----

----

----

| Assets                                                                                                                                                                                                |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                  |   | 2009 |   |   | 2008 |   |
| Cash and due from banks                                                                                                                                                                               |   | $ | 42,515,145 |   |   |   | 13,639,940 |   |
| Federal funds sold                                                                                                                                                                                    |   |   | - |   |   |   | 620,036 |   |
| Cash and cash equivalents                                                                                                                                                                             |   |   | 42,515,145 |   |   |   | 14,259,976 |   |
| Investment securities available for sale                                                                                                                                                              |   |   | 74,456,973 |   |   |   | 97,277,891 |   |
| Investment securities held to maturity, estimated fair value of $902,617 and $1,052,829                                                                                                               |   |   | 881,416 |   |   |   | 1,025,435 |   |
| Other investments                                                                                                                                                                                     |   |   | 2,595,634 |   |   |   | 3,334,124 |   |
| Loans, net of allowance for loan loss of  $12,106,070 and $12,167,645                                                                                                                       |   |   | 264,888,779 |   |   |   | 310,606,916 |   |
| Premises and equipment, net                                                                                                                                                                           |   |   | 12,606,349 |   |   |   | 19,479,393 |   |
| Bank property held for sale                                                                                                                                                                           |   |   | 5,061,866 |   |   |   | - |   |
| Accrued interest receivable                                                                                                                                                                           |   |   | 1,587,377 |   |   |   | 2,221,546 |   |
| Other real estate                                                                                                                                                                                     |   |   | 37,833,328 |   |   |   | 27,336,874 |   |
| Cash surrender value of life insurance                                                                                                                                                                |   |   | 10,282,414 |   |   |   | 9,936,088 |   |
| Income tax receivable                                                                                                                                                                                 |   |   | 1,925,000 |   |   |   | 2,504,297 |   |
| Other assets                                                                                                                                                                                          |   |   | 1,385,071 |   |   |   | 6,886,725 |   |
| Total assets                                                                                                                                                                                          |   | $ | 456,019,352 |   |   |   | 494,869,265 |   |
| Liabilities and Stockholders’ Equity                                                                                                                                                            |   |
| Deposits:                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Noninterest-bearing demand                                                                                                                                                                            |   | $ | 35,569,757 |   |   |   | 29,664,234 |   |
| Money market and NOW accounts                                                                                                                                                                         |   |   | 91,687,330 |   |   |   | 77,638,103 |   |
| Savings                                                                                                                                                                                               |   |   | 38,307,417 |   |   |   | 43,180,202 |   |
| Time ($100,000 and over)                                                                                                                                                                              |   |   | 104,309,397 |   |   |   | 102,390,560 |   |
| Other time                                                                                                                                                                                            |   |   | 120,286,767 |   |   |   | 140,014,565 |   |
| Total deposits                                                                                                                                                                                        |   |   | 390,160,668 |   |   |   | 392,887,664 |   |
| Short-term borrowings                                                                                                                                                                                 |   |   | 539,541 |   |   |   | 760,468 |   |
| Federal funds purchased and securities sold under repurchase agreements                                                                                                                               |   |   | 6,316,735 |   |   |   | 16,383,982 |   |
| Federal Home Loan Bank advances                                                                                                                                                                       |   |   | 38,000,000 |   |   |   | 38,000,000 |   |
| Accrued interest payable                                                                                                                                                                              |   |   | 2,192,051 |   |   |   | 2,805,353 |   |
| Other liabilities                                                                                                                                                                                     |   |   | 1,735,124 |   |   |   | 2,033,785 |   |
| Total liabilities                                                                                                                                                                                     |   |   | 438,944,119 |   |   |   | 452,871,252 |   |
| Commitments and contingencies                                                                                                                                                                         |   |   |   |   |   |   |   |   |
| Stockholders’ equity:                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Preferred stock – 10,000,000 shares authorized                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Series A:  No par  value; 10,000 shares authorized: No shares issued and outstanding at December 31, 2009 and  3,000 shares issued and outstanding at December 31, 2008 |   |   | - |   |   |   | 2,977,762 |   |
| Series B:  No par value; 4,000 shares authorized;  4,000 shares issued and outstanding at December 31, 2009 and no shares issued and outstanding at December 31, 2008             |   |   | 3,962,910 |   |   |   | - |   |
| Common stock, $1.00 par value; 10,000,000 shares authorized; 2,818,593 shares issued and outstanding                                                                                                  |   |   | 2,818,593 |   |   |   | 2,818,593 |   |
| Additional paid-in capital                                                                                                                                                                            |   |   | 13,490,587 |   |   |   | 13,490,587 |   |
| Retained (deficit) earnings                                                                                                                                                                           |   |   | (3,821,546 | ) |   |   | 22,517,920 |   |
| Accumulated other comprehensive income                                                                                                                                                                |   |   | 624,689 |   |   |   | 193,151 |   |
| Total stockholders’ equity                                                                                                                                                                      |   |   | 17,075,233 |   |   |   | 41,998,013 |   |
| Total liabilities and stockholders’ equity                                                                                                                                                      |   | $ | 456,019,352 |   |   |   | 494,869,265 |   |

----

|                                                                       |   | 2009   |        |   | 2008   |   |        | 2007   |   |
|----------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| Interest income:                                                           |   |   |        |   |   |   |        |   |   |
| Loans                                                                      |   | $      | 16,169,359  |   |   |   | 21,416,324  |   |   |   | 31,670,690 |   |
| Investments:                                                               |   |   |        |   |   |   |        |   |   |   |   |   |
| Taxable securities                                                         |   |   | 3,599,818   |   |   |   | 3,559,252   |   |   |   | 3,086,017 |   |
| Tax exempt securities                                                      |   |   | 553,212     |   |   |   | 906,024     |   |   |   | 1,110,046 |   |
| Other investments                                                          |   |   | 36,156      |   |   |   | 157,440     |   |   |   | 236,914 |   |
| Federal funds sold                                                         |   |   | 27,726      |   |   |   | 95,542      |   |   |   | 271,871 |   |
| Total interest income                                                      |   |   | 20,386,271  |   |   |   | 26,134,582  |   |   |   | 36,375,538 |   |
| Interest expense:                                                          |   |   |        |   |   |   |        |   |   |   |   |   |
| Time deposits, $100,000 and over                                           |   |   | 3,965,219   |   |   |   | 4,718,506   |   |   |   | 5,792,183 |   |
| Other deposits                                                             |   |   | 6,064,080   |   |   |   | 7,110,672   |   |   |   | 8,377,088 |   |
| Federal funds purchased and securities sold under repurchase agreements    |   |   | 219,299     |   |   |   | 621,668     |   |   |   | 611,682 |   |
| Short-term and other borrowings, primarily FHLB advances                   |   |   | 1,499,377   |   |   |   | 1,884,968   |   |   |   | 2,097,304 |   |
| Total interest expense                                                     |   |   | 11,747,975  |   |   |   | 14,335,814  |   |   |   | 16,878,257 |   |
| Net interest income                                                        |   |   | 8,638,296   |   |   |   | 11,798,768  |   |   |   | 19,497,281 |   |
| Provision for loan losses                                                  |   |   | 13,476,000  |   |   |   | 16,020,862  |   |   |   | 675,225 |   |
| Net interest (loss) income after provision for loan losses                 |   |   | (4,837,704  | )      |   |   | (4,222,094  | )      |   |   | 18,822,056 |   |
| Noninterest income:                                                        |   |   |        |   |   |   |        |   |   |   |   |   |
| Mortgage origination income                                                |   |   | 123,503     |   |   |   | 402,275     |   |   |   | 774,490 |   |
| Service charges on deposit accounts                                        |   |   | 1,067,407   |   |   |   | 1,081,228   |   |   |   | 988,256 |   |
| Other service charges and commissions                                      |   |   | 256,941     |   |   |   | 264,526     |   |   |   | 254,240 |   |
| Securities gains (losses), net                                             |   |   | 513,468     |   |   |   | 362,769     |   |   |   | 4,900 |   |
| Gain (loss) on sale and impairment of other investments, net               |   |   | 19,998      |   |   |   | -           |   |   |   | - |   |
| Gain on sale of subsidiary – Advantage Insurers, Inc.                |   |   | 297,476     |   |   |   | -           |   |   |   | - |   |
| Income from life insurance                                                 |   |   | 346,326     |   |   |   | 397,477     |   |   |   | 190,084 |   |
| Trust services fees                                                        |   |   | 444,435     |   |   |   | 481,730     |   |   |   | 410,069 |   |
| Other income                                                               |   |   | 1,083,685   |   |   |   | 1,134,373   |   |   |   | 1,148,957 |   |
| Total noninterest income                                                   |   |   | 4,153,239   |   |   |   | 4,124,378   |   |   |   | 3,770,996 |   |
| Noninterest expense:                                                       |   |   |        |   |   |   |        |   |   |   |   |   |
| Salaries and employee benefits                                             |   |   | 7,347,450   |   |   |   | 9,473,561   |   |   |   | 10,544,056 |   |
| Goodwill impairment                                                        |   |   | -           |   |   |   | 3,549,780   |   |   |   | - |   |
| Occupancy expenses                                                         |   |   | 2,784,629   |   |   |   | 2,652,590   |   |   |   | 2,401,145 |   |
| Losses on sales, write-downs and other expenses on other real estate       |   |   | 4,562,957   |   |   |   | 1,363,928   |   |   |   | 177,733 |   |
| Loss (gain) on sales and disposals of premises and equipment, net          |   |   | 244,930     |   |   |   | 7,576       |   |   |   | (7,545 | ) |
| Computer services                                                          |   |   | 686,788     |   |   |   | 608,457     |   |   |   | 632,601 |   |
| Telephone                                                                  |   |   | 498,735     |   |   |   | 493,476     |   |   |   | 453,464 |   |
| Leased equipment expense                                                   |   |   | 481,014     |   |   |   | 470,217     |   |   |   | 422,836 |   |
| Other                                                                      |   |   | 5,056,555   |   |   |   | 3,970,687   |   |   |   | 4,008,985 |   |
| Total noninterest expense                                                  |   |   | 21,663,058  |   |   |   | 22,590,272  |   |   |   | 18,633,275 |   |
| (Loss) earnings before income taxes                                        |   |   | (22,347,523 | )      |   |   | (22,687,988 | )      |   |   | 3,959,777 |   |
| Income tax (expense) benefit                                               |   |   | (3,780,711  | )      |   |   | 7,838,667   |   |   |   | (1,020,420 | ) |
| Net  (loss) earnings                                             |   |   | (26,128,234 | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |
| Preferred stock dividends                                                  |   |   | (211,232    | )      |   |   | -           |   |   |   | - |   |
| (Loss) earnings available to common stockholders                           |   | $      | (26,339,466 | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |
| (Loss) earnings per common share – basic and diluted                 |   | $      | (9.34       | )      |   |   | (5.27       | )      |   |   | 1.00 |   |
| Weighted average number of common shares outstanding                       |   |   | 2,818,593   |   |   |   | 2,818,593   |   |   |   | 2,942,292 |   |
| Weighted average number of common and common equivalent shares outstanding |   |   | 2,818,593   |   |   |   | 2,818,593   |   |   |   | 2,952,528 |   |

