangibles     |   |                                 | 411    |   |                           |   | 49   | (b)                                  |   |   | 460 |   |
| Other assets                 |   |                                 | 292    |   |                           |   | 553       |                                 |   |   | 845 |   |
| Total Assets                 |   | $                                    | 41,543 |   |                           | $      | 151       |                                 |   | $ | 41,694 |   |
|                         |   |                                 |   |   |                           |   |      |                                 |   |   |   |   |
| Liabilities                  |   |                                 |   |   |                           |   |      |                                 |   |   |   |   |
| Noninterest-bearing deposits |   | $                                    | 1,074  |   |                           | $      | -         |                                 |   | $ | 1,074 |   |
| Interest-bearing deposits    |   |                                 | 40,427 |   |                           |   | 151  | (c)                                  |   |   | 40,578 |   |
| Other liabilities            |   |                                 | 42     |   |                           |   | -    |                                 |   |   | 42 |   |
| Total Liabilities            |   | $                                    | 41,543 |   |                           | $      | 151       |                                 |   | $ | 41,694 |   |

|   | (a) | The adjustment represents a refinement to the fair market value of the loans assumed in the transaction. |
|--------|-----|----------------------------------------------------------------------------------------------------------|

|   | (b) | The adjustment represents a refinement to the value of the core deposit intangible assumed in the acquisition.  The core deposit intangible was recorded as an identifiable intangible asset and will be amortized over the average life of the related deposit portfolio, estimated to be seven years. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The adjustment represents a refinement to fair value of the CD's acquired and will be amortized to reduce interest expense over the average life of the portfolio. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                          |   | Amortized Cost |        |   | GrossUnrealized Gains |   |      | Gross Unrealized Losses |   |   | Fair Value |   |
|-------------------------------------------------------------------------------|--------|----------------|-------------|--------|-----------------------|--------|-----------|-------------------------|--------|--------|------------|--------|
| December 31, 2010:                                                            |   |           |        |   |                  |   |      |                    |   |   |       |   |
| U. S. Government sponsored agencies (GSEs) and U. S. Treasury securities |   | $              | 89,679,833  |   |                  | $      | 245,972   |                    |   | $      | (894,154   | )      |   | $ | 89,031,651 |   |
| State and municipal securities                                                |   |           | 20,641,820  |   |                  |   | 65,042    |                    |   |   | (1,546,891 | )      |   |   | 19,159,971 |   |
| Corporate debt securities                                                     |   |           | 2,169,801   |   |                  |   | -         |                    |   |   | (469,657   | )      |   |   | 1,700,144 |   |
| GSE residential mortgage-backed securities                                    |   |           | 125,749,586 |   |                  |   | 723,508   |                    |   |   | (1,137,256 | )      |   |   | 125,335,838 |   |
| Private label residential mortgage-backed securities                          |   |           | 2,800,558   |   |                  |   | 6,933     |                    |   |   | -          |   |   |   | 2,807,491 |   |
| Total debt securities                                                         |   |           | 241,041,598 |   |                  |   | 1,041,455 |                    |   |   | (4,047,958 | )      |   |   | 238,035,095 |   |
| Equity securities                                                             |   |           | 434,801     |   |                  |   | 31,199    |                    |   |   | (124,193   | )      |   |   | 341,807 |   |
| Total securities                                                              |   | $              | 241,476,399 |   |                  | $      | 1,072,654 |                    |   | $      | (4,172,151 |   |   | $ | 238,376,902 |   |

| December 31, 2009:                                                            |   |   |        |   |   |   |    |   |   |   |       |   |
|-------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|---------|--------|--------|--------|------------|--------|
| U. S. Government sponsored agencies (GSEs) and U. S. Treasury securities |   | $      | 30,571,605  |   |   | $      | 190,036 |   |   | $      | (299,664   | )      |   | $ | 30,461,977 |   |
| State and municipal securities                                                |   |   | 30,142,545  |   |   |   | 196,013 |   |   |   | (1,215,694 | )      |   |   | 29,122,864 |   |
| Corporate debt securities                                                     |   |   | 2,178,999   |   |   |   | 44,976  |   |   |   | (313,757   | )      |   |   | 1,910,218 |   |
| GSE residential mortgage-backed securities                                    |   |   | 54,091,124  |   |   |   | 449,796 |   |   |   | (4,682     | )      |   |   | 54,536,238 |   |
| Private label residential mortgage-backed securities                          |   |   | 3,859,494   |   |   |   | 15,015  |   |   |   | (30        | )      |   |   | 3,874,479 |   |
| Total debt securities                                                         |   |   | 120,843,767 |   |   |   | 895,836 |   |   |   | (1,833,827 | )      |   |   | 119,905,776 |   |
| Equity securities                                                             |   |   | 751,521     |   |   |   | 47,999  |   |   |   | (178,396   | )      |   |   | 621,124 |   |
| Total securities                                                              |   | $      | 121,595,288 |   |   | $      | 943,835 |   |   | $      | (2,012,223 | )      |   | $ | 120,526,900 |   |

|                       |   | December 31, 2010 |        |   | December 31, 2009 |   |
|----------------------------|--------|-------------------|-------------|--------|-------------------|--------|
|                       |   | AmortizedCost     |        |   | FairValue         |   |   | AmortizedCost |   |   | FairValue |   |
|                       |   |              |        |   |              |   |   |   |   |
| One year or less           |   | $                 | 24,998,970  |   |              | $      | 24,998,251 |   |   | $ | - |   |   | $ | - |   |
| One to five years          |   |              | 13,576,702  |   |              |   | 13,113,049 |   |   |   | 3,700,300 |   |   |   | 3,487,707 |   |
| Five to ten years          |   |              | 26,925,926  |   |              |   | 26,729,226 |   |   |   | 11,384,865 |   |   |   | 11,493,407 |   |
| Over ten years             |   |              | 46,989,856  |   |              |   | 45,051,240 |   |   |   | 47,807,984 |   |   |   | 46,513,945 |   |
| Mortgage-backed securities |   |              | 128,550,144 |   |              |   | 128,143,329 |   |   |   | 57,950,618 |   |   |   | 58,410,717 |   |
|                       |   | $                 | 241,041,598 |   |              | $      | 238,035,095 |   |   | $ | 120,843,767 |   |   | $ | 119,905,776 |   |

----

|                                                         |   | Years Ended December 31, |    |
|--------------------------------------------------------------|--------|--------------------------|---------|
|                                                         |   | 2010                     |    |   | 2009 |   |   | 2008 |   |
|                                                         |   |                     |    |   |   |   |   |   |   |
|                                                         |   |                     |    |   |   |   |   |   |   |
| Gross gains on sales of securities                           |   | $                        | 323,771 |   |   | $ | 964,793 |   |   | $ | 361,701 |   |
| Gross losses on sales of securities                          |   |                     | (29,980 | ) |   |   | (55,916 | ) |   |   | (127,025 | ) |
| Net realized gains on sales of securities available for sale |   | $                        | 293,791 |   |   | $ | 908,877 |   |   | $ | 234,676 |   |

|                                                                        |   | Less Than 12 Months |        |   | 12 Months or More |   |       | Total     |   |
|-----------------------------------------------------------------------------|--------|---------------------|-------------|--------|-------------------|--------|------------|-----------|--------|
| Description of Securities                                                   |   | FairValue           |        |   | UnrealizedLosses  |   |       | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                                                        |   |                |        |   |              |   |       |      |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010 :                                                         |   |                |        |   |              |   |       |      |   |   |   |   |   |   |   |   |   |   |
| U.S. Government sponsored agencies (GSEs) and U.S. Treasury securities |   | $                   | 68,947,931  |   |              | $      | (894,154   | )         |   | $ | - |   |   | $ | - |   |   | $ | 68,947,931 |   |   | $ | (894,154 | ) |
| State and municipal securities                                              |   |                | 13,815,123  |   |              |   | (638,416   | )         |   |   | 3,540,787 |   |   |   | (908,475 | ) |   |   | 17,355,910 |   |   |   | (1,546,891 | ) |
| Corporate debt securities                                                   |   |                | 934,144     |   |              |   | (79,419    | )         |   |   | 766,000 |   |   |   | (390,238 | ) |   |   | 1,700,144 |   |   |   | (469,657 | ) |
| GSE residential mortgage-backed securities                             |   |                | 72,747,679  |   |              |   | (1,137,256 | )         |   |   | - |   |   |   | - |   |   |   | 72,747,679 |   |   |   | (1,137,256 | ) |
| Subtotal, debt securities                                                   |   |                | 156,444,877 |   |              |   | (2,749,245 | )         |   |   | 4,306,787 |   |   |   | (1,298,713 | ) |   |   | 160,751,664 |   |   |   | (4,047,958 | ) |
| Equity securities                                                           |   |                | -           |   |              |   | -          |      |   |   | 310,607 |   |   |   | (124,193 | ) |   |   | 310,607 |   |   |   | (124,193 | ) |
| Total temporarily impaired securities                                       |   | $                   | 156,444,877 |   |              | $      | (2,749,245 | )         |   | $ | 4,617,394 |   |   | $ | (1,422,906 | ) |   | $ | 161,062,271 |   |   | $ | (4,172,151 | ) |

| December 31, 2009:                                                          |   |   |       |   |   |   |     |   |   |   |       |   |   |   |       |   |   |   |
|-----------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|----------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|
| U.S. Government sponsored agencies (GSEs) and U.S. Treasury securities |   | $      | 14,295,966 |   |   | $      | (299,664 | )      |   | $      | -          |   |   | $      | -          |   |   | $      | 14,295,966 |   |   | $ | (299,664 | ) |
| State and municipal securities                                              |   |   | 8,125,696  |   |   |   | (311,298 | )      |   |   | 10,722,375 |   |   |   | (904,396   | )      |   |   | 18,848,071 |   |   |   | (1,215,694 | ) |
| Corporate debt securities                                                   |   |   | -          |   |   |   | -        |   |   |   | 845,308    |   |   |   | (313,757   | )      |   |   | 845,308 |   |   |   | (313,757 | ) |
| GSE residential mortgage-backed securities                             |   |   | 2,883,976  |   |   |   | (4,682   | )      |   |   | -          |   |   |   | -          |   |   |   | 2,883,976 |   |   |   | (4,682 | ) |
| Private label residential mortgage-backed securities                   |   |   | 24,344     |   |   |   | (30      | )      |   |   | -          |   |   |   | -          |   |   |   | 24,344 |   |   |   | (30 | ) |
| Subtotal, debt securities                                                   |   |   | 25,329,982 |   |   |   | (615,674 | )      |   |   | 11,567,683 |   |   |   | (1,218,153 | )      |   |   | 36,897,665 |   |   |   | (1,833,827 | ) |
| Equity securities                                                           |   |   | -          |   |   |   | -        |   |   |   | 256,404    |   |   |   | (178,396   | )      |   |   | 256,404 |   |   |   | (178,396 | ) |
| Total temporarily impaired securities                                       |   | $      | 25,329,982 |   |   | $      | (615,674 | )      |   | $      | 11,824,087 |   |   | $      | (1,396,549 | )      |   | $      | 37,154,069 |   |   | $ | (2,012,223 | ) |