----

|                                                                                                                           |   | 2009   |        |   | 2008   |   |        | 2007   |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| Net (loss) earnings                                                                                                            |   | $      | (26,128,234 | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |
| Other comprehensive income:                                                                                                    |   |   |        |   |   |   |        |   |   |   |   |   |
| Unrealized holding gains on investment securities available for sale arising during period                                     |   |   | 1,071,841   |   |   |   | 1,097,054   |   |   |   | 836,769 |   |
| Unrealized holding gains (losses) on derivative financial instruments classified as cash flow hedges arising during the period |   |   | 95,473      |   |   |   | (62,356     | )      |   |   | (149,402 | ) |
| Reclassification adjustment for gains on investment securities available for sale included in operations                       |   |   | (513,468    | )      |   |   | (344,877    | )      |   |   | (4,900 | ) |
| Total other comprehensive income before tax                                                                                    |   |   | 653,846     |   |   |   | 689,821     |   |   |   | 682,467 |   |
| Income taxes related to other comprehensive income:                                                                            |   |   |        |   |   |   |        |   |   |   |   |   |
| Unrealized holding gains on investment securities available for sale arising during period                                     |   |   | (364,426    | )      |   |   | (372,998    | )      |   |   | (284,502 | ) |
| Unrealized holding (gains) losses on derivative financial instruments classified as cash flow hedges arising during the period |   |   | (32,461     | )      |   |   | 21,201      |   |   |   | 50,797 |   |
| Reclassification adjustment for gains (losses) on investment securities available for sale                                     |   |   | 174,579     |   |   |   | 117,258     |   |   |   | 1,666 |   |
| Total income taxes related to other comprehensive income                                                                       |   |   | (222,308    | )      |   |   | (234,539    | )      |   |   | (232,039 | ) |
| Total other comprehensive income, net of tax                                                                                   |   |   | 431,538     |   |   |   | 455,282     |   |   |   | 450,428 |   |
| Total comprehensive (loss) income                                                                                              |   | $      | (25,696,696 | )      |   |   | (14,394,039 | )      |   |   | 3,389,785 |   |

----

|                                                                              |   | Preferred StockSeries A |       |   | Preferred StockSeries B |   |      | CommonStock |   |   | AdditionalPaid-inCapital |   |   | RetainedEarnings (Deficit) |       |   | AccumulatedOtherComprehensiveIncome (Loss) |   |        | Total  |   |
|-----------------------------------------------------------------------------------|--------|------------------------------|------------|--------|------------------------------|--------|-----------|-------------|--------|--------|--------------------------|--------|--------|----------------------------|------------|--------|--------------------------------------------|--------|-------------|--------|--------|
| Balance, December 31, 2006                                                        |   | $                            | -          |   |                         |   | -         |        |   |   | 2,968,593                |   |   |                       | 15,530,587 |   |                                       |   | 37,777,500  |   |   |   | (712,559 | ) |   |   | 55,564,121 |   |
| Net earnings                                                                      |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | 2,939,357   |   |   |   | - |   |   |   | 2,939,357 |   |
| Change in other comprehensive income, net of tax                                  |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | -           |   |   |   | 450,428 |   |   |   | 450,428 |   |
| Common stock repurchase  - 150,000 shares                               |   |                         | -          |   |                         |   | -         |        |   |   | (150,000                 | )      |   |                       | (2,040,000 | )      |                                       |   | -           |   |   |   | - |   |   |   | (2,190,000 | ) |
| Cash dividends, $.90 per share                                                    |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | (2,581,731  | )      |   |   | - |   |   |   | (2,581,731 | ) |
| Balance, December 31, 2007                                                        |   |                         | -          |   |                         |   | -         |        |   |   | 2,818,593                |   |   |                       | 13,490,587 |   |                                       |   | 38,135,126  |   |   |   | (262,131 | ) |   |   | 54,182,175 |   |
| Net loss                                                                          |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | (14,849,321 | )      |   |   | - |   |   |   | (14,849,321 | ) |
| Change in other comprehensive income, net of tax                                  |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | -           |   |   |   | 455,282 |   |   |   | 455,282 |   |
| Cumulative effect of change in accounting principle due to adoption of EITF 06-10 |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | (63,237     | )      |   |   | - |   |   |   | (63,237 | ) |
| Issuance of preferred stock , net of issuance costs of $22,238                    |   |                         | 2,977,762  |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | -           |   |   |   | - |   |   |   | 2,977,762 |   |
| Cash dividends, $.25 per share                                                    |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | (704,648    | )      |   |   | - |   |   |   | (704,648 | ) |
| Balance, December 31, 2008                                                        |   |                         | 2,977,762  |   |                         |   | -         |        |   |   | 2,818,593                |   |   |                       | 13,490,587 |   |                                       |   | 22,517,920  |   |   |   | 193,151 |   |   |   | 41,998,013 |   |
| Net loss                                                                          |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | (26,128,234 | )      |   |   | - |   |   |   | (26,128,234 | ) |
| Change in other comprehensive income, net of tax                                  |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | -           |   |   |   | 431,538 |   |   |   | 431,538 |   |
| Issuance of preferred stock, net of issuance costs of  $14,852          |   |                         | -          |   |                         |   | 985,148   |        |   |   | -                        |   |   |                       | -          |   |                                       |   | -           |   |   |   | - |   |   |   | 985,148 |   |
| Exchange of Series A preferred stock for Series B preferred stock                 |   |                         | (2,977,762 | )      |                         |   | 2,977,762 |        |   |   | -                        |   |   |                       | -          |   |                                       |   | -           |   |   |   | - |   |   |   | - |   |
| Cash dividends on preferred stock                                                 |   |                         | -          |   |                         |   | -         |        |   |   | -                        |   |   |                       | -          |   |                                       |   | (211,232    | )      |   |   | - |   |   |   | (211,232 | ) |
| Balance, December 31, 2009                                                        |   | $                            | -          |   |                         |   | 3,962,910 |        |   |   | 2,818,593                |   |   |                       | 13,490,587 |   |                                       |   | (3,821,546  | )      |   |   | 624,689 |   |   |   | 17,075,233 |   |

----

|                                                                                                 |   | 2009   |          |   | 2008   |   |        | 2007   |   |
|------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|--------|--------|-------------|--------|--------|
| Cash flows from operating activities:                                                                |   |   |          |   |   |   |        |   |   |
| Net (loss) earnings                                                                                  |   | $      | (26,128,234   | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |
| Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities: |   |   |          |   |   |   |        |   |   |   |   |   |
| Provision for loan losses                                                                            |   |   | 13,476,000    |   |   |   | 16,020,862  |   |   |   | 675,225 |   |
| Write downs of other real estate                                                                     |   |   | 1,711,355     |   |   |   | 451,616     |   |   |   | 142,000 |   |
| Goodwill impairment                                                                                  |   |   | -             |   |   |   | 3,549,780   |   |   |   | - |   |
| Income from life insurance                                                                           |   |   | (346,326      | )      |   |   | (397,477    | )      |   |   | (190,084 | ) |
| Depreciation expense                                                                                 |   |   | 1,090,689     |   |   |   | 1,110,407   |   |   |   | 1,170,791 |   |
| Loss (gain) on sales and disposals  of premises and equipment, net                         |   |   | 244,930       |   |   |   | 7,576       |   |   |   | (7,545 | ) |
| Net amortization of premium/discount in investment securities                                        |   |   | 354,744       |   |   |   | 140,531     |   |   |   | 80,651 |   |
| Securities (gains) losses, net                                                                       |   |   | (513,468      | )      |   |   | (362,769    | )      |   |   | (4,900 | ) |
| Gain on sale of subsidiary – Advantage Insurers, Inc                                           |   |   | (297,476      | )      |   |   | -           |   |   |   | - |   |
| Gain on sale of other investments                                                                    |   |   | (119,998      | )      |   |   | -           |   |   |   | - |   |
| Write off of other investment                                                                        |   |   | 100,000       |   |   |   | -           |   |   |   | - |   |
| Losses (gains) on sale of other real estate                                                          |   |   | 2,069,187     |   |   |   | 175,167     |   |   |   | (82,556 | ) |
| Net gain on sale of loans held for sale                                                              |   |   | (123,503      | )      |   |   | (147,027    | )      |   |   | (774,490 | ) |
| Proceeds from sales of loans held for sale                                                           |   |   | 6,200,920     |   |   |   | 20,886,277  |   |   |   | 35,732,752 |   |
| Increase in loans held for sale                                                                      |   |   | (6,077,417    | )      |   |   | (18,873,400 | )      |   |   | (33,640,997 | ) |
| Net loss on sale of loans                                                                            |   |   | 59,697        |   |   |   | -           |   |   |   | - |   |
| Amortization of intangible assets                                                                    |   |   | 62,065        |   |   |   | 62,064      |   |   |   | 62,064 |   |
| Deferred income tax (benefit) expense                                                                |   |   | 6,065,404     |   |   |   | (4,850,715  | )      |   |   | 301,978 |   |
| Changes in assets and liabilities:                                                                   |   |   |          |   |   |   |        |   |   |   |   |   |
| (Increase) decrease in accrued interest receivable                                                   |   |   | 634,169       |   |   |   | 530,627     |   |   |   | 185,808 |   |
| (Increase) decrease in other assets                                                                  |   |   | (190,993      | )      |   |   | (2,590,491  | )      |   |   | (466,156 | ) |
| Increase (decrease) in accrued interest payable                                                      |   |   | (613,302      | )      |   |   | (498,041    | )      |   |   | 324,106 |   |
| Increase (decrease) in other liabilities                                                             |   |   | (269,096      | )      |   |   | 453,823     |   |   |   | (396,657 | ) |
| Net cash (used in) provided by operating activities                                                  |   |   | (2,610,653    | )      |   |   | 819,489     |   |   |   | 6,051,347 |   |
| Cash flows from investing activities:                                                                |   |   |          |   |   |   |        |   |   |   |   |   |
| Investment securities available for sale:                                                            |   |   |          |   |   |   |        |   |   |   |   |   |
| Proceeds from maturities                                                                             |   |   | 14,084,812    |   |   |   | 9,265,767   |   |   |   | 6,555,706 |   |
| Proceeds from sales and calls                                                                        |   |   | 42,936,095    |   |   |   | 46,279,585  |   |   |   | 4,136,400 |   |
| Purchases                                                                                            |   |   | (33,483,193   | )      |   |   | (61,976,570 | )      |   |   | (14,843,351 | ) |
| Investment securities held to maturity:                                                              |   |   |          |   |   |   |        |   |   |   |   |   |
| Proceeds from maturities                                                                             |   |   | 144,320       |   |   |   | 431,192     |   |   |   | 599,800 |   |
| Proceeds from calls                                                                                  |   |   | -             |   |   |   | 1,250,415   |   |   |   | - |   |
| Other investments:                                                                                   |   |   |          |   |   |   |        |   |   |   |   |   |
| Proceeds from sales                                                                                  |   |   | 758,488       |   |   |   | 74,800      |   |   |   | - |   |
| Purchases                                                                                            |   |   | -             |   |   |   | -           |   |   |   | (43,700 | ) |
| Net decrease (increase) in loans                                                                     |   |   | 9,900,365     |   |   |   | 3,770,333   |   |   |   | (17,310,848 | ) |
| Proceeds from sale of subsidiary – Advantage Insurers, Inc., net of cash sold of $404,000      |   |   |  296,406 |   |   |   |  -     |   |   |   |  - |   |
| Purchases of premises and equipment                                                                  |   |   | (123,270      | )      |   |   | (4,515,783  | )      |   |   | (4,364,275 | ) |
| Proceeds from sales of premises and equipment                                                        |   |   | 587,975       |   |   |   | -           |   |   |   | 43,156 |   |
| Capitalized completion costs of other real estate                                                    |   |   | (755,597      | )      |   |   | (1,759,558  | )      |   |   | (435,179 | ) |
| Purchase of  life insurance                                                                |   |   | -             |   |   |   | -           |   |   |   | (4,501,753 | ) |
| Redemption of life insurance                                                                         |   |   | -             |   |   |   | -           |   |   |   | 200,056 |   |
| Proceeds from sales of other real estate                                                             |   |   | 8,760,676     |   |   |   | 3,146,904   |   |   |   | 616,231 |   |
| Net cash (used in) provided by investing activities                                             |   |   | 43,107,077    |   |   |   | (4,032,915  | )      |   |   | (29,347,757 | ) |