----

----

----

----

|                                                  |   | December 31, |        |
|-------------------------------------------------------|--------|--------------|-------------|
|                                                  |   | 2010         |        |   | 2009 |   |
|                                                  |   |         |        |   |   |   |
| Commercial real estate:                               |   |         |        |   |   |   |
| Non Residential                                       |   | $            | 97,482,402  |   |   | $ | 71,013,650 |   |
| Multifamily                                           |   |         | 10,769,939  |   |   |   | 11,650,057 |   |
| Farmland                                              |   |         | 11,775,446  |   |   |   | 9,012,642 |   |
| Total commercial real estate loans                    |   |         | 120,027,787 |   |   |   | 91,676,349 |   |
|                                                  |   |         |        |   |   |   |   |   |
| Construction and land                                 |   |         | 22,426,182  |   |   |   | 28,002,622 |   |
|                                                  |   |         |        |   |   |   |   |   |
| Consumer real estate:                                 |   |         |        |   |   |   |   |   |
| Mortgage loans, 1-4 families                          |   |         | 110,961,116 |   |   |   | 81,255,214 |   |
| Home equity                                           |   |         | 16,637,774  |   |   |   | 17,312,606 |   |
| Total consumer real estate loans                      |   |         | 127,598,890 |   |   |   | 98,567,820 |   |
|                                                  |   |         |        |   |   |   |   |   |
| Consumer:                                             |   |         |        |   |   |   |   |   |
| Indirect auto loans                                   |   |         | 8,747,644   |   |   |   | 16,546,425 |   |
| Direct auto loans                                     |   |         | 7,651,136   |   |   |   | 10,151,213 |   |
| Other                                                 |   |         | 8,875,116   |   |   |   | 8,283,542 |   |
| Total consumer loans                                  |   |         | 25,273,896  |   |   |   | 34,981,180 |   |
|                                                  |   |         |        |   |   |   |   |   |
| Commercial and industrial loans                       |   |         | 50,194,884  |   |   |   | 45,784,735 |   |
|                                                  |   |         |        |   |   |   |   |   |
| Total originated loans                                |   |         | 345,521,639 |   |   |   | 299,012,706 |   |
|                                                  |   |         |        |   |   |   |   |   |
| Purchased loans, net of fair market value adjustments |   |         | 73,475,357  |   |   |   | 35,126,226 |   |
|                                                  |   |         |        |   |   |   |   |   |
| Total loans                                           |   |         | 418,996,996 |   |   |   | 334,138,932 |   |
| Total allowance for loan losses                       |   |         | (8,101,445  | ) |   |   | (6,060,460 | ) |
| Loans, net                                            |   | $            | 410,895,551 |   |   | $ | 328,078,472 |   |

|                                       |   |   |  Years Ended December 31,  |   |
|--------------------------------------------|--------|--------|--------------------------------------|--------|
|                                       |   |   | 2010                                 |   |   |   | 2009 |   |   |   | 2008 |   |
| Balance, beginning of period               |   | $      | 6,060,460                            |   |   | $ | 4,950,722 |   |   | $ | 4,415,669 |   |
| Provision for loan losses                  |   |   | 5,500,000                            |   |   |   | 7,500,000 |   |   |   | 3,350,000 |   |
| Loans charged off                          |   |   | (3,686,283                           | )      |   |   | (6,620,779 | ) |   |   | (3,001,570 | ) |
| Recoveries of loans previously charged off |   |   | 227,268                              |   |   |   | 230,517 |   |   |   | 186,623 |   |
| Balance, end of period                     |   | $      | 8,101,445                            |   |   | $ | 6,060,460 |   |   | $ | 4,950,722 |   |

----

|                                                       |   | CommercialRealEstate |   |   | ConsumerRealEstate |   |   | ConstructionandLand |   |   | CommercialandIndustrialLoans |   |   |   Consumer |   |   |   Total |   |
|------------------------------------------------------------|--------|----------------------|--------|--------|--------------------|--------|--------|---------------------|--------|--------|------------------------------|--------|--------|----------------------|--------|--------|-------------------|--------|
| 2010 Allowance for loan losses:                       |   |                 |   |   |               |   |   |                |   |   |                         |   |   |                 |   |   |              |   |
| Beginning balance                                          |   | $                    | 1,176  |   |               | $      | 1,422  |                |   | $      | 1,419                        |   |   | $                    | 1,193  |   |              | $      | 850 |   |   | $ | 6,060 |   |
| Add (deduct):                                              |   |                 |   |   |               |   |   |                |   |   |                         |   |   |                 |   |   |              |   |   |   |   |   |   |   |
| Charge-offs                                                |   |                 | (412   | )      |               |   | (1,278 | )                   |   |   | (704                         | )      |   |                 | (804   | )      |              |   | (488 | ) |   |   | (3,686 | ) |
| Recoveries                                                 |   |                 | -      |   |               |   | 10     |                |   |   | -                            |   |   |                 | -      |   |              |   | 217 |   |   |   | 227 |   |
| Provision                                                  |   |                 | 957    |   |               |   | 2,043  |                |   |   | 1,262                        |   |   |                 | 1,212  |   |              |   | 26 |   |   |   | 5,500 |   |
| Ending balance                                             |   | $                    | 1,721  |   |               | $      | 2,197  |                |   | $      | 1,977                        |   |   | $                    | 1,601  |   |              | $      | 605 |   |   | $ | 8,101 |   |
| Loans:                                                     |   |                 |   |   |               |   |   |                |   |   |                         |   |   |                 |   |   |              |   |   |   |   |   |   |   |
| Ending balance: individually evaluated for impairment |   | $                    | 2,625  |   |               | $      | 5,699  |                |   | $      | 4,909                        |   |   | $                    | 932    |   |              | $      | - |   |   | $ | 14,165 |   |
| Ending balance: collectively evaluated for impairment |   | $                    | 35     |   |               | $      | 132    |                |   | $      | 87                           |   |   | $                    | 52     |   |              | $      | 161 |   |   | $ | 467 |   |

|                                              | As of and For the Years Ended |        |
|---------------------------------------------------|-------------------------------|-------------|
|                                              | December 31,                  |        |
|                                              | 2010                          |        | 2009 |   | 2008 |   |
|                                              | (dollars in thousands)        |        |
| Impaired loans without a valuation allowance      | $                             | -           |   |   | $ | - |   |   | $ | - |   |
| Impaired loans with a valuation allowance         |                          | 14,632      |   |   |   | 7,237 |   |   |   | 7,281 |   |
| Total impaired loans                              | $                             | 14,632      |   |   | $ | 7,237 |   |   | $ | 7,281 |   |
| Valuation allowance related to impaired loans     | $                             | 2,803       |   |   | $ | 1,175 |   |   | $ | 666 |   |
| Year to date average investment in impaired loans | $                             |  8,821 |   |   | $ | 9,506 |   |   | $ | 4,811 |   |
| Foregone interest income on impaired loans        | $                             | 538         |   |   | $ | 610 |   |   | $ | 203 |   |

----

|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   | Interest   |   |
|----------------------------------------------------------------|--------|------------------------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|
|                                                           |   |                   |   |   | Unpaid    |   |   |      |   |   | Average    |   |   | Income     |   |
|                                                           |   | Recorded               |   |   | Principal |   |   | Related   |   |   | Recorded   |   |   | Recognized |   |
|                                                           |   | Investment             |   |   | Balance   |   |   | Allowance |   |   | Investment |   |   | YTD 2010   |   |
|                                                           |   | (dollars in thousands) |   |
| Commercial real estate:                                        |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |
|    Non Residential                              |   | $                      | 1,357  |   |      | $      | 1,357  |      |   | $      | 280        |   |   | $          | 1,357  |   |   | $ | 1 |   |
|    Multifamily                                  |   |                   | 1,302  |   |      |   | 1,302  |      |   |   | 175        |   |   |       | 1,302  |   |   |   | 47 |   |
|    Farmland                                     |   |                   | -      |   |      |   | -      |      |   |   | -          |   |   |       | -      |   |   |   | - |   |
|    Total commercial real estate loans           |   |                   | 2,659  |   |      |   | 2,659  |      |   |   | 455        |   |   |       | 2,659  |   |   |   | 48 |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| Construction and land                                          |   |                   | 4,997  |   |      |   | 4,997  |      |   |   | 1,114      |   |   |       | 4,997  |   |   |   | 198 |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| Consumer real estate:                                          |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
|    Mortgage loans, 1-4 families                 |   |                   | 5,803  |   |      |   | 5,803  |      |   |   | 896        |   |   |       | 5,803  |   |   |   | 237 |   |
|    Home equity                                  |   |                   | 7      |   |      |   | 7      |      |   |   | 2          |   |   |       | 7      |   |   |   | 1 |   |
|    Total consumer real estate loans             |   |                   | 5,810  |   |      |   | 5,810  |      |   |   | 898        |   |   |       | 5,810  |   |   |   | 238 |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
|  Consumer:                                                |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
|     Indirect auto loans                    |   |                   | 108    |   |      |   | 108    |      |   |   | 50         |   |   |       | 108    |   |   |   | 5 |   |
|     Direct auto loans                      |   |                   | 45     |   |      |   | 45     |      |   |   | 17         |   |   |       | 45     |   |   |   | 2 |   |
|     Other                                  |   |                   | 8      |   |      |   | 8      |      |   |   | 3          |   |   |       | 8      |   |   |   | 1 |   |
|        Total consumer loans |   |                   | 161    |   |      |   | 161    |      |   |   | 70         |   |   |       | 161    |   |   |   | 8 |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| Commercial and industrial loans                                |   |                   | 1,005  |   |      |   | 1,005  |      |   |   | 266        |   |   |       | 1,005  |   |   |   | 62 |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
|    Total originated loans                       |   |                   | 14,632 |   |      |   | 14,632 |      |   |   | 2,803      |   |   |       | 14,632 |   |   |   | 554 |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| Purchased loans, net                                           |   |                   | 1,848  |   |      |   | 1,848  |      |   |   | -          |   |   |       | 1,848  |   |   |   | 42 |   |
|                                                           |   |                   |   |   |      |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
|    Total                                        |   | $                      | 16,480 |   |      | $      | 16,480 |      |   | $      | 2,803      |   |   | $          | 16,480 |   |   | $ | 596 |   |

----

|                                                                         |   | 30-59                  |   |   | 60-89    |   |   | Greater |   |   | Total  |   |   |    |   |   |   |   |
|------------------------------------------------------------------------------|--------|------------------------|--------|--------|----------|--------|--------|---------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|
|                                                                         |   | Days                   |   |   | Days     |   |   | Than    |   |   | Past   |   |   |    |   |   | Total  |   |
|                                                                         |   | Past Due               |   |   | Past Due |   |   | 90 Days |   |   | Due    |   |   | Current |   |   | Loans  |   |
|                                                                         |   | (dollars in thousands) |   |
| Commercial real estate:                                                      |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |
|    Non Residential                                            |   | $                      | -      |   |     | $      | -      |    |   | $      | 1,357  |   |   | $       | 1,357  |   |   | $      | 96,126 |   |   | $ | 97,483 |   |
|    Multifamily                                                |   |                   | -      |   |     |   | -      |    |   |   | 1,302  |   |   |    | 1,302  |   |   |   | 9,468 |   |   |   | 10,770 |   |
|    Farmland                                                   |   |                   | -      |   |     |   | -      |    |   |   | -      |   |   |    | -      |   |   |   | 11,775 |   |   |   | 11,775 |   |
|        Total commercial real estate loans |   |                   | -      |   |     |   | -      |    |   |   | 2,659  |   |   |    | 2,659  |   |   |   | 117,369 |   |   |   | 120,028 |   |
|                                                                         |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Construction and land                                                        |   |                   | 295    |   |     |   | -      |    |   |   | 1,423  |   |   |    | 1,718  |   |   |   | 20,708 |   |   |   | 22,426 |   |
|                                                                         |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Consumer real estate:                                                        |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|    Mortgage loans, 1-4 families                               |   |                   | 865    |   |     |   | -      |    |   |   | 3,758  |   |   |    | 4,623  |   |   |   | 106,338 |   |   |   | 110,961 |   |
|    Home equity                                                |   |                   | -      |   |     |   | 38     |    |   |   | 7      |   |   |    | 45     |   |   |   | 16,593 |   |   |   | 16,638 |   |
|      Total consumer real estate loans               |   |                   | 865    |   |     |   | 38     |    |   |   | 3,765  |   |   |    | 4,668  |   |   |   | 122,931 |   |   |   | 127,599 |   |
|                                                                         |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|  Consumer:                                                              |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|     Indirect auto loans                                  |   |                   | 171    |   |     |   | 10     |    |   |   | 108    |   |   |    | 289    |   |   |   | 8,458 |   |   |   | 8,747 |   |
|     Direct auto loans                                    |   |                   | 42     |   |     |   | 5      |    |   |   | 45     |   |   |    | 92     |   |   |   | 7,559 |   |   |   | 7,651 |   |
|     Other                                                |   |                   | 12     |   |     |   | -      |    |   |   | 8      |   |   |    | 20     |   |   |   | 8,856 |   |   |   | 8,876 |   |
|        Total consumer loans               |   |                   | 225    |   |     |   | 15     |    |   |   | 161    |   |   |    | 401    |   |   |   | 24,873 |   |   |   | 25,274 |   |
|                                                                         |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial loans                                              |   |                   | 34     |   |     |   | 89     |    |   |   | 88     |   |   |    | 211    |   |   |   | 49,984 |   |   |   | 50,195 |   |
|                                                                         |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|     Total originated loans                               |   |                   | 1,419  |   |     |   | 142    |    |   |   | 8,096  |   |   |    | 9,657  |   |   |   | 335,865 |   |   |   | 345,522 |   |
|                                                                         |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Purchased loans                                                              |   |                   | 835    |   |     |   | 103    |    |   |   | 1,848  |   |   |    | 2,786  |   |   |   | 70,689 |   |   |   | 73,475 |   |
|                                                                         |   |                   |   |   |     |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|      Total                                          |   | $                      | 2,254  |   |     | $      | 245    |    |   | $      | 9,944  |   |   | $       | 12,443 |   |   | $      | 406,554 |   |   | $ | 418,997 |   |