----

|                                                                                               |   | 2009   |        |   | 2008   |   |       | 2007   |   |
|----------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|
| Cash flows from financing activities:                                                              |   |   |        |   |   |   |       |   |   |
| Net (decrease) increase in deposits                                                                |   | $      | (2,726,997  | )      |   |   | 2,621,026  |   |   |   | (60,362,122 | ) |
| Net decrease in short-term borrowings                                                              |   |   | (220,927    | )      |   |   | (6,140     | )      |   |   | (12,170 | ) |
| Proceeds from FHLB advances                                                                        |   |   | 15,000,000  |   |   |   | 7,000,000  |   |   |   | 4,000,000 |   |
| Repayment of FHLB advances                                                                         |   |   | (15,000,000 | )      |   |   | (7,000,000 | )      |   |   | (4,000,000 | ) |
| Net (decrease) increase in federal funds purchased and securities sold under repurchase agreements |   |   | (10,067,247 | )      |   |   | (9,799,825 | )      |   |   |  20,309,852 |   |
| Payment of cash dividends                                                                          |   |   | (211,232    | )      |   |   | (704,648   | )      |   |   | (2,581,731 | ) |
| Common stock repurchase                                                                            |   |   | -           |   |   |   | -          |   |   |   | (2,190,000 | ) |
| Proceeds from issuance of preferred stock                                                          |   |   | 1,000,000   |   |   |   | 3,000,000  |   |   |   | - |   |
| Preferred stock issuance costs                                                                     |   |   | (14,852     | )      |   |   | (22,238    | )      |   |   |  - |   |
| Net cash used in financing activities                                                              |   |   | (12,241,255 | )      |   |   | (4,911,825 | )      |   |   | (44,836,171 | ) |
| Change in cash and cash equivalents                                                                |   |   | 28,255,169  |   |   |   | (8,125,251 | )      |   |   | (68,132,581 | ) |
| Cash and cash equivalents at beginning of the year                                                 |   |   | 14,259,976  |   |   |   | 22,385,227 |   |   |   | 90,517,808 |   |
| Cash and cash equivalents at end of year                                                           |   | $      | 42,515,145  |   |   |   | 14,259,976 |   |   |   | 22,385,227 |   |
| Supplemental disclosures of cash flow information:                                                 |   |   |        |   |   |   |       |   |   |   |   |   |
| Cash paid (refunds) during the year for:                                                           |   |   |        |   |   |   |       |   |   |   |   |   |
| Interest                                                                                           |   | $      | 12,361,277  |   |   |   | 14,786,087 |   |   |   | 16,522,798 |   |
| Income taxes                                                                                       |   | $      | (2,778,582  | )      |   |   | -          |   |   |   | 1,261,000 |   |
| Supplemental disclosures of noncash investing and financing activities:                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Other real estate acquired through loan foreclosures                                               |   | $      | 22,282,074  |   |   |   | 17,852,732 |   |   |   | 11,200,792 |   |
| Exchange of Series A preferred stock for Series B preferred stock                                  |   | $      | 2,977,762   |   |   |   | -          |   |   |   | - |   |

----

| (1) | Organization and Basis of Presentation |
|-----|----------------------------------------|

|   | Interest Rate Risk |
|--------|--------------------|

|   | Reclassifications |
|--------|-------------------|

| (2) | Summary of Significant Accounting Policies |
|-----|--------------------------------------------|

|   | Cash and Cash Equivalents |
|--------|---------------------------|

|   | Investment Securities |
|--------|-----------------------|

----

|   | Other Investments |
|--------|-------------------|

|   | Loans Held for Sale |
|--------|---------------------|

|   | Loans |
|--------|-------|

|   | Allowance for Loan Losses |
|--------|---------------------------|

----

|   | Other Real Estate |
|--------|-------------------|

|   | Premises and Equipment |
|--------|------------------------|

|   | Goodwill and Other Intangible Assets |
|--------|--------------------------------------|

----

----

| (3) | Regulatory Oversight, Capital Adequacy, Operating Losses, Liquidity and Management’s Plans |
|-----|--------------------------------------------------------------------------------------------------|

----

| (4) | Cumulative Effect of Change in Accounting Principle |
|-----|-----------------------------------------------------|

| (5) | Reserve Requirements |
|-----|----------------------|

| (6) | Net (Loss) Earnings Per Share |
|-----|-------------------------------|

|                                                 |   | 2009   |        |   | 2008   |   |        | 2007   |   |
|------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
|                                                 |   |   |        |   |   |   |        |   |   |
| Net (loss) earnings                                  |   | $      | (26,128,234 | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |
| Less dividends on preferred stock                    |   |   | (211,232    | )      |   |   | -           |   |   |   | - |   |
| Net (loss) earnings available to common shareholders |   | $      | (26,339,466 | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |
|                                                 |   |   |        |   |   |   |        |   |   |   |   |   |
| Weighted average common shares outstanding           |   |   | 2,818,593   |   |   |   | 2,818,593   |   |   |   | 2,942,292 |   |
| (Loss) earnings per share:                           |   |   |        |   |   |   |        |   |   |   |   |   |
| Basic                                                |   | $      | (9.34       | )      |   |   | (5.27       | )      |   |   | 1.00 |   |
| Diluted                                              |   | $      | (9.34       | )      |   |   | (5.27       | )      |   |   | 1.00 |   |

----

| (7) | Investment Securities Available for Sale |
|-----|------------------------------------------|

| December 31, 2009                     |   | AmortizedCost |       |   | GrossUnrealizedGains |   |      | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
|---------------------------------------|--------|---------------|------------|--------|----------------------|--------|-----------|-----------------------|--------|--------|---------------------|--------|
| U.S. government-sponsored enterprises |   | $             | 16,310,655 |   |                 |   | 59,477    |                  |   |   | 290,026             |   |   |   | 16,080,106 |   |
| Mortgage-backed securities            |   |          | 48,208,190 |   |                 |   | 1,318,987 |                  |   |   | 17,126              |   |   |   | 49,510,051 |   |
| State and political subdivisions      |   |          | 8,782,519  |   |                 |   | 87,256    |                  |   |   | 188,879             |   |   |   | 8,680,896 |   |
| Equity securities                     |   |          | 209,110    |   |                 |   | -         |                  |   |   | 23,190              |   |   |   | 185,920 |   |
| Total                                 |   | $             | 73,510,474 |   |                 |   | 1,465,720 |                  |   |   | 519,221             |   |   |   | 74,456,973 |   |

| December 31, 2008                     |   | AmortizedCost |       |   | GrossUnrealizedGains |   |      | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
|---------------------------------------|--------|---------------|------------|--------|----------------------|--------|-----------|-----------------------|--------|--------|---------------------|--------|
| U.S. government-sponsored enterprises |   | $             | 26,698,164 |   |                 |   | 450,650   |                  |   |   | 16,018              |   |   |   | 27,132,796 |   |
| Mortgage-backed securities            |   |          | 55,390,658 |   |                 |   | 1,066,636 |                  |   |   | 45,143              |   |   |   | 56,412,151 |   |
| State and political subdivisions      |   |          | 14,591,833 |   |                 |   | 30,802    |                  |   |   | 1,075,052           |   |   |   | 13,547,583 |   |
| Equity securities                     |   |          | 209,110    |   |                 |   | -         |                  |   |   | 23,749              |   |   |   | 185,361 |   |
| Total                                 |   | $             | 96,889,765 |   |                 |   | 1,548,088 |                  |   |   | 1,159,962           |   |   |   | 97,277,891 |   |

|                                        |   | 2009                 |       |   | 2008              |   |
|---------------------------------------------|--------|----------------------|------------|--------|-------------------|--------|
|                                        |   | Estimated Fair Value |       |   | Unrealized Losses |   |   | Estimated Fair Value |   |   | Unrealized Losses |   |
| Unrealized loss for less than 12 months:    |   |                 |       |   |              |   |   |   |   |   |   |   |
| U.S. government-sponsored enterprises       |   | $                    | 11,530,468 |   |              |   | 289,081 |   |   |   | 858,685 |   |   |   | 14,391 |   |
| Mortgage-backed securities                  |   |                 | 2,080,811  |   |              |   | 17,126 |   |   |   | 2,621,883 |   |   |   | 12,534 |   |
| State and political subdivisions            |   |                 | 2,773,138  |   |              |   | 146,860 |   |   |   | 9,974,570 |   |   |   | 860,452 |   |
|                                        |   |                 | 16,384,417 |   |              |   | 453,067 |   |   |   | 13,455,138 |   |   |   | 887,377 |   |
| Unrealized loss for greater than 12 months: |   |                 |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored enterprises       |   |                 | 51,027     |   |              |   | 945 |   |   |   | 60,555 |   |   |   | 1,627 |   |
| Mortgage-backed securities                  |   |                 | -          |   |              |   | - |   |   |   | 4,599,716 |   |   |   | 32,609 |   |
| State and political subdivisions            |   |                 | 1,199,412  |   |              |   | 42,020 |   |   |   | 1,519,588 |   |   |   | 214,600 |   |
| Equity securities                           |   |                 | 185,920    |   |              |   | 23,189 |   |   |   | 185,361 |   |   |   | 23,749 |   |
|                                        |   |                 | 1,436,359  |   |              |   | 66,154 |   |   |   | 6,365,220 |   |   |   | 272,585 |   |
|                                        |   | $                    | 17,820,776 |   |              |   | 519,221 |   |   |   | 19,820,358 |   |   |   | 1,159,962 |   |

----

|                                   |   | AmortizedCost |       |   | EstimatedFair Value |   |
|----------------------------------------|--------|---------------|------------|--------|---------------------|--------|
| Due in one year or less                |   | $             | 131,754    |   |                |   | 132,324 |   |
| Due after one year through five years  |   |          | 1,696,151  |   |                |   | 1,710,650 |   |
| Due after five years through ten years |   |          | 6,218,054  |   |                |   | 6,374,757 |   |
| Due after ten years                    |   |          | 65,255,405 |   |                |   | 66,053,322 |   |
| Total                                  |   | $             | 73,301,364 |   |                |   | 74,271,053 |   |

| (8) | Investment Securities Held to Maturity |
|-----|----------------------------------------|

| December 31, 2009                |   | AmortizedCost |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
|----------------------------------|--------|---------------|---------|--------|----------------------|--------|--------|-----------------------|--------|--------|---------------------|--------|
| Mortgage-backed securities       |   | $             | 17,461  |   |                 |   | 841    |                  |   |   | -                   |   |   |   | 18,302 |   |
| State and political subdivisions |   |          | 863,955 |   |                 |   | 20,360 |                  |   |   | -                   |   |   |   | 884,315 |   |
| Total                            |   | $             | 881,416 |   |                 |   | 21,201 |                  |   |   | -                   |   |   |   | 902,617 |   |

| December 31, 2008                |   | AmortizedCost |      |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
|----------------------------------|--------|---------------|-----------|--------|----------------------|--------|--------|-----------------------|--------|--------|---------------------|--------|
| Mortgage-backed securities       |   | $             | 26,835    |   |                 |   | 890    |                  |   |   | 84                  |   |   |   | 27,641 |   |
| State and political subdivisions |   |          | 998,600   |   |                 |   | 26,588 |                  |   |   | -                   |   |   |   | 1,025,188 |   |
| Total                            |   | $             | 1,025,435 |   |                 |   | 27,478 |                  |   |   | 84                  |   |   |   | 1,052,829 |   |

|                                   |   | AmortizedCost |    |   | EstimatedFair Value |   |
|----------------------------------------|--------|---------------|---------|--------|---------------------|--------|
| Due in one year or less                |   | $             | 345,000 |   |                |   | 347,667 |   |
| Due after one year through five years  |   |          | 408,579 |   |                |   | 414,317 |   |
| Due after five years through ten years |   |          | 123,857 |   |                |   | 136,592 |   |
| Due after ten years                    |   |          | 3,980   |   |                |   | 4,041 |   |
| Total                                  |   | $             | 881,416 |   |                |   | 902,617 |   |

----

| (9) | Loans |
|-----|-------|

|                                   |   | 2009   |        |   | 2008   |   |
|----------------------------------------|--------|--------|-------------|--------|--------|--------|
| Real estate:                           |   |   |        |   |   |   |
| Construction                           |   | $      | 107,717,807 |   |   |   | 148,110,567 |   |
| Other                                  |   |   | 143,282,759 |   |   |   | 142,862,216 |   |
| Commercial, financial and agricultural |   |   | 13,763,667  |   |   |   | 16,808,412 |   |
| Consumer installment                   |   |   | 12,246,338  |   |   |   | 15,049,635 |   |
|                                   |   |   | 277,010,571 |   |   |   | 322,830,830 |   |
| Less:                                  |   |   |        |   |   |   |   |   |
| Unamortized loan origination fees, net |   |   | 7,793       |   |   |   | 34,888 |   |
| Unearned credit life premiums          |   |   | 7,929       |   |   |   | 21,381 |   |
| Allowance for loan losses              |   |   | 12,106,070  |   |   |   | 12,167,645 |   |
| Total                                  |   | $      | 264,888,779 |   |   |   | 310,606,916 |   |

|                      |   | 2009   |        |   | 2008   |   |       | 2007   |   |
|---------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|
| Balance, January 1        |   | $      | 12,167,645  |   |   |   | 2,136,848  |   |   |   | 3,444,789 |   |
| Provision for loan losses |   |   | 13,476,000  |   |   |   | 16,020,862 |   |   |   | 675,225 |   |
| Loans charged off         |   |   | (13,889,808 | )      |   |   | (6,045,113 | )      |   |   | (2,116,001 | ) |
| Recoveries                |   |   | 352,233     |   |   |   | 55,048     |   |   |   | 132,835 |   |
| Balance, December 31      |   | $      | 12,106,070  |   |   |   | 12,167,645 |   |   |   | 2,136,848 |   |

|   | The Company considers a loan to be impaired when it is probable that it will be unable to collect all amounts due according to the original terms of the loan agreement. The Company measures impairment of a loan on a loan-by-loan basis for commercial real estate, commercial business, and agricultural loans. Residential mortgages, installment, and other consumer loans are considered smaller balance, homogenous loans which are not evaluated individually for impairment. Amounts of impaired loans that are not probable of collection are charged off immediately. Impaired loans and related amounts included in the allowance for loan losses at December 31, 2009 and 2008 are as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |   | 2009    |       |   | 2008            |   |
|--------------------------------------------|--------|---------|------------|--------|-----------------|--------|
|                                       |   | Balance |       |   | AllowanceAmount |   |   | Balance |   |   | AllowanceAmount |   |
| Impaired loans with a related allowance    |   | $       | 29,874,000 |   |            |   | 8,189,000 |   |   |   | 33,198,000 |   |   |   | 9,375,000 |   |
| Impaired loans without a related allowance |   |    | 41,939,000 |   |            |   | - |   |   |   | 22,857,000 |   |   |   | - |   |

|                                           |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Average impaired loans                         |   | $      | 52,123,000 |   |   |   | 25,492,000 |   |   |   | 6,152,000 |   |
| Interest income recognized on nonaccrual loans |   |   | 735,000    |   |   |   | 349,000    |   |   |   | 593,000 |   |

|                                                       |   | 2009   |        |   | 2008   |   |
|------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Real estate lessors (amortized non-owner occupied)         |   | $      | 65,004,166  |   |   |   | 69,291,195 |   |
| Land and subdivision development                           |   |   | 52,061,855  |   |   |   | 77,725,875 |   |
| Raw land                                                   |   |   | 27,883,898  |   |   |   | 24,860,081 |   |
| Non-residential building construction (non-owner occupied) |   |   | 22,964,330  |   |   |   | 11,907,466 |   |
|                                                       |   |   |        |   |   |   |   |   |
|                                                       |   | $      | 167,914,249 |   |   |   | 183,784,617 |   |

----

|                            |   | 2009   |       |   | 2008   |   |
|---------------------------------|--------|--------|------------|--------|--------|--------|
| Nonaccrual loans                |   | $      | 71,812,703 |   |   |   | 56,055,277 |   |
| Accruing loans 90 days past due |   |   | -          |   |   |   | 802,267 |   |
| Restructured loans              |   |   | 728,345    |   |   |   | - |   |
|                            |   |   |       |   |   |   |   |   |
| Total nonperforming loans       |   | $      | 72,541,048 |   |   |   | 56,857,544 |   |

|                                                     |   | Number of loans |   |   | 2009   |   |       | Number of loans |   |   | 2008 |   |
|----------------------------------------------------------|--------|-----------------|--------|--------|--------|--------|------------|-----------------|--------|--------|------|--------|
| Real estate – construction & development loans |   |            | 50     |   |   | $      | 59,863,354 |            |   |   | 50   |   |   | $ | 52,442,846 |   |
| Real estate – residential loans                    |   |            | 23     |   |   |   | 4,966,478  |            |   |   | 11   |   |   |   | 313,004 |   |
| Real estate – commercial                           |   |            | 8      |   |   |   | 6,548,962  |            |   |   | 4    |   |   |   | 2,689,491 |   |
| Commercial loans                                         |   |            | 3      |   |   |   | 216,829    |            |   |   | 4    |   |   |   | 459,389 |   |
| Consumer loans                                           |   |            | 11     |   |   |   | 217,080    |            |   |   | 23   |   |   |   | 150,547 |   |
| Total nonaccrual loans                                   |   |            | 95     |   |   | $      | 71,812,703 |            |   |   | 92   |   |   | $ | 56,055,277 |   |

| (10) | Premises and Equipment |
|------|------------------------|

|                          |   | 2009   |       |   | 2008   |   |
|-------------------------------|--------|--------|------------|--------|--------|--------|
| Land                          |   | $      | 2,946,649  |   |   |   | 5,121,361 |   |
| Buildings                     |   |   | 13,217,358 |   |   |   | 17,171,787 |   |
| Leasehold improvements        |   |   | -          |   |   |   | 148,637 |   |
| Furniture and equipment       |   |   | 7,275,562  |   |   |   | 7,771,007 |   |
| Total                         |   |   | 23,439,569 |   |   |   | 30,212,792 |   |
| Less accumulated depreciation |   |   | 10,833,220 |   |   |   | 10,733,399 |   |
| Premises and equipment, net   |   | $      | 12,606,349 |   |   |   | 19,479,393 |   |

| 2010   |   | $      | 597,491   |   |
|--------|--------|--------|-----------|--------|
| 2011   |   |   | 422,696   |   |
| 2012   |   |   | 130,964   |   |
| 2013   |   |   | 27,973    |   |
|   |   | $      | 1,179,124 |   |