----

----

|                                   |   |                   |   |   |        |   |   |     |   |   | Construction |   |
|----------------------------------------|--------|------------------------|--------|--------|-------------|--------|--------|----------|--------|--------|--------------|--------|
|                                   |   | Non-                   |   |   |        |   |   |     |   |   | and          |   |
|                                   |   | Residential            |   |   | Multifamily |   |   | Farmland |   |   | Land         |   |
|                                   |   | (dollars in thousands) |   |
| Commercial Real Estate Credit Exposure |   |                   |   |   |        |   |   |     |   |   |         |   |
| Pass 1                                 |   | $                      | -      |   |        | $      | -      |     |   | $      | -            |   |   | $ | - |   |
| Pass 2                                 |   |                   | -      |   |        |   | -      |     |   |   | -            |   |   |   | - |   |
| Pass 3                                 |   |                   | 39,237 |   |        |   | 4,677  |     |   |   | 6,788        |   |   |   | 6,550 |   |
| Pass 4                                 |   |                   | 54,146 |   |        |   | 4,790  |     |   |   | 3,167        |   |   |   | 9,649 |   |
| Special Mention 5                      |   |                   | 843    |   |        |   | -      |     |   |   | 1,293        |   |   |   | 530 |   |
| Substandard 6                          |   |                   | 3,256  |   |        |   | 1,303  |     |   |   | 527          |   |   |   | 5,697 |   |
| Doubtful 7                             |   |                   | -      |   |        |   | -      |     |   |   | -            |   |   |   | - |   |
| Loss 8                                 |   |                   | -      |   |        |   | -      |     |   |   | -            |   |   |   | - |   |
| Total                                  |   | $                      | 97,482 |   |        | $      | 10,770 |     |   | $      | 11,775       |   |   | $ | 22,426 |   |

|                       |   | Commercial             |   |
|----------------------------|--------|------------------------|--------|
|                       |   | (dollars in thousands) |   |
| Commercial Credit Exposure |   |                   |   |
| Pass 1                     |   | $                      | 848    |   |
| Pass 2                     |   |                   | 281    |   |
| Pass 3                     |   |                   | 27,687 |   |
| Pass 4                     |   |                   | 18,793 |   |
| Special Mention 5          |   |                   | 651    |   |
| Substandard 6              |   |                   | 1,935  |   |
| Doubtful 7                 |   |                   | -      |   |
| Loss 8                     |   |                   | -      |   |
| Total                      |   | $                      | 50,195 |   |

|                                 |   | Mortgage               |    |   | Home Equity |   |
|--------------------------------------|--------|------------------------|---------|--------|-------------|--------|
|                                 |   | (dollars in thousands) |    |
| Consumer Real Estate Credit Exposure |   |                   |    |   |        |   |
| Pass 1-4                             |   | $                      | 101,093 |   |        | $      | 16,541 |   |
| Special Mention 5                    |   |                   | 1,359   |   |        |   | - |   |
| Substandard 6                        |   |                   | 8,509   |   |        |   | 97 |   |
| Doubtful 7                           |   |                   | -       |   |        |   | - |   |
| Loss 8                               |   |                   | -       |   |        |   | - |   |
| Total                                |   | $                      | 110,961 |   |        | $      | 16,638 |   |

----

|                                                  |   | Indirect               |   |   |   |   |   | Other    |   |
|-------------------------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|----------|--------|
|                                                  |   | Auto                   |   |   | Auto   |   |   | Consumer |   |
|                                                  |   | (dollars in thousands) |   |
| Consumer Credit Exposure                              |   |                   |   |   |   |   |   |     |   |
| Pass 1-4                                              |   | $                      | 8,509  |   |   | $      | 7,578  |     |   | $ | 8,850 |   |
| Special Mention 5                                     |   |                   | 25     |   |   |   | -      |     |   |   | - |   |
| Substandard 6                                         |   |                   | 214    |   |   |   | 73     |     |   |   | 26 |   |
| Doubtful 7                                            |   |                   | -      |   |   |   | -      |     |   |   | - |   |
| Loss 8                                                |   |                   | -      |   |   |   | -      |     |   |   | - |   |
|         Total |   | $                      | 8,748  |   |   | $      | 7,651  |     |   | $ | 8,876 |   |

|                            |   | Purchased,Net Fair Value |   |
|---------------------------------|--------|--------------------------|--------|
|                            |   | (dollars in thousands)   |   |
| Purchased Loans Credit Exposure |   |                     |   |
| Pass 1                          |   | $                        | 1,024  |   |
| Pass 2                          |   |                     | 19     |   |
| Pass 3                          |   |                     | 44,694 |   |
| Pass 4                          |   |                     | 19,977 |   |
| Special Mention 5               |   |                     | 2,576  |   |
| Substandard 6                   |   |                     | 5,185  |   |
| Doubtful 7                      |   |                     | -      |   |
| Loss 8                          |   |                     | -      |   |
| Total                           |   | $                        | 73,475 |   |

----

| (dollars in thousands)                        |   | Acquired Loans Without Specific Evidence of Deterioration in Credit Quality |   |   | Acquired Loans With Specific Evidence of Deterioration in Credit Quality |   |   | Total Loans Acquired |   |
|-----------------------------------------------|--------|----------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------|--------|--------|----------------------|--------|
|                                          |   |                                                                             |   |   |                                                                     |   |   |                 |   |
| Contractually required principal and interest |   | $                                                                                | 18,430 |   |                                                                     | $      | 15,145 |                 |   | $ | 33,575 |   |
| Non-accretable difference                     |   |                                                                             | (1,393 | )      |                                                                     |   | (5,866 | )                    |   |   | (7,259 | ) |
| Cash flows expected to be collected           |   |                                                                             | 17,037 |   |                                                                     |   | 9,279  |                 |   |   | 26,316 |   |
| Accretable yield                              |   |                                                                             | (3,299 | )      |                                                                     |   | (1,299 | )                    |   |   | (4,598 | ) |
| Basis in acquired loans                       |   | $                                                                                | 13,738 |   |                                                                     | $      | 7,980  |                 |   | $ | 21,718 |   |

| (dollars in thousands)                      |   | Acquired Loans Without Specific Evidence of Deterioration in Credit Quality |   |   | Acquired Loans With Specific Evidence of Deterioration in Credit Quality |   |   | Total Loans Acquired |   |
|---------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------|--------|--------|----------------------|--------|
|                                        |   |                                                                        |   |   |                                                                     |   |   |                 |   |
| Balance at acquisition, December 4, 2009    |   | $                                                                           | 1,090  |   |                                                                     | $      | 2,480  |                 |   | $ | 3,570 |   |
| Accretion                                   |   |                                                                        | (65    | )      |                                                                     |   | (128   | )                    |   |   | (193 | ) |
| Balance, December 31, 2009                  |   | $                                                                           | 1,025  |   |                                                                     | $      | 2,352  |                 |   | $ | 3,377 |   |
| Transfers from non-accretable difference    |   |                                                                        |   |   |                                                                     |   |   |                 |   |   |   |   |
|     to accretable yield |   |                                                                        | 3,823  |   |                                                                     |   | (485   | )                    |   |   | 3,338 |   |
| Accretion                                   |   |                                                                        | (1,549 | )      |                                                                     |   | (568   | )                    |   |   | (2,117 | ) |
| Balance, December 31, 2010                  |   | $                                                                           | 3,299  |   |                                                                     | $      | 1,299  |                 |   | $ | 4,598 |   |

|   | The Company did not acquire any loans with deteriorated credit quality as of the acquisition date in the Lake City and Park Avenue Bank branch acquisitions.  Accordingly, the Company accounts for the loans acquired in these acquisitions under FASB ASC 805, Business Combinations. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                         |   | December 31,2010 |        |   | December 31,2009 |   |
|------------------------------|--------|------------------|-------------|--------|------------------|--------|
|                         |   |             |        |   |             |   |
|                         |   |             |        |   |             |   |
| Balance, beginning of period |   | $                | 8,721,810   |   |             | $      | 10,075,860 |   |
| Advances                     |   |             | 13,328,242  |   |             |   | 9,699,433 |   |
| Repayments                   |   |             | (12,701,797 | )      |             |   | (11,053,483 | ) |
| Changes in related parties   |   |             | (227,637    | )      |             |   | - |   |
| Balance, end of period       |   | $                | 9,120,618   |   |             | $      | 8,721,810 |   |

|                                                                    |   | December 31, 2010 |      |   | December 31,2009 |   |      | December 31,2008 |   |
|-------------------------------------------------------------------------|--------|------------------------|-----------|--------|------------------|--------|-----------|------------------|--------|
|                                                                    |   |                   |      |   |             |   |      |             |   |
|  Loans                                                             |   | $                      | 1,969,951 |   |             | $      | 2,044,815 |             |   | $ | 1,344,520 |   |
|  Other interest earning assets                                     |   |                   | 83        |   |             |   | 817       |             |   |   | - |   |
|  GSE and private label residential mortgage-backed securities |   |                   | 406,259   |   |             |   | 190,973   |             |   |   | 287,387 |   |
|  Other investment securities                                       |   |                   | 530,757   |   |             |   | 562,770   |             |   |   | 523,420 |   |
|       Subtotal, securities                |   |                   | 937,016   |   |             |   | 753,743   |             |   |   | 810,807 |   |
|                                                                    |   | $                      | 2,907,050 |   |             | $      | 2,799,375 |             |   | $ | 2,155,327 |   |

|   |   |   |   | Years Ended December 31, |
|--------|--------|--------|--------|--------------------------|
|   |   |   |   | 2010                     |   | 2009 |   | 2008 |

| Balance, beginning of period                                                                                           |   | $      | 1,739,437  |   |   | $      | 2,064,789  |   |   | $      | 287,030    |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|
| Additions                                                                                                              |   |   | 4,559,863  |   |   |   | 716,084    |   |   |   | 3,276,417  |   |
|         Purchased other real estate, net of fair market value adjustments |   |   | -          |   |   |   | 600,870    |   |   |   | -          |   |
| Disposals                                                                                                              |   |   | (2,628,085 | )      |   |   | (1,220,206 | )      |   |   | (1,112,341 | )      |
| Gain (loss) on sales and write downs of other real estate owned                                                   |   |   | 17,512     |   |   |   | (422,100   | )      |   |   | (386,317   | )      |
| Balance, end of period                                                                                                 |   | $      | 3,688,727  |   |   | $      | 1,739,437  |   |   | $      | 2,064,789  |   |

----

| NOTE 7. | PREMISES AND EQUIPMENT |
|---------|------------------------|

|   |   | December 31, |
|--------|--------|--------------|
|   |   | 2010         |   | 2009 |   |

| Land and improvements    |   | $      | 7,269,536   |   |   | $      | 5,416,591   |   |
|--------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|
| Buildings                |   |   | 13,851,013  |   |   |   | 10,658,122  |   |
| Furniture and equipment  |   |   | 10,524,730  |   |   |   | 8,818,068   |   |
| Construction in progress |   |   | 806,544     |   |   |   | 885,627     |   |
|                     |   |   | 32,451,823  |   |   |   | 25,778,408  |   |
| Accumulated depreciation |   |   | (11,040,193 | )      |   |   | (10,188,288 | )      |
|                     |   | $      | 21,411,630  |   |   | $      | 15,590,120  |   |
|                     |   |   |        |   |   |   |        |   |
| Premises held for sale   |   | $      | 1,080,000   |   |   | $      | 1,080,000   |   |

----

| 2011       |   | $      | 315,733   |   |
|------------|--------|--------|-----------|--------|
| 2012       |   |   | 210,632   |   |
| 2013       |   |   | 123,442   |   |
| 2014       |   |   | 46,793    |   |
| Thereafter |   |   | 790,245   |   |
|       |   | $      | 1,486,845 |   |

----

|                       | As of December 31, 2010 |   |                    | As of December 31, 2009 |   |
|----------------------------|-------------------------|--------|-------------------------|-------------------------|--------|
|                       | GrossCarryingAmount     |   | AccumulatedAmortization |                    |   | GrossCarryingAmount |   |   | AccumulatedAmortization |   |
|                       |                    |   |                    |                    |   |   |   |   |
| The Tattnall Bank          |                    | $      | 263,446                 |                    |   | $ | 39,518 |   |   | $ | 159,463 |   |   | $ | - |   |
| Lake City, Florida, branch |                    |   | 460,410                 |                    |   |   | 69,061 |   |   |   | 411,369 |   |   |   | - |   |
| PAB branches               |                    |   | 1,911,953               |                    |   |   | 167,296 |   |   |   | - |   |   |   | - |   |
| Core deposit intangibles   |                    | $      | 2,635,809               |                    |   | $ | 275,875 |   |   | $ | 570,832 |   |   | $ | - |   |

| 2011            |   | $      | 353,985   |   |
|-----------------|--------|--------|-----------|--------|
| 2012            |   |   | 300,895   |   |
| 2013            |   |   | 270,255   |   |
| 2014            |   |   | 263,580   |   |
| 2015            |   |   | 263,580   |   |
| 2016 and beyond |   |   | 907,639   |   |
|            |   | $      | 2,359,934 |   |

----

| 2011            |   | $      | 111,471,493 |   |
|-----------------|--------|--------|-------------|--------|
| 2012            |   |   | 25,128,878  |   |
| 2013            |   |   | 16,925,122  |   |
| 2014            |   |   | 4,295,705   |   |
| 2015 and beyond |   |   | 11,218,562  |   |
|            |   | $      | 169,039,760 |   |

|                     |   | Years Ended December 31, |      |
|--------------------------|--------|--------------------------|-----------|
|                     |   | 2010                     |      |   | 2009 |   |   | 2008 |   |
| Interest Expense         |   |                     |      |   |   |   |   |   |   |
| Interest bearing demand  |   | $                        | 917,090   |   |   | $ | 533,960 |   |   | $ | 485,760 |   |
| Savings and money market |   |                     | 2,030,022 |   |   |   | 1,552,814 |   |   |   | 1,389,725 |   |
| Retail time deposits     |   |                     | 2,553,844 |   |   |   | 3,787,689 |   |   |   | 5,282,841 |   |
| Wholesale time deposits  |   |                     | 258,372   |   |   |   | 597,058 |   |   |   | 1,884,456 |   |
|                     |   | $                        | 5,759,328 |   |   | $ | 6,471,521 |   |   | $ | 9,042,782 |   |

----

|                                                        |   | December 31, |       |
|-------------------------------------------------------------|--------|--------------|------------|
|                                                        |   | 2010         |       |   | 2009 |   |   | 2008 |   |
| Changes in benefit obligations:                             |   |         |       |   |   |   |   |   |   |
| Obligations at beginning of year                            |   | $            | 8,327,315  |   |   | $ | 6,753,603 |   |   | $ | 7,574,649 |   |
| Service cost                                                |   |         | 702,735    |   |   |   | 609,511 |   |   |   | 753,177 |   |
| Interest cost                                               |   |         | 488,658    |   |   |   | 418,965 |   |   |   | 398,996 |   |
| Benefits paid                                               |   |         | (529,804   | ) |   |   | (544,384 | ) |   |   | (615,968 | ) |
| Actuarial (gain) loss                                       |   |         | 862,580    |   |   |   | 1,089,620 |   |   |   | (1,357,251 | ) |
| Obligations at end of year                                  |   | $            | 9,851,484  |   |   | $ | 8,327,315 |   |   | $ | 6,753,603 |   |
|                                                        |   |         |       |   |   |   |   |   |   |   |   |   |
| Changes in plan assets:                                     |   |         |       |   |   |   |   |   |   |   |   |   |
| Fair value of assets at beginning of year                   |   | $            | 6,233,089  |   |   | $ | 4,592,074 |   |   | $ | 6,227,688 |   |
| Actual return on assets                                     |   |         | 860,824    |   |   |   | 1,185,399 |   |   |   | (1,320,750 | ) |
| Company contributions                                       |   |         | 1,620,000  |   |   |   | 1,000,000 |   |   |   | 301,104 |   |
| Benefits paid                                               |   |         | (529,804   | ) |   |   | (544,384 | ) |   |   | (615,968 | ) |
| Fair value of assets at end of year                         |   | $            | 8,184,109  |   |   | $ | 6,233,089 |   |   | $ | 4,592,074 |   |
|                                                        |   |         |       |   |   |   |   |   |   |   |   |   |
| Funded status at end of year, included in other liabilities |   | $            | (1,667,375 | ) |   | $ | (2,094,226 | ) |   | $ | (2,161,529 | ) |
|                                                        |   |         |       |   |   |   |   |   |   |   |   |   |
| Pretax amounts recognized in accumulated other              |   |         |       |   |   |   |   |   |   |   |   |   |
| comprehensive income consist of:                            |   |         |       |   |   |   |   |   |   |   |   |   |
| Net loss                                                    |   | $            | 3,666,112  |   |   | $ | 3,495,052 |   |   | $ | 3,564,058 |   |
| Prior service cost                                          |   |         | 157,705    |   |   |   | 166,819 |   |   |   | 175,933 |   |
|                                                        |   | $            | 3,823,817  |   |   | $ | 3,661,871 |   |   | $ | 3,739,991 |   |
|                                                        |   |         |       |   |   |   |   |   |   |   |   |   |
| Accumulated benefit obligation                              |   | $            | 8,264,762  |   |   | $ | 6,587,683 |   |   | $ | 5,424,718 |   |
|                                                        |   |         |       |   |   |   |   |   |   |   |   |   |
| Net periodic benefit cost:                                  |   |         |       |   |   |   |   |   |   |   |   |   |
| Service cost                                                |   | $            | 709,306    |   |   | $ | 609,511 |   |   | $ | 753,177 |   |
| Interest cost                                               |   |         | 506,856    |   |   |   | 418,965 |   |   |   | 398,996 |   |
| Expected return on plan assets                              |   |         | (636,527   | ) |   |   | (358,807 | ) |   |   | (449,094 | ) |
| Amortization of prior losses                                |   |         | 319,162    |   |   |   | 332,034 |   |   |   | 310,909 |   |
| Amortization of service costs                               |   |         | 9,114      |   |   |   | 9,114 |   |   |   | 9,114 |   |
| Net periodic benefit cost                                   |   | $            | 907,911    |   |   | $ | 1,010,817 |   |   | $ | 1,023,102 |   |

----

|                                                  |   | December 31, |     |
|-------------------------------------------------------|--------|--------------|----------|
|                                                  |   | 2010         |     |   | 2009 |   |   | 2008 |   |
|                                                  |   |         |     |   |   |   |   |   |   |
| Current year actuarial loss                           |   | $            | 477,074  |   |   | $ | 263,028 |   |   | $ | 412,593 |   |
| Amortization of prior losses                          |   |         | (306,014 | ) |   |   | (332,034 | ) |   |   | (310,909 | ) |
| Amortization of prior service cost                    |   |         | (9,114   | ) |   |   | (9,114 | ) |   |   | (9,114 | ) |
| Total recognized in other comprehensive income (loss) |   | $            | 161,946  |   |   | $ | (78,120 | ) |   | $ | 92,570 |   |

|                                            |   | December 31, |   |
|-------------------------------------------------|--------|--------------|--------|
|                                            |   | 2010         |   |   | 2009 |   |
| Assumptions used in computations:               |   |         |   |   |   |   |
| In computing ending obligations:                |   |         |   |   |   |   |
|    Discount rate                 |   |         | 5.25   | % |   |   | 6.00 | % |
|    Rate of compensation increase |   |         | 3.00   | % |   |   | 3.00 | % |
| In computing expected return on plan assets     |   |         | 7.50   | % |   |   | 7.50 | % |

|                      |   | 2010   |   |   | 2009   |   |
|---------------------------|--------|--------|--------|--------|--------|--------|
|                      |   |   |   |   |   |   |
| Fixed income              |   |   | 31.3   | %      |   |   | 39.8 | % |
| Equities                  |   |   | 43.0   | %      |   |   | 51.9 | % |
| Cash and cash equivalents |   |   | 9.7    | %      |   |   | 8.3 | % |

| Prior service cost |   | $      | 9,114   |   |
|--------------------|--------|--------|---------|--------|
| Net loss           |   |   | 319,162 |   |
|               |   | $      | 328,276 |   |

----

| Fiscal Year |   | Amount |      |
|-------------|--------|--------|-----------|
|        |   |   |      |
| 2011        |   | $      | 394,162   |   |
| 2012        |   |   | 1,437,125 |   |
| 2013        |   |   | 642,414   |   |
| 2014        |   |   | 342,011   |   |
| 2015        |   |   | 324,648   |   |
| 2016-2020   |   |   | 6,240,896 |   |

----

|                                         |   | Years Ended December 31, |      |
|----------------------------------------------|--------|--------------------------|-----------|
|                                         |   | 2010                     |      |   | 2009 |   |
| Shares released for allocation               |   |                     | 204,531   |   |   |   | 166,128 |   |
| Unearned                                     |   |                     | 492,320   |   |   |   | 203,046 |   |
| Total ESOP shares                            |   |                     | 696,851   |   |   |   | 369,174 |   |
|                                         |   |                     |      |   |   |   |   |   |
| Fair value of unearned shares at December 31 |   | $                        | 6,114,617 |   |   | $ | 1,757,291 |   |