----

| (11) | Bank Property Held for Sale |
|------|-----------------------------|

|                    |   | 2009   |      |
|-------------------------|--------|--------|-----------|
| Land                    |   | $      | 1,988,712 |   |
| Buildings               |   |   | 3,001,917 |   |
| Furniture and equipment |   |   | 71,237    |   |
| Total                   |   | $      | 5,061,866 |   |

| (12) | Other Real Estate |
|------|-------------------|

|                                       |   | 2009                 |   |   | 2008           |   |
|--------------------------------------------|--------|----------------------|--------|--------|----------------|--------|
|                                       |   | Number of Properties |   |   | CarryingAmount |   |   | Number of Properties |   |   | CarryingAmount |   |
|                                       |   |                 |   |   |           |   |   |   |   |   |   |   |
| Residential properties – spec houses |   |                 | 33     |   |           | $      | 12,412,239 |   |   |   | 41 |   |   | $ | 15,714,994 |   |
| Commercial properties                      |   |                 | 13     |   |           |   | 5,116,878 |   |   |   | 2 |   |   |   | 673,250 |   |
| Land and vacant lots                       |   |                 | 223    |   |           |   | 19,461,935 |   |   |   | 207 |   |   |   | 10,785,430 |   |
| Mobile homes and lots                      |   |                 | 1      |   |           |   | 51,590 |   |   |   | - |   |   |   | - |   |
| Residential construction properties        |   |                 | 2      |   |           |   | 790,686 |   |   |   | 1 |   |   |   | 163,200 |   |
|                                       |   |                 | 272    |   |           | $      | 37,833,328 |   |   |   | 251 |   |   | $ | 27,336,874 |   |

|                                 |   | 2009                 |   |   | 2008           |   |
|--------------------------------------|--------|----------------------|--------|--------|----------------|--------|
|                                 |   | Number of Properties |   |   | CarryingAmount |   |   | Number of Properties |   |   | CarryingAmount |   |
| Balance at the beginning of the year |   |                 | 251    |   |           | $      | 27,336,874 |   |   |   | 64 |   |   | $ | 11,498,271 |   |
| Foreclosed properties                |   |                 | 56     |   |           |   | 22,282,074 |   |   |   | 201 |   |   |   | 17,852,732 |   |
| Capitalized completion costs         |   |                 | -      |   |           |   | 755,597 |   |   |   | - |   |   |   | 1,759,558 |   |
| Sales of properties                  |   |                 | (35    | )      |           |   | (10,829,862 | ) |   |   | (14 | ) |   |   | (3,322,071 | ) |
| Write-downs                          |   |                 | -      |   |           |   | (1,711,355 | ) |   |   | - |   |   |   | (451,616 | ) |
| Balance at the end of the year       |   |                 | 272    |   |           | $      | 37,833,328 |   |   |   | 251 |   |   | $ | 27,336,874 |   |

| (13) | Deposits and Short-Term Borrowings |
|------|------------------------------------|

| 2010  |   | $      | 188,633,417 |   |
|-------|--------|--------|-------------|--------|
| 2011  |   |   | 24,891,671  |   |
| 2012  |   |   | 4,147,626   |   |
| 2013  |   |   | 6,454,416   |   |
| 2014  |   |   | 469,034     |   |
| Total |   | $      | 224,596,164 |   |

----

| (14) | Federal Funds Purchased and Securities Sold Under Repurchase Agreements |
|------|-------------------------------------------------------------------------|

|                                           |   | 2009   |       |   | 2008   |   |
|------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Balance at year-end                            |   | $      | 6,316,735  |   |   |   | 16,383,982 |   |
| Maximum outstanding during the year            |   |   | 21,933,798 |   |   |   | 42,720,547 |   |
| Average outstanding during the year            |   |   | 10,427,552 |   |   |   | 24,175,635 |   |
| Weighted average interest rate during the year |   |   | 2.10       | %      |   |   | 3.57 | % |
| Weighted average interest rate at end of year  |   |   | 1.06       | %      |   |   | 3.79 | % |

|                                                                     |   | 2009            |      |   | 2008            |   |
|--------------------------------------------------------------------------|--------|-----------------|-----------|--------|-----------------|--------|
|                                                                     |   | Total Available |      |   | Total Available |   |
| Federal discount window                                                  |   | $               | 8,672,000 |   |            |   | 24,630,000 |   |
| Federal funds line                                                       |   |            | -         |   |            |   | 10,000,000 |   |
| Retail repurchase agreement                                              |   |            | -         |   |            |   | 921,000 |   |
| Retail repurchase agreement  (subject to available securities) |   |            |  -   |   |            |   |  3,950,000 |   |

----

| (15) | FHLB Advances |
|------|---------------|

| Advance date       |   | Amount |       |   | Interest Rate |   |   | Maturity Date |   | Rate               |   | Call Feature |
|--------------------|--------|--------|------------|--------|---------------|--------|--------|---------------|--------|--------------------|--------|--------------|
| March 30, 2000     |   | $      | 10,000,000 |   |          |   | 6.02   | %             |   | March 30, 2010     |   | Fixed        |   | Callable each year |
| January 12, 2001   |   |   | 10,000,000 |   |          |   | 4.93   | %             |   | January 12, 2011   |   | Fixed        |   | Callable each year |
| May 22, 2008       |   |   | 3,000,000  |   |          |   | 3.26   | %             |   | May 22, 2013       |   | Fixed        |   | Callable each year |
| May 19, 2009       |   |   | 4,000,000  |   |          |   | .80    | %             |   | May 19, 2010       |   | Fixed        |   | No call provision |
| May 21, 2009       |   |   | 3,000,000  |   |          |   | .83    | %             |   | May 21, 2010       |   | Fixed        |   | No call provision |
| August 26, 2009    |   |   | 1,000,000  |   |          |   | 1.50   | %             |   | August 26, 2011    |   | Fixed        |   | No call provision |
| August 26, 2009    |   |   | 1,000,000  |   |          |   | 2.12   | %             |   | August 27, 2012    |   | Fixed        |   | No call provision |
| August 26, 2009    |   |   | 1,000,000  |   |          |   | 2.59   | %             |   | August 26, 2013    |   | Fixed        |   | No call provision |
| September 14, 2009 |   |   | 1,500,000  |   |          |   | 1.37   | %             |   | September 14, 2011 |   | Fixed        |   | No call provision |
| September 14, 2009 |   |   | 1,500,000  |   |          |   | 2.02   | %             |   | September 14, 2012 |   | Fixed        |   | No call provision |
| September 16, 2009 |   |   | 2,000,000  |   |          |   | 2.61   | %             |   | September 16, 2013 |   | Fixed        |   | No call provision |
|               |   |   |       |   |          |   |   |          |   |               |   |         |   |   |
|               |   | $      | 38,000,000 |   |          |   |   |          |   |               |   |         |   |   |

| Advance date       |   | Amount |       |   | Interest Rate |   |   | Maturity Date |   | Rate               |   | Call Feature |
|--------------------|--------|--------|------------|--------|---------------|--------|--------|---------------|--------|--------------------|--------|--------------|
| March 30, 2000     |   | $      | 10,000,000 |   |          |   | 6.02   | %             |   | March 30, 2010     |   | Fixed        |   | Callable each year |
| January 12, 2001   |   |   | 10,000,000 |   |          |   | 4.93   | %             |   | January 12, 2011   |   | Fixed        |   | Callable each year |
| May 21, 2004       |   |   | 3,000,000  |   |          |   | 2.40   | %             |   | May 21, 2009       |   | Floating     |   | No call provision |
| August 26, 2004    |   |   | 3,000,000  |   |          |   | 2.40   | %             |   | August 26, 2009    |   | Floating     |   | No call provision |
| May 19, 2008       |   |   | 4,000,000  |   |          |   | 2.91   | %             |   | May 19, 2009       |   | Fixed        |   | No call provision |
| May 22, 2008       |   |   | 3,000,000  |   |          |   | 3.26   | %             |   | May 22, 2013       |   | Fixed        |   | No call provision |
| September 13, 2006 |   |   | 5,000,000  |   |          |   | 2.00   | %             |   | September 14, 2009 |   | Floating     |   | No call provision |
|               |   | $      | 38,000,000 |   |          |   |   |          |   |               |   |         |   |   |

| (16) | Derivative Instruments and Hedging Activities |
|------|-----------------------------------------------|