----

|                                                                                                                                                                                                                                                              |   | December 31, |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|
|                                                                                                                                                                                                                                                              |   | 2010         |       |   | 2009 |   |
| Federal funds purchased from Chattahoochee Bank of Georgia with interest at 0.15% maturing daily.                                                                                                                                                                 |   | $            | 12,978     |   |   | $ | 2,533,892 |   |
| Sold in overnight agreements maturing in one to four days.                                                                                                                                                                                                        |   |         | 2,408,504  |   |   |   | 309,573 |   |
| Sold in a structured agreement due January 25, 2015.  The rate resets quarterly until January 25, 2011.  At that date, it can be terminated or renewed at a rate of 3.78% until maturity.  The rate at December 31, 2010 was 0.00%. |   |         | 5,000,000  |   |   |   | 5,000,000 |   |
| Sold in a structured agreement due March 3, 2013.  On September 3, 2010, the repurchase agreement was renewed at a rate of 3.45% fixed until maturity.                                                                                                  |   |         | 5,000,000  |   |   |   | 5,000,000 |   |
| Sold in a structured agreement due March 3, 2018.  The variable rate resets quarterly and was 4.37% at December 31, 2010.                                                                                                                               |   |         | 5,000,000  |   |   |   | 5,000,000 |   |
| Sold in a structured agreement at a variable rate due March 8, 2017with a quarterly put beginning March 8, 2010.  The rate resets quarterly and was 4.85% at December 31, 2010.                                                                         |   |         | 10,000,000 |   |   |   | 10,000,000 |   |
| Sold in a structured agreement at a fixed rate of 4.75% due August 21, 2017 with a quarterly put beginning August 21, 2011.                                                                                                                                       |   |         | 5,000,000  |   |   |   | 5,000,000 |   |
|                                                                                                                                                                                                                                                              |   | $            | 32,421,482 |   |   | $ | 32,843,465 |   |

----

|                                                                                                 |   | December 31, |       |
|------------------------------------------------------------------------------------------------------|--------|--------------|------------|
|                                                                                                 |   | 2010         |       |   | 2009 |   |
|                                                                                                 |   |         |       |   |   |   |
| Advance from Federal Home Loan Bank with interest at a fixed rate of 3.71%, due September 17, 2014   |   | $            | 5,000,000  |   |   | $ | 5,000,000 |   |
| Advance from Federal Home Loan Bank with interest at a fixed rate of 4.23%, due August 17, 2015      |   |         | 5,000,000  |   |   |   | 5,000,000 |   |
| Advance from Federal Home Loan Bank with interest at a variable rate of 2.85%, due February 28, 2011 |   |         | 7,500,000  |   |   |   | 7,500,000 |   |
| Advance from Federal Home Loan Bank with interest at a fixed rate of 2.74%                           |   |         | 10,000,000 |   |   |   | 10,000,000 |   |
| Advance from Federal Home Loan Bank with interest at a fixed rate of 4.54%, due October 31, 2016     |   |         | 15,000,000 |   |   |   | 15,000,000 |   |
| Advance from Federal Home Loan Bank with interest at a fixed rate of 0.47%, due December 22, 2011    |   |         | 20,000,000 |   |   |   | - |   |
|                                                                                                 |   | $            | 62,500,000 |   |   | $ | 42,500,000 |   |

| 2011        |   | $      | 27,500,000 |   |
|-------------|--------|--------|------------|--------|
| 2012        |   |   | -          |   |
| 2013        |   |   | -          |   |
| 2014        |   |   | 5,000,000  |   |
| 2015        |   |   | 5,000,000  |   |
| Later years |   |   | 25,000,000 |   |
|        |   | $      | 62,500,000 |   |

----

|     | Years Ended December 31, |   |
|----------|--------------------------|--------|
|     | 2010                     |   | 2009 |   | 2008 |   |
| Current  |                     | $      | 346,235 |   |   | $ | (1,024,716 | ) |   | $ | 698,964 |   |
| Deferred |                     |   | (652,873 | ) |   |   | (699,610 | ) |   |   | (1,926,940 | ) |
|     |                     | $      | (306,638 | ) |   | $ | (1,724,326 | ) |   | $ | (1,227,976 | ) |

|                                            |   | Years Ended December 31, |      |
|-------------------------------------------------|--------|--------------------------|-----------|
|                                            |   | 2010                     |      |   | 2009 |   |   | 2008 |   |
| Tax at federal income tax rate                  |   | $                        | 373,740   |   |   |   | 34.00 | % |   | $ | (1,148,059 | ) |   |   | 34.00 | % |   | $ | (506,714 | ) |   |   | 34.00 | % |
| Increase (decrease) resulting from:             |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax-exempt interest                             |   |                     | (322,965  | ) |   |   | (29.38 | )% |   |   | (385,077 | ) |   |   | (11.41 | )% |   |   | (407,702 | ) |   |   | (27.36 | )% |
| Gain on bank owned life insurance death benefit |   |                     | (311,426  | ) |   |   | (28.33 | )% |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Bank owned life insurance                       |   |                     | (207,528  | ) |   |   | (18.88 | )% |   |   | (211,022 | ) |   |   | (6.25 | )% |   |   | (168,467 | ) |   |   | (11.30 | )% |
| Employee Stock                                  |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ownership Plan                                  |   |                     | (39,430   | ) |   |   | (3.59 | )% |   |   | (64,578 | ) |   |   | (1.91 | )% |   |   | (23,395 | ) |   |   | (1.57 | )% |
| Other                                           |   |                     | 200,971   |   |   |   | 18.28 | % |   |   | 84,410 |   |   |   | 2.50 | % |   |   | (121,698 | ) |   |   | (8.17 | )% |
| Provision for income tax benefits               |   |                     | (306,638  | ) |   |   | (27.90 | )% |   |   | (1,724,326 | ) |   |   | (51.07 | )% |   |   | (1,227,976 | ) |   |   | (82.40 | )% |
| Pre-tax income (loss) for each period           |   | $                        | 1,099,236 |   |   |   |   |   |   | $ | (3,376,645 | ) |   |   |   |   |   | $ | (1,490,336 | ) |   |   |   |   |

----

|                                             |   | December 31, |      |
|--------------------------------------------------|--------|--------------|-----------|
|                                             |   | 2010         |      |   | 2009 |   |
| Deferred tax assets:                             |   |         |      |   |   |   |
| Loan loss reserves                               |   | $            | 2,427,311 |   |   | $ | 1,520,552 |   |
| Deferred compensation                            |   |         | 1,467,108 |   |   |   | 1,441,359 |   |
| Pension liability                                |   |         | 1,529,193 |   |   |   | 1,464,415 |   |
| Unrealized loss on securities available for sale |   |         | 1,232,750 |   |   |   | 420,307 |   |
| Impairment loss on securities available for sale |   |         | 555,686   |   |   |   | 555,686 |   |
| Stock-based compensation                         |   |         | 433,341   |   |   |   | 367,796 |   |
| Nonaccrual loans                                 |   |         | 204,283   |   |   |   | 244,148 |   |
| Premises held for sale                           |   |         | 200,988   |   |   |   | 200,988 |   |
| Other real estate owned                          |   |         | 492,548   |   |   |   | 314,192 |   |
| Net operating loss carryforward                  |   |         | 617,983   |   |   |   | - |   |
| State tax credit carryforward                    |   |         | 317,672   |   |   |   | - |   |
| Other                                            |   |         | 82,770    |   |   |   | 21,465 |   |
|                                             |   |         | 9,561,633 |   |   |   | 6,550,908 |   |
| Deferred tax liabilities:                        |   |         |      |   |   |   |   |   |
| Bargain gain purchase                            |   |         | 1,088,825 |   |   |   | - |   |
| Depreciation and amortization                    |   |         | 209,986   |   |   |   | 104,381 |   |
| Realized gains on terminated cash flow hedges    |   |         | 164,567   |   |   |   | 305,313 |   |
| Deferred pension costs                           |   |         | 266,543   |   |   |   | 31,024 |   |
| Deferred loans costs                             |   |         | 105,124   |   |   |   | 69,175 |   |
| Goodwill                                         |   |         | 14,733    |   |   |   | - |   |
|                                             |   |         | 1,849,778 |   |   |   | 509,893 |   |
|                                             |   |         |      |   |   |   |   |   |
| Net deferred tax assets                          |   | $            | 7,711,855 |   |   | $ | 6,041,015 |   |

|   | Management performed an analysis related to the Company’s deferred tax assets for the year ended December 31, 2010 and December 31, 2009. In its analysis, the Company considered all available evidence, both positive and negative, to determine whether estimated future taxable income will be sufficient to realize these assets. The primary negative evidence considered was that the Company has incurred operating losses for financial and tax reporting purposes for the years ended December 31, 2009 and 2008. The tax operating losses have been carried back against prior years’ taxable income, resulting in the tax benefits from the losses being fully realized. However, based on current tax laws, there are no more income taxes that may be recovered from prior years. As a result, the realization of the deferred tax assets is solely dependent upon future taxable income.  The primary positive evidence considered was 2010 income, internal projections, economic and industry trends, historical and projected loan loss trends, the impact of regulatory reform and demographic data for the Company’s markets.  Based upon this analysis, the Company believes that future taxable income will more likely than not be sufficient to realize these assets, and thus, no valuation allowances were deemed necessary for the periods indicated above. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                               |   | Years Ended December 31, |      |
|----------------------------------------------------|--------|--------------------------|-----------|
|                                               |   | 2010                     |      |   | 2009 |   |   | 2008 |   |
| Basic earnings (loss) and shares:                  |   |                     |      |   |   |   |   |   |   |
| Net income (loss)                                  |   | $                        | 1,405,874 |   |   | $ | (1,652,319 | ) |   | $ | (262,360 | ) |
|                                               |   |                     |      |   |   |   |   |   |   |   |   |   |
| Weighted-average basic shares outstanding          |   |                     | 8,424,394 |   |   |   | 8,421,500 |   |   |   | 8,552,063 |   |
|                                               |   |                     |      |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share:                   |   |                     |      |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                  |   | $                        | 0.17      |   |   | $ | (0.20 | ) |   | $ | (0.03 | ) |
|                                               |   |                     |      |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) and shares:                |   |                     |      |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                  |   | $                        | 1,405,874 |   |   | $ | (1,652,319 | ) |   | $ | (262,360 | ) |
|                                               |   |                     |      |   |   |   |   |   |   |   |   |   |
| Weighted-average basic shares outstanding          |   |                     | 8,424,394 |   |   |   | 8,421,500 |   |   |   | 8,552,063 |   |
| Add:  Stock options and nonvested shares |   |                     | 7,888     |   |   |   | - |   |   |   | - |   |
| Weighted-average diluted shares outstanding        |   |                     | 8,432,282 |   |   |   | 8,421,500 |   |   |   | 8,552,063 |   |
|                                               |   |                     |      |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per share:                 |   |                     |      |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                  |   | $                        | 0.17      |   |   | $ | (0.20 | ) |   | $ | (0.03 | ) |

----

|                                                                    |   |  December 31, |
|-------------------------------------------------------------------------|--------|--------------------|
|                                                                    |   |               | 2010 |   |   |   |   |   | 2009 |   |   |   |
|                                                                    |   |               | Number |   |   |   | Weighted-AverageExercisePrice |   |   |   | Number |   |   |   | Weighted-AverageExercisePrice |   |
| Under option, beginning of period                                       |   |               | 416,791 |   |   | $ | 14.90 |   |   |   | 411,765 |   |   | $ | 14.98 |   |
| Granted                                                                 |   |               | - |   |   |   | - |   |   |   | 5,026 |   |   |   | 8.32 |   |
| Exercised                                                               |   |               | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Forfeited                                                               |   |               | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|         Expired                      |   |               | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Under option, end of period                                             |   |               | 416,791 |   |   | $ | 14.90 |   |   |   | 416,791 |   |   | $ | 14.90 |   |
| Exercisable at end of period                                            |   |               | 323,787 |   |   | $ | 14.99 |   |   |   | 240,443 |   |   | $ | 15.00 |   |
| Weighted average fair value per option of options granted during period |   |               |   |   |   | $ | - |   |   |   |   |   |   | $ | 1.77 |   |
|                                                                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |
| Total grant date fair value of options vested during the period         |   |               |   |   |   | $ | 304,835 |   |   |   |   |   |   | $ | 310,591 |   |
| Total intrinsic value of options exercised during the period            |   |               |   |   |   | $ | - |   |   |   |   |   |   | $ | - |   |
| Shares available for grant                                              |   |               |   |   |   |   | 36,446 |   |   |   |   |   |   |   | 36,446 |   |

|                                                                 |   |  Years Ended December 31, |    |
|----------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                                 |   | 2010                           |    |   | 2009 |   |
| Stock options vested and expected to vest:                           |   |                           |    |   |   |   |
|     Number                                       |   |                           | 416,791 |   |   |   | 416,791 |   |
|     Weighted Average Exercise Price              |   | $                              | 14.90   |   |   | $ | 14.90 |   |
|     Aggregate Intrinsic Value                    |   |                           | -       |   |   |   | - |   |
|     Weighted Average Contractual Term of Options |   | 5.5 years                      |    |   | 6.5 years |   |
|                                                                 |   |                           |    |   |   |   |   |   |
| Stock options vested and currently exercisable:                      |   |                           |    |   |   |   |   |   |
| Number                                                               |   |                           | 323,787 |   |   |   | 240,443 |   |
| Weighted Average Exercise Price                                      |   | $                              | 14.99   |   |   | $ | 14.99 |   |
| Aggregate Intrinsic Value                                            |   |                           | -       |   |   |   | - |   |
| Weighted Average Contractual Term of Options                         |   | 5.4 years                      |    |   | 6.4 years |   |

----

|                     |   |   | Options Outstanding |   |    | Options Exercisable                         |   |
|--------------------------|--------|--------|---------------------|--------|---------|---------------------------------------------|--------|
| Range of Exercise Prices |   |   | Number              |   |    | Weighted- Average Contractual Life in Years |   |   | Weighted-AverageExercisePrice |   |   | Number |   |   | Weighted-AverageExercisePrice |   |
|                     |   |   |                |   |    |                                        |   |   |   |   |   |   |   |   |   |   |
| $                        | 8.32   |   |                |   | 5,026   |                                        |   |   | 8.9 |   |   | $ | 8.32 |   |   |   | 1,005 |   |   | $ | 8.32 |   |
| $                        | 13.43  |   |                |   | 16,543  |                                        |   |   | 7.0 |   |   | $ | 13.43 |   |   |   | 6,617 |   |   | $ | 13.43 |   |
| $                        | 14.97  |   |                |   | 388,940 |                                        |   |   | 5.4 |   |   | $ | 14.97 |   |   |   | 311,155 |   |   | $ | 14.97 |   |
| $                        | 19.85  |   |                |   | 6,282   |                                        |   |   | 5.9 |   |   | $ | 19.85 |   |   |   | 3,770 |   |   | $ | 19.85 |   |
|                     |   |   |                |   | 416,791 |                                        |   |   | 5.5 |   |   | $ | 14.99 |   |   |   | 322,547 |   |   | $ | 14.99 |   |

|   | Years Ended December 31, |
|--------|--------------------------|
|   | 2010                     |   | 2009 |

| Weighted-average risk-free interest rate          |   |   | -      |   | 3.36%     |
|---------------------------------------------------|--------|--------|--------|--------|-----------|
| Weighted average expected life of the options     |   |   | -      |   | 7.5 years |
| Weighted average expected dividends (as a percent |   |   |   |   |      |
| of the fair value of the stock)                   |   |   | -      |   | 3.12%     |
| Weighted-average expected volatility              |   |   | -      |   | 24.50%    |

----

|                         |   | December 31, 2010 |    |   | December 31, 2009 |   |
|------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                         |   |              |    |   | Weighted          |   |   |   |   |   | Weighted |   |
|                         |   |              |    |   | Average           |   |   |   |   |   | Average |   |
|                         |   |              |    |   | Market            |   |   |   |   |   | Market |   |
|                         |   | Restricted        |    |   | Price             |   |   | Restricted |   |   | Price |   |
|                         |   | Shares            |    |   | at Grant          |   |   | Shares |   |   | at Grant |   |
|                         |   |              |    |   |              |   |   |   |   |   |   |   |
| Balance, beginning of period |   |              | 71,213  |   |              | $      | 14.74 |   |   |   | 102,713 |   |   | $ | 14.92 |   |
| Granted                      |   |              | -       |   |              |   | - |   |   |   | 1,675 |   |   |   | 8.32 |   |
| Vested                       |   |              | (33,508 | )      |              |   | 14.90 |   |   |   | (33,175 | ) |   |   | 14.97 |   |
| Forfeited                    |   |              | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |
| Balance, end of period       |   |              | 37,705  |   |              | $      | 14.60 |   |   |   | 71,213 |   |   | $ | 14.74 |   |

----

| 2011   |   | $      | 248,013 |   |
|--------|--------|--------|---------|--------|
| 2012   |   |   | 163,405 |   |
|   |   | $      | 411,418 |   |

| NOTE 18. | COMMITMENTS AND CONTINGENCIES |
|----------|-------------------------------|

|                         |   | December 31, |       |
|------------------------------|--------|--------------|------------|
|                         |   |         | 2010       |   |   |   | 2009 |   |
| Commitments to extend credit |   | $            | 52,151,367 |   |   | $ | 37,570,312 |   |
| Standby letters of credit    |   |         | 808,265    |   |   |   | 834,060 |   |
|                         |   | $            | 52,959,632 |   |   | $ | 38,404,372 |   |

----

----

|                                   |   |                   |    |   |     |   |   | For Capital       |   |   | To Be Well Capitalized  |   |
|----------------------------------------|--------|------------------------|---------|--------|----------|--------|--------|-------------------|--------|--------|-------------------------|--------|
|                                   |   |                   |    |   |     |   |   | Adequacy          |   |   | Under Prompt Corrective |   |
|                                   |   | Actual                 |    |   | Purposes |   |   | Action Provisions |   |
|                                   |   | Amount                 |    |   | Ratio    |   |   | Amount            |   |   | Ratio                   |   |   | Amount |   |   | Ratio |   |
|                                   |   | (Dollars in thousands) |    |
| Total Capital to Risk Weighted Assets  |   |                   |    |   |     |   |   |              |   |   |                    |   |   |   |   |   |   |   |
| Consolidated                           |   | $                      | 120,189 |   |     |   | 26.4   | %                 |   | $      | 36,465                  |   |   |   | 8.0 | % |   | $ | N/A |   |   |   | - |   |
| HeritageBank of the South              |   |                   | 88,712  |   |     |   | 19.9   | %                 |   |   | 35,739                  |   |   |   | 8.0 | % |   |   | 44,674 |   |   |   | 10.0 | % |
| Tier I Capital to Risk Weighted Assets |   |                   |    |   |     |   |   |              |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                           |   | $                      | 114,560 |   |     |   | 25.1   | %                 |   | $      | 18,233                  |   |   |   | 4.0 | % |   | $ | N/A |   |   |   | - |   |
| HeritageBank of the South              |   |                   | 83,083  |   |     |   | 18.6   | %                 |   |   | 17,870                  |   |   |   | 4.0 | % |   |   | 26,805 |   |   |   | 6.0 | % |
| Tier I Capital to Average Assets:      |   |                   |    |   |     |   |   |              |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                           |   | $                      | 114,560 |   |     |   | 16.1   | %                 |   | $      | 28,508                  |   |   |   | 4.0 | % |   | $ | N/A |   |   |   | - |   |
| HeritageBank of the South              |   |                   | 83,083  |   |     |   | 12.1   | %                 |   |   | 27,436                  |   |   |   | 4.0 | % |   |   | 34,294 |   |   |   | 5.0 | % |

| As of December 31, 2009                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Total Capital to Risk Weighted Assets  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                           |   | $      | 66,476 |   |   |   | 16.8   | %      |   | $      | 31,735 |   |   |   | 8.0    | %      |   | $      | N/A |   |   |   | - |   |
| HeritageBank of the South              |   |   | 60,004 |   |   |   | 15.5   | %      |   |   | 31,067 |   |   |   | 8.0    | %      |   |   | 38,834 |   |   |   | 10.0 | % |
| Tier I Capital to Risk Weighted Assets |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                           |   | $      | 61,586 |   |   |   | 15.5   | %      |   | $      | 15,867 |   |   |   | 4.0    | %      |   | $      | N/A |   |   |   | - |   |
| HeritageBank of the South              |   |   | 55,114 |   |   |   | 14.2   | %      |   |   | 15,534 |   |   |   | 4.0    | %      |   |   | 23,301 |   |   |   | 6.0 | % |
| Tier I Capital to Average Assets:      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                           |   | $      | 61,586 |   |   |   | 12.4   | %      |   | $      | 19,803 |   |   |   | 4.0    | %      |   | $      | N/A |   |   |   | - |   |
| HeritageBank of the South              |   |   | 55,114 |   |   |   | 11.2   | %      |   |   | 19,724 |   |   |   | 4.0    | %      |   |   | 24,655 |   |   |   | 5.0 | % |

----

|                                                                                  |   | December 31, |   |
|---------------------------------------------------------------------------------------|--------|--------------|--------|
| (dollars in thousands)                                                                |   | 2010         |   |   | 2009 |   |
|                                                                                  |   |         |   |   |   |   |
| Total capital per balance sheet                                                       |   | $            | 86,149 |   |   | $ | 54,462 |   |
| Regulatory capital adjustments:                                                       |   |         |   |   |   |   |   |   |
| Net unrealized gains on available for sale securities                                 |   |         | 1,790  |   |   |   | 531 |   |
| Net unrealized loss on available for sale equity securities                           |   |         | (31    | ) |   |   | (48 | ) |
| Accumulated net gains on cash flow hedges                                             |   |         | 2,048  |   |   |   | 1,740 |   |
| Disallowed goodwill and other disallowed intangible assets                            |   |         | (2,912 | ) |   |   | (1,571 | ) |
| Disallowed deferred tax assets                                                        |   |         | (3,961 | ) |   |   | - |   |
|                                                                                  |   |         |   |   |   |   |   |   |
| Total Tier 1 Capital                                                                  |   |         | 83,083 |   |   |   | 55,114 |   |
|                                                                                  |   |         |   |   |   |   |   |   |
| Allowance for loan and lease losses includible in  Tier 2 capital           |   |         | 5,615  |   |   |   | 4,869 |   |
| Unrealized gains on available for sale equity securities includible in Tier 2 capital |   |         | 14     |   |   |   | 21 |   |
|                                                                                  |   |         |   |   |   |   |   |   |
| Total Tier 1 and 2 Capital                                                            |   | $            | 88,712 |   |   | $ | 60,004 |   |