----

| (17) | Income Taxes |
|------|--------------|

----

|                          |   | 2009   |        |   | 2008   |   |      | 2007   |   |
|-------------------------------|--------|--------|-------------|--------|--------|--------|-----------|--------|--------|
| Current:                      |   |   |        |   |   |   |      |   |   |
| Federal                       |   | $      | 1,925,000   |   |   |   | 2,235,459 |   |   |   | (718,442 | ) |
| State                         |   |   | 359,693     |   |   |   | 752,493   |   |   |   | - |   |
| Total current                 |   |   | 2,284,693   |   |   |   | 2,987,952 |   |   |   | (718,442 | ) |
| Deferred:                     |   |   |        |   |   |   |      |   |   |   |   |   |
| Federal                       |   |   | 5,962,460   |   |   |   | 4,344,687 |   |   |   | (270,476 | ) |
| State                         |   |   | 695,814     |   |   |   | 506,028   |   |   |   | (31,502 | ) |
| Total deferred                |   |   | 6,658,274   |   |   |   | 4,850,715 |   |   |   | (301,978 | ) |
| Change in valuation allowance |   |   | (12,723,678 | )      |   |   | -         |   |   |   | - |   |
| Total                         |   | $      | (3,780,711  | )      |   |   | 7,838,667 |   |   |   | (1,020,420 | ) |

|                                                                   |   | 2009   |        |   | 2008   |   |       | 2007   |   |
|------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|
| Income benefit (tax) on earnings before income taxes at statutory rate |   | $      | 7,598,158   |   |   |   | 7,713,916  |   |   |   | (1,346,324 | ) |
| Differences resulting from:                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Goodwill impairment                                                    |   |   | -           |   |   |   | (1,206,925 | )      |   |   | - |   |
| Tax-exempt income                                                      |   |   | 223,920     |   |   |   | 339,547    |   |   |   | 394,833 |   |
| Earnings on cash surrender value of life insurance                     |   |   | 117,751     |   |   |   | 135,142    |   |   |   | 62,281 |   |
| Nondeductible interest expense                                         |   |   | (38,758     | )      |   |   | (46,081    | )      |   |   | (64,088 | ) |
| State income tax, net of Federal tax effect                            |   |   | 936,980     |   |   |   | 830,624    |   |   |   | (20,791 | ) |
| Change in valuation allowance                                          |   |   | (12,723,678 | )      |   |   | -          |   |   |   | - |   |
| Other                                                                  |   |   | 104,916     |   |   |   | 72,444     |   |   |   | (46,331 | ) |
|                                                                   |   | $      | (3,780,711  | )      |   |   | 7,838,667  |   |   |   | (1,020,420 | ) |

|                                                                        |   | 2009   |        |   | 2008   |   |
|-----------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Deferred tax assets:                                                        |   |   |        |   |   |   |
| Allowance for loan losses                                                   |   | $      | 4,595,102   |   |   |   | 4,619,048 |   |
| Nonaccrual loans                                                            |   |   | 256,807     |   |   |   | 115,613 |   |
| Net operating loss carryforwards                                            |   |   | 4,613,197   |   |   |   | - |   |
| State tax credits                                                           |   |   | 307,188     |   |   |   | 99,692 |   |
| Other real estate                                                           |   |   | 3,037,966   |   |   |   | 1,052,100 |   |
| Deferred compensation                                                       |   |   | 312,922     |   |   |   | 440,158 |   |
| Furniture, fixtures and equipment due to difference in depreciation methods |   |   | 42,857      |   |   |   | 90,376 |   |
| Unrealized loss on derivatives                                              |   |   | -           |   |   |   | 32,461 |   |
| Other                                                                       |   |   | 25,124      |   |   |   | 37,871 |   |
| Gross deferred tax assets                                                   |   |   | 13,191,163  |   |   |   | 6,487,319 |   |
| Valuation allowance                                                         |   |   | (12,723,678 | )      |   |   | - |   |
| Net deferred tax assets                                                     |   |   | 467,485     |   |   |   | 6,487,319 |   |
|                                                                        |   |   |        |   |   |   |   |   |
| Deferred tax liabilities:                                                   |   |   |        |   |   |   |   |   |
| Unrealized gain on investment securities available for sale                 |   |   | (321,810    | )      |   |   | (131,963 | ) |
| Core deposit intangible                                                     |   |   | (131,541    | )      |   |   | (155,100 | ) |
| Deferred loan fees                                                          |   |   | (2,958      | )      |   |   | (13,244 | ) |
| Prepaid expenses                                                            |   |   | (332,986    | )      |   |   | (221,110 | ) |
|                                                                        |   |   | (789,295    | )      |   |   | (521,417 | ) |
| Net deferred tax asset (liability)                                          |   | $      | (321,810    | )      |   |   | 5,965,902 |   |

----

| (18) | Preferred Stock |
|------|-----------------|

| (19) | Regulatory Matters |
|------|--------------------|

----

|   | Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2009 that the Company and the Bank did not meet all capital adequacy requirements to which they are subject.  Management believes, as of December 31, 2008 that the Company and the Bank met all capital adequacy requirements to which they were subject. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   |   Actual |   |   |  For CapitalAdequacy Purposes |   |   | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |   |
|-------------------------------------------|--------|--------------------|--------|--------|------------------------------------|--------|--------|---------------------------------------------------------------|--------|
|                                      |   | Amount             |   |   | Ratio                              |   |   | Amount                                                        |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| As of December 31, 2009:                  |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to Risk-Weighted Assets):  |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |
| Company                                   |   | $                  | 20,314 |   |                               |   | 6.15   | %                                                             |   |   | 26,417 |   |   |   | 8 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                      |   | $                  | 18,794 |   |                               |   | 5.69   | %                                                             |   |   | 26,406 |   |   |   | 8 | % |   |   | 33,007 |   |   |   | 10 | % |
| Tier I Capital (to Risk-Weighted Assets): |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                   |   | $                  | 16,088 |   |                               |   | 4.87   | %                                                             |   |   | 13,209 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                      |   | $                  | 14,570 |   |                               |   | 4.41   | %                                                             |   |   | 13,203 |   |   |   | 4 | % |   |   | 19,804 |   |   |   | 6 | % |
| Tier I Capital (to Average Assets):       |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                   |   | $                  | 16,088 |   |                               |   | 3.39   | %                                                             |   |   | 18,981 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                      |   | $                  | 14,570 |   |                               |   | 3.08   | %                                                             |   |   | 18,912 |   |   |   | 4 | % |   |   | 23,640 |   |   |   | 5 | % |
| As of December 31, 2008:                  |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to Risk-Weighted Assets):  |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                   |   | $                  | 44,428 |   |                               |   | 11.60  | %                                                             |   |   | 30,643 |   |   |   | 8 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                      |   | $                  | 40,320 |   |                               |   | 10.61  | %                                                             |   |   | 30,408 |   |   |   | 8 | % |   |   | 38,010 |   |   |   | 10 | % |
| Tier I Capital (to Risk-Weighted Assets): |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                   |   | $                  | 39,591 |   |                               |   | 10.34  | %                                                             |   |   | 15,321 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                      |   | $                  | 35,483 |   |                               |   | 9.33   | %                                                             |   |   | 15,204 |   |   |   | 4 | % |   |   | 22,806 |   |   |   | 6 | % |
| Tier I Capital (to Average Assets):       |   |               |   |   |                               |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                   |   | $                  | 39,591 |   |                               |   | 7.94   | %                                                             |   |   | 19,943 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                      |   | $                  | 35,483 |   |                               |   | 7.14   | %                                                             |   |   | 19,872 |   |   |   | 4 | % |   |   | 24,840 |   |   |   | 5 | % |