----

----

|   | Cash, Due From Banks, Interest-Bearing Deposits in Banks and Federal Funds Sold:  The carrying amount of cash, due from banks, interest-bearing deposits at other financial institutions and federal funds sold approximates fair value. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Securities:  Fair value of securities is based on available quoted market prices.  The carrying amount of equity securities with no readily determinable fair value approximates fair value. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loans Held for Sale:  The carrying amount of loans held for sale approximates fair value. |
|--------|-----------------------------------------------------------------------------------------------------|

|   | Loans:  The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value.  The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality.  The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Deposits:  The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value.  The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Federal Funds Purchased and Securities Sold Under Repurchase Agreements:  The fair value of fixed rate federal funds purchased and securities sold under repurchase agreements is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar type borrowing arrangements. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Other Borrowings:  The carrying amount of variable rate advances approximates fair value. The fair value of fixed rate advances is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar type borrowing arrangements. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Accrued Interest:  The carrying amount of accrued interest approximates fair value. |
|--------|-----------------------------------------------------------------------------------------------|

|   | Off-Balance-Sheet Instruments:  The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                            |   |  Fair Value Measurements Using                                       |   |   |                                      |   |
|-------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------|-------------------------------------------|--------|
|                                            |   |   Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |   |   |   SignificantUnobservableInputs(Level 3) |   |   |   TotalCarryingValue |   |
| December 31, 2010                               |   |                                                                      |   |   |                                      |   |   |   |   |   |   |   |
| Securities available for sale                   |   |                                                                      |   |   |                                      |   |   |   |   |   |   |   |
| Debt securities                                 |   | $                                                                         | -      |   |                                      | $      | 238,035,095 |   |   | $ | - |   |   | $ | 238,035,095 |   |
|     Marketable equity securities |   |                                                                      | 31,200 |   |                                      |   | 310,607 |   |   |   | - |   |   |   | 341,807 |   |
| Total securities available for sale             |   | $                                                                         | 31,200 |   |                                      | $      | 238,345,702 |   |   | $ | - |   |   | $ | 238,376,902 |   |

| December 31, 2009                             |   |   |   |   |   |   |        |   |   |   |   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|-------------|--------|--------|--------|--------|--------|
| Securities available for sale Debt securities |   | $      | -      |   |   | $      | 119,905,776 |   |   | $      | -      |   |   | $ | 119,905,776 |   |
|                                          |   |   |   |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Marketable equity securities                  |   |   | 48,000 |   |   |   | 573,124     |   |   |   | -      |   |   |   | 621,124 |   |
| Total securities available for sale           |   | $      | 48,000 |   |   | $      | 120,478,900 |   |   | $      | -      |   |   | $ | 120,526,900 |   |

| December 31, 2008                                    |   |   |   |   |   |   |        |   |   |   |   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|-------------|--------|--------|--------|--------|--------|
| Securities available for sale Debt securities        |   | $      | -      |   |   | $      | 115,872,984 |   |   | $      | -      |   |   | $ | 115,872,984 |   |
|     Marketable equity securities |   |   | 21,000 |   |   |   | 246,541     |   |   |   | -      |   |   |   | 267,541 |   |
| Total securities available for sale                  |   | $      | 21,000 |   |   | $      | 116,119,525 |   |   | $      | -      |   |   | $ | 116,140,525 |   |

----

|              |   | Fair Value Measurements Using                                 |   |   |                                         |   |
|-------------------|--------|---------------------------------------------------------------|--------|--------|----------------------------------------------|--------|
|              |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Total Losses |   |
| December 31, 2010 |   |                                                          |   |   |                                         |   |   |   |   |   |   |   |
| Impaired loans    |   | $                                                             | -      |   |                                         | $      | - |   |   | $ | 11,829,065 |   |   | $ | 3,498,151 |   |
| Foreclosed assets |   |                                                          | -      |   |                                         |   | - |   |   |   | 2,021,028 |   |   |   | 381,369 |   |
| Total             |   | $                                                             | -      |   |                                         | $      | - |   |   | $ | 13,850,093 |   |   | $ | 3,879,520 |   |

| December 31, 2009 |   |   |   |   |   |   |   |   |   |   |      |   |
|-------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|
| Impaired loans    |   | $      | -      |   |   | $      | -      |   |   | $      | 7,236,764 |   |   | $ | 4,274,496 |   |
| Foreclosed assets |   |   | -      |   |   |   | -      |   |   |   | 530,028   |   |   |   | 362,200 |   |
| Total             |   | $      | -      |   |   | $      | -      |   |   | $      | 7,766,792 |   |   | $ | 4,636,696 |   |

| December 31, 2008 |   |   |   |   |   |   |   |   |   |   |      |   |
|-------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|
| Impaired loans    |   | $      | -      |   |   | $      | -      |   |   | $      | 7,207,780 |   |   | $ | 665,106 |   |
| Foreclosed assets |   |   | -      |   |   |   | -      |   |   |   | 1,386,726 |   |   |   | 448,050 |   |
| Total             |   | $      | -      |   |   | $      | -      |   |   | $      | 8,594,506 |   |   | $ | 1,113,156 |   |

----

|                                                                                           |   | December 31, 2010 |        |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------------------|--------|-------------------|-------------|--------|-------------------|--------|
|                                                                                           |   | CarryingAmount    |        |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |
| Financial assets:                                                                              |   |              |        |   |              |   |   |   |   |   |   |   |
| Cash, due from banks and interest-bearing deposits in banks                                    |   | $                 | 39,714,202  |   |              | $      | 39,714,202 |   |   | $ | 58,157,804 |   |   | $ | 58,157,804 |   |
| Federal funds sold                                                                             |   | $                 | 2,700,000   |   |              | $      | 2,700,000 |   |   | $ | 11,340,000 |   |   | $ | 11,340,000 |   |
| Securities available for sale                                                                  |   | $                 | 238,376,902 |   |              | $      | 238,376,902 |   |   | $ | 120,526,900 |   |   | $ | 120,526,900 |   |
| Federal home loan bank stock                                                                   |   | $                 | 3,703,400   |   |              | $      | 3,703,400 |   |   | $ | 3,253,400 |   |   | $ | 3,253,400 |   |
| Other equity securities                                                                        |   | $                 | 1,010,000   |   |              | $      | 1,010,000 |   |   | $ | 1,010,000 |   |   | $ | 1,010,000 |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Loans held for sale                                                                            |   | $                 | 224,500     |   |              | $      | 224,500 |   |   | $ | - |   |   | $ | - |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                          |   | $                 | 418,996,996 |   |              | $      | 419,834,733 |   |   | $ | 334,138,932 |   |   | $ | 341,971,372 |   |
| Allowance for loan losses                                                                      |   |              | 8,101,445   |   |              |   | - |   |   |   | 6,060,460 |   |   |   | - |   |
| Loans, net                                                                                     |   | $                 | 410,895,551 |   |              | $      | 419,834,733 |   |   | $ | 328,078,472 |   |   | $ | 341,971,372 |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Accrued interest receivable                                                                    |   | $                 | 2,907,050   |   |              | $      | 2,907,050 |   |   | $ | 2,799,375 |   |   | $ | 2,799,375 |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                                         |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
|    Deposits                                                                     |   | $                 | 534,242,959 |   |              | $      | 532,050,239 |   |   | $ | 426,606,522 |   |   | $ | 424,097,453 |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
|    Federal funds purchased and securities sold under repurchase agreements |   | $                 | 34,421,482  |   |              | $      | 32,424,714 |   |   | $ | 32,843,465 |   |   | $ | 35,285,910 |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
|    Other borrowings                                                             |   | $                 | 62,500,000  |   |              | $      | 65,591,633 |   |   | $ | 42,500,000 |   |   | $ | 44,563,744 |   |
|                                                                                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
|    Accrued interest payable                                                     |   | $                 | 702,495     |   |              | $      | 702,495 |   |   | $ | 706,321 |   |   | $ | 706,321 |   |

----

|                                         |   |  December 31, |        |
|----------------------------------------------|--------|--------------------|-------------|
|                                         |   | 2010               |        |   | 2009 |   |   | 2008 |   |
| Assets                                       |   |               |        |   |   |   |   |   |   |
| Cash and due from banks                      |   | $                  | 6,184,154   |   |   | $ | 4,264,674 |   |   | $ | 112,682 |   |
| Federal funds sold                           |   |               | -           |   |   |   | - |   |   |   | 62,000 |   |
| Other equity securities, at cost             |   |               | 1,010,000   |   |   |   | 1,010,000 |   |   |   | 1,010,000 |   |
| Securities available for sale, at fair value |   |               | 25,464,857  |   |   |   | 401,712 |   |   |   | 4,616,161 |   |
| Investment in subsidiary                     |   |               | 86,148,812  |   |   |   | 54,461,917 |   |   |   | 55,884,743 |   |
| Premises and equipment, net                  |   |               | 464,336     |   |   |   | 476,028 |   |   |   | 469,986 |   |
| Other assets                                 |   |               | 947,281     |   |   |   | 1,088,572 |   |   |   | 941,580 |   |
|                                         |   |               |        |   |   |   |   |   |   |   |   |   |
| Total assets                                 |   | $                  | 120,219,440 |   |   | $ | 61,702,903 |   |   | $ | 63,097,152 |   |
|                                         |   |               |        |   |   |   |   |   |   |   |   |   |
| Liabilities                                  |   |               |        |   |   |   |   |   |   |   |   |   |
| Other liabilities                            |   | $                  | 879,528     |   |   | $ | 886,062 |   |   | $ | 884,179 |   |
|                                         |   |               |        |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                         |   |               | 119,339,912 |   |   |   | 60,816,841 |   |   |   | 62,212,973 |   |
|                                         |   |               |        |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity   |   | $                  | 120,219,440 |   |   | $ | 61,702,903 |   |   | $ | 63,097,152 |   |

----

| CONDENSED STATEMENTS OF OPERATIONS |
|------------------------------------|

|                                                                                                                                             |   | Years Ended December 31, |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|-----------|
|                                                                                                                                             |   | 2010                     |      |   | 2009 |   |   | 2008 |   |
| Income                                                                                                                                           |   |                     |      |   |   |   |   |   |   |
| Dividends from subsidiary                                                                                                                        |   | $                        | -         |   |   | $ | 1,000,000 |   |   | $ | 1,571,500 |   |
| Interest                                                                                                                                         |   |                     | 38,960    |   |   |   | 101,744 |   |   |   | 359,260 |   |
| Impairment loss on securities                                                                                                                    |   |                     | -         |   |   |   | - |   |   |   | (860,049 | ) |
| Gains on sales of securities                                                                                                                     |   |                     | -         |   |   |   | 37,215 |   |   |   | 89,250 |   |
| Other income                                                                                                                                     |   |                     | -         |   |   |   | - |   |   |   | 1,571 |   |
| Total income                                                                                                                                     |   |                     | 38,960    |   |   |   | 1,138,959 |   |   |   | 1,161,532 |   |
|                                                                                                                                             |   |                     |      |   |   |   |   |   |   |   |   |   |
| Expense                                                                                                                                          |   |                     |      |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                     |   |                     | 13,729    |   |   |   | 13,197 |   |   |   | 14,705 |   |
| Other expense                                                                                                                                    |   |                     | 770,965   |   |   |   | 702,195 |   |   |   | 768,009 |   |
| Total expense                                                                                                                                    |   |                     | 784,694   |   |   |   | 715,392 |   |   |   | 782,714 |   |
|                                                                                                                                             |   |                     |      |   |   |   |   |   |   |   |   |   |
| Income (loss) before income tax benefits and equity in undistributed earnings (distributions in excess of earnings) of subsidiary |   |                     | (745,734  | ) |   |   | 423,567 |   |   |   | 378,818 |   |
|                                                                                                                                             |   |                     |      |   |   |   |   |   |   |   |   |   |
| Income tax benefits                                                                                                                              |   |                     | 248,183   |   |   |   | 231,563 |   |   |   | 441,145 |   |
|                                                                                                                                             |   |                     |      |   |   |   |   |   |   |   |   |   |
| Income (loss) before equity in undistributed earnings (distribution in excess of earnings) of subsidiary                               |   |                     | (497,551  | ) |   |   | 655,130 |   |   |   | 819,963 |   |
|                                                                                                                                             |   |                     |      |   |   |   |   |   |   |   |   |   |
| Equity in undistributed earnings (distributions in excess of earnings) of subsidiary                                                        |   |                     | 1,903,425 |   |   |   | (2,307,449 | ) |   |   | (1,082,323 | ) |
|                                                                                                                                             |   |                     |      |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                                                                |   | $                        | 1,405,874 |   |   | $ | (1,652,319 | ) |   | $ | (262,360 | ) |

----

| CONDENSED STATEMENTS OF CASH FLOWS |   |
|------------------------------------|--------|

|                                                                                               |   | Years Ended December 31, |        |
|----------------------------------------------------------------------------------------------------|--------|--------------------------|-------------|
|                                                                                               |   | 2010                     |        |   | 2009 |   |   | 2008 |   |
| OPERATING ACTIVITIES                                                                               |   |                     |        |   |   |   |   |   |   |
| Net income (loss)                                                                                  |   | $                        | 1,405,874   |   |   | $ | (1,652,319 | ) |   | $ | (262,360 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |   |                     |        |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                      |   |                     | 13,729      |   |   |   | 13,197 |   |   |   | 14,705 |   |
| Excess tax shortfall related to stock-based compensation plans                                |   |                     | 14,417      |   |   |   | 58,494 |   |   |   | 3,432 |   |
| Stock-based compensation expense                                                                   |   |                     | 228,550     |   |   |   | 226,084 |   |   |   | 225,420 |   |
| Impairment losses on securities available for sale                                                 |   |                     | -           |   |   |   | - |   |   |   | 860,049 |   |
| Loss on sales of securities                                                                        |   |                     | -           |   |   |   | (37,215 | ) |   |   | (89,250 | ) |
| (Equity in undistributed earnings) distributions in excess of earnings of subsidiary          |   |                     | (1,903,425  | ) |   |   | 2,307,449 |   |   |   | 1,082,323 |   |
| Other operating activities                                                                         |   |                     | 98,822      |   |   |   | (224,967 | ) |   |   | (393,772 | ) |
| Total adjustments                                                                                  |   |                     | (1,547,907  | ) |   |   | 2,343,042 |   |   |   | 1,702,907 |   |
| Net cash provided by (used in) operating activities                                                |   |                     | (142,033    | ) |   |   | 690,723 |   |   |   | 1,440,547 |   |
|                                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
|                                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| Contribution of 50% of proceeds of stock offering to subsidiary                                    |   |                     | (30,729,528 | ) |   |   | - |   |   |   | - |   |
| Fund ESOP note receivable from conversion and stock offering                                       |   |                     | (3,276,770  | ) |   |   | - |   |   |   | - |   |
| Decrease in federal funds sold                                                                     |   |                     | -           |   |   |   | 62,000 |   |   |   | 2,401,000 |   |
| Purchase of premises and equipment                                                                 |   |                     | (2,037      | ) |   |   | (19,239 | ) |   |   | - |   |
| Purchases of securities available for sale                                                         |   |                     | (79,993,811 | ) |   |   | (964,033 | ) |   |   | - |   |
| Proceeds from maturities of securities available for sale                                          |   |                     | 54,997,669  |   |   |   | 1,707,321 |   |   |   | 1,101,362 |   |
| Proceeds from sale of securities available for sale                                                |   |                     | -           |   |   |   | 3,561,788 |   |   |   | 409,250 |   |
| Purchase of other equity securities                                                                |   |                     | -           |   |   |   | - |   |   |   | (1,010,000 | ) |
|                                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) investing activities                                                |   |                     | (59,004,477 | ) |   |   | 4,347,837 |   |   |   | 2,901,612 |   |
|                                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| Net proceeds from common stock offering                                                            |   |                     | 61,482,300  |   |   |   | - |   |   |   | - |   |
| Shares released to employee stock ownership plan                                                   |   |                     | 468,066     |   |   |   | 409,077 |   |   |   | 487,882 |   |
| Excess tax benefit related to stock-based compensation plans                                       |   |                     | (14,417     | ) |   |   | (58,494 | ) |   |   | (3,432 | ) |
| Purchase of treasury shares, net                                                                   |   |                     | (15,842     | ) |   |   | (516,426 | ) |   |   | (4,241,148 | ) |
| Dividends paid to stockholders                                                                     |   |                     | (854,117    | ) |   |   | (720,725 | ) |   |   | (786,914 | ) |
| Net cash provided by (used in) financing activities                                                |   |                     | 61,065,990  |   |   |   | (886,568 | ) |   |   | (4,543,612 | ) |
|                                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and due from banks                                                 |   |                     | 1,919,480   |   |   |   | 4,151,992 |   |   |   | (201,453 | ) |
|                                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| Cash and due from banks at beginning of period                                                     |   |                     | 4,264,674   |   |   |   | 112,682 |   |   |   | 314,135 |   |
|                                                                                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| Cash and due from banks at end of period                                                           |   | $                        | 6,184,154   |   |   | $ | 4,264,674 |   |   | $ | 112,682 |   |

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| Exhibit Number  | Document                                                                                                                                                         | Reference to Prior Filing or Exhibit Number Attached Hereto |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------|
|                 |                                                                                                                                                             |                                                        |
| 2.1                  | Plan of Conversion and Reorganization of Heritage MHC                                                                                                            | a                                                           |
| 2.2                  | Form of Agreement and Plan of Merger by and among Heritage Financial Group, Heritage MHC and Heritage Financial Group, Inc.                                      | a                                                           |
| 3.1                  | Articles of Incorporation of Heritage Financial Group, Inc.                                                                                                      | a                                                           |
| 3.2                  | Bylaws of Heritage Financial Group, Inc.                                                                                                                         | a                                                           |
| 4                    | Form of Heritage Financial Group, Inc. Common Stock Certificate                                                                                                  | a                                                           |
| 9                    | Voting Trust Agreement                                                                                                                                           | None                                                        |
| 10.1                 | Employment Agreement between O. Leonard Dorminey and HeritageBank                                                                                                |                                                        |
| 10.2                 | Employment Agreement between O. Leonard Dorminey and Heritage Financial Group, Inc.                                                                              |                                                        |
| 10.3                 | Employment Agreement between Carol W. Slappey and HeritageBank                                                                                                   | b                                                           |
| 10.4                 | Deferred Compensation and Excess/Matching Contribution Plans                                                                                                     | b                                                           |
| 10.5                 | Supplemental Executive Retirement Plan                                                                                                                           | b                                                           |
| 10.6                 | Directors’ Retirement Plan                                                                                                                                 | b                                                           |
| 10.7                 | Employee Stock Ownership Plan                                                                                                                                    | b                                                           |
| 10.8                 | Purchase and Assumption Agreement dated September 1, 2009, between HeritageBank of the South and Atlantic Coast Federal Bank                                     | c                                                           |
| 10.9                 | Definitive Whole-bank Purchase and Assumption Agreement dated December 4, 2009, between HeritageBank of the South and the Federal Deposit Insurance Corporation  | d                                                           |
| 10.10                | Purchase and Assumption Agreement dated February 23, 2010, between HeritageBank of the South and The Park Avenue Bank                                            | e                                                           |
| 10.11                | Employment Agreement between T. Heath Fountain and HeritageBank                                                                                                  | f                                                           |
| 10.12                | Employment Agreement between O. Mitchell Smith and HeritageBank                                                                                                  | f                                                           |
| 10.13                | Definitive Whole-bank Purchase and Assumption Agreement dated February 18, 2011, between HeritageBank of the South and the Federal Deposit Insurance Corporation | h                                                           |
| 11                   | Statement re: computation of per share earnings                                                                                                                  | None                                                        |
| 12                   | Statement re: computation of ratios                                                                                                                              | None                                                        |
| 13                   | Annual report to security holders, Form 10-Q or quarterly reports to security holders                                                                            | None                                                        |
| 14                   | Code of Business Conduct and Ethics                                                                                                                              | 14                                                          |
| 16                   | Letter re: change in certifying accountant                                                                                                                       | None                                                        |
| 18                   | Letter re: change in accounting principles                                                                                                                       | None                                                        |
| 21                   | Subsidiaries of the Company                                                                                                                                      | 21                                                          |
| 22                   | Published report regarding matters submitted to vote of security holders                                                                                         | None                                                        |
| 23                   | Consent of Accountants                                                                                                                                           | 23                                                          |
| 24                   | Power of Attorney                                                                                                                                                | g                                                           |
| 31.1                 | Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer                                                                                               | 31.1                                                        |
| 31.2                 | Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer                                                                                               | 31.2                                                        |
| 32                   | Section 1350 Certifications                                                                                                                                      | 32                                                          |

| a | Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-123581) filed on June 22, 2010.                                   |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| b | Filed as an exhibit to the Registration Statement of Heritage Financial Group on Form SB-2 (File No. 333-123581)filed on March 25, 2005.                      |
| c | Included as an exhibit to the Form 8-K filed by Heritage Financial Group with the SEC on September 2, 2009.                                                   |
| d | Included as an exhibit to the Form 8-K filed by Heritage Financial Group with the SEC on December 8, 2009.                                                    |
| e | Included as an exhibit to the Form 8-K filed by Heritage Financial Group with the SEC on February 25, 2010.                                                   |
| f | Filed as an exhibit to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-123581) filed on August 9, 2010. |
| g | Included on signature page of this Form 10-K.                                                                                                                 |
| h | Included as an exhibit to the Form 8-K filed by Heritage Financial Group, Inc. with the SEC on February 24, 2011.                                             |

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|                            | HERITAGE FINANCIAL GROUP, INC. |
|---------------------------------|--------------------------------|
| Date:  March 31, 2011 |                           |   |
|                            | By:                            | /s/O. Leonard Dorminey |
|                            |                           | O. Leonard Dorminey, President and Chief Executive Officer(Duly Authorized Representative) |

| Date:  | March 31, 2011 |                                                     | /s/ O. Leonard Dorminey                                                       |
|--------|----------------|----------------------------------------------------------|-------------------------------------------------------------------------------|
|   |           |                                                     | O. Leonard Dorminey                                                           |
|   |           |                                                     | President, Chief Executive Officer and Director (Principal Executive Officer) |
|   |           |                                                     |                                                                          |
| Date:  | March 31, 2011 |                                                     | /s/ Antone D. Lehr                                                            |
|   |           |                                                     | Antone D. Lehr, Chairman of the Board                                         |
|   |           |                                                     |                                                                          |
| Date:  | March 31, 2011 |                                                     | /s/ Joseph C. Burger                                                          |
|   |           |                                                     | Joseph C. Burger, Vice Chairman of the Board                                  |
|   |           |                                                     |                                                                          |
| Date:  | March 31, 2011 |                                                     | /s/ Douglas J. McGinley                                                       |
|   |           |                                                     | Douglas J. McGinley, Director                                                 |
|   |           |                                                     |                                                                          |
| Date:  | March 31, 2011 |                                                     | /s/ Carol W. Slappey                                                          |
|   |           |                                                     | Carol W. Slappey, Director                                                    |
|   |           |                                                     |                                                                          |
| Date:  | March 31, 2011 |                                                     | /s/ J. Keith Land                                                             |
|   |           |                                                     | J. Keith Land, Director                                                       |
|   |           |                                                     |                                                                          |
| Date:  | March 31, 2011 |                                                     | /s/ J. Lee Stanley                                                            |
|   |           |                                                     | J. Lee Stanley, Director                                                      |
|   |           |                                                     |                                                                          |
| Date:  | March 31, 2011 |                                                     | /s/ T. Heath Fountain                                                         |
|   |           |                                                     | T. Heath Fountain, Executive Vice President                                   |
|   |           | Chief Administrative Officer and Chief Financial Officer |
|   |           | (Principal Financial and Accounting Officer)             |

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| 14     | Code of Business Conduct and Ethics                                |
|--------|--------------------------------------------------------------------|
|   |                                                               |
| 21     | Subsidiaries of the Company                                        |
|   |                                                               |
| 23     | Consent of Accountants                                             |
|   |                                                               |
| 31.1   | Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer |
|   |                                                               |
| 31.2   | Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer |
|   |                                                               |
| 32     | Section 1350 Certifications                                        |

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