----

| (20) | Employee Benefit and Stock Option Plans |
|------|-----------------------------------------|

| NumberOutstanding andExercisable atDecember 31, 2009 |   |   | WeightedAverage RemainingContractual Lifein Years |   |   | Weighted Average Exercise Price |
|------------------------------------------------------|--------|--------|---------------------------------------------------|--------|--------|---------------------------------|
|                                                 |   |   |                                              |   |   |                            |
|                                                 | 91,500 |   |                                              |   | 3.8    |                            |   | $ | 22.95 |   |
|                                                 |   |   |                                              |   |   |                            |   |   |   |   |

|                                       |   | 2009   |    |   | 2008                        |   |   | 2007   |   |
|--------------------------------------------|--------|--------|---------|--------|-----------------------------|--------|--------|--------|--------|
|                                       |   | Shares |    |   | Weighted Avg.Exercise Price |   |   | Shares |   |   | Weighted Avg.Exercise Price |   |   | Shares |   |   | Weighted Avg.Exercise Price |   |
| Outstanding at beginning of the year       |   |   | 174,750 |   |                        | $      | 21.99  |   |   |   | 230,750 |   |   | $ | 22.56 |   |   |   | 298,250 |   |   | $ | 21.49 |   |
| Terminated and expired                     |   |   | (83,250 | )      |                        |   | 20.94  |   |   |   | (56,000 | ) |   |   | 24.34 |   |   |   | (67,500 | ) |   |   | 17.82 |   |
| Outstanding and exercisable at end of year |   |   | 91,500  |   |                        | $      | 22.95  |   |   |   | 174,750 |   |   | $ | 21.99 |   |   |   | 230,750 |   |   | $ | 22.56 |   |

----

| (21) | Other Expenses |
|------|----------------|

|                             |   | 2009   |      |   | 2008   |   |      | 2007   |   |
|----------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Legal and other outside services |   | $      | 2,922,489 |   |   |   | 1,326,610 |   |   |   | 1,198,210 |   |
| Advertising and public relations |   |   | 333,767   |   |   |   | 599,926   |   |   |   | 721,683 |   |
| Office supplies                  |   |   | 411,310   |   |   |   | 486,689   |   |   |   | 535,841 |   |
| Other                            |   |   | 1,388,989 |   |   |   | 1,557,462 |   |   |   | 1,553,251 |   |
| Total                            |   | $      | 5,056,555 |   |   |   | 3,970,687 |   |   |   | 4,008,985 |   |

| (22) | Fair Value Measurements and Disclosures |
|------|-----------------------------------------|

|   | Level 1– | Valuation is based upon quoted prices for identical instruments traded in active markets. |
|--------|----------------|-------------------------------------------------------------------------------------------|

|   | Level 2– | Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. |
|--------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3– | Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
|--------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                     |   | 2009  |       |
|------------------------------------------|--------|-------|------------|
|                                     |   | Total |       |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Investment securities available for sale |   | $     | 74,456,973 |   |   |   | 8,464,792 |   |   |   | 65,992,181 |   |   |   | - |   |

|                                     |   | 2008 |       |
|------------------------------------------|--------|------|------------|
| Investment securities available for sale |   | $    | 97,277,891 |   |   |   | 8,411,357 |   |   |   | 88,866,534 |   |   |   | - |   |

|              |   | 2009   |       |
|-------------------|--------|--------|------------|
|              |   | Total  |       |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Other real estate |   | $      | 37,833,328 |   |   |   | - |   |   |   | 1,907,075 |   |   |   | 35,926,253 |   |
| Loans             |   |   | 26,087,743 |   |   |   | - |   |   |   | 26,087,743 |   |   |   | - |   |
|              |   | $      | 63,921,071 |   |   |   | - |   |   |   | 27,994,818 |   |   |   | 35,926,253 |   |

|              |   | 2008   |       |
|-------------------|--------|--------|------------|
| Other real estate |   | $      | 27,336,874 |   |   |   | - |   |   |   | 27,336,874 |   |   |   | - |   |
| Loans             |   |   | 24,501,415 |   |   |   | - |   |   |   | 24,501,415 |   |   |   | - |   |
|              |   | $      | 51,838,289 |   |   |   | - |   |   |   | 51,838,289 |   |   |   | - |   |

|                                                                    |   | 2009           |        |   | 2008      |   |
|-------------------------------------------------------------------------|--------|----------------|-------------|--------|-----------|--------|
|                                                                    |   | CarryingAmount |        |   | FairValue |   |   | CarryingAmount |   |   | FairValue |   |
| Assets:                                                                 |   |           |        |   |      |   |   |   |   |   |   |   |
| Cash and cash equivalents                                               |   | $              | 42,515,145  |   |      |   | 42,515,145 |   |   |   | 14,259,976 |   |   |   | 14,259,976 |   |
| Investment securities available for sale                                |   |           | 74,456,973  |   |      |   | 74,456,973 |   |   |   | 97,277,891 |   |   |   | 97,277,891 |   |
| Investment securities held to maturity                                  |   |           | 881,416     |   |      |   | 902,617 |   |   |   | 1,025,435 |   |   |   | 1,052,829 |   |
| Other investments                                                       |   |           | 2,595,634   |   |      |   | 2,595,634 |   |   |   | 3,334,124 |   |   |   | 3,334,124 |   |
| Loans, net                                                              |   |           | 264,888,779 |   |      |   | 264,890,502 |   |   |   | 310,606,916 |   |   |   | 311,010,207 |   |
| Cash surrender value of life insurance                                  |   |           | 10,282,414  |   |      |   | 10,282,414 |   |   |   | 9,936,088 |   |   |   | 9,936,088 |   |
| Liabilities:                                                            |   |           |        |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                |   | $              | 390,160,668 |   |      |   | 392,791,771 |   |   |   | 392,887,664 |   |   |   | 396,813,058 |   |
| Short-term borrowings                                                   |   |           | 539,541     |   |      |   | 539,541 |   |   |   | 760,468 |   |   |   | 760,468 |   |
| Federal funds purchased and securities sold under repurchase agreements |   |           | 6,316,735   |   |      |   | 6,316,735 |   |   |   | 16,383,982 |   |   |   | 16,383,982 |   |
| FHLB advances                                                           |   |           | 38,000,000  |   |      |   | 38,869,313 |   |   |   | 38,000,000 |   |   |   | 39,280,490 |   |
| Interest rate swaps                                                     |   |           | -           |   |      |   | - |   |   |   | 95,473 |   |   |   | 95,473 |   |

----

| (23) | Related Party Transactions |
|------|----------------------------|

| Balance, January 1        |   | $      | 11,006,331  |   |
|---------------------------|--------|--------|-------------|--------|
| Amounts advanced          |   |   | 10,887,374  |   |
| Repayments                |   |   | (11,209,500 | )      |
| Change in related parties |   |   | (4,320,627  | )      |
|                      |   |   |        |   |
| Balance, December 31      |   | $      | 6,363,578   |   |

----

| (24) | Condensed Financial Statements of Habersham Bancorp (Parent Only) |
|------|-------------------------------------------------------------------|

| Assets                                           |   |
|--------------------------------------------------|--------|
|                                             |   | 2009 |   |   | 2008 |   |
| Cash                                             |   | $ | 1,379,568 |   |   |   | 1,352,342 |   |
| Investment in subsidiaries                       |   |   | 15,556,832 |   |   |   | 37,890,470 |   |
| Other investments                                |   |   | - |   |   |   | 599,990 |   |
| Equipment, net                                   |   |   | 16,327 |   |   |   | 34,228 |   |
| Other assets                                     |   |   | 122,506 |   |   |   | 2,283,550 |   |
| Total assets                                     |   | $ | 17,075,233 |   |   |   | 42,160,580 |   |
| Liabilities and Stockholders’ Equity       |   |
| Liabilities consisting of accounts payable       |   | $ | - |   |   |   | 162,567 |   |
| Stockholders’ equity:                      |   |   |   |   |   |   |   |   |
| Preferred stock                                  |   |   | 3,962,910 |   |   |   | 2,977,762 |   |
| Common stock                                     |   |   | 2,818,593 |   |   |   | 2,818,593 |   |
| Additional paid-in capital                       |   |   | 13,490,587 |   |   |   | 13,490,587 |   |
| Retained (deficit) earnings                      |   |   | (3,821,546 | ) |   |   | 22,517,920 |   |
| Accumulated other comprehensive income           |   |   | 624,689 |   |   |   | 193,151 |   |
| Total stockholders’ equity                 |   |   | 17,075,233 |   |   |   | 41,998,013 |   |
| Total liabilities and stockholders’ equity |   | $ | 17,075,233 |   |   |   | 42,160,580 |   |

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|                                                                                                   |   | 2009   |        |   | 2008   |   |        | 2007   |   |
|--------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| Income:                                                                                                |   |   |        |   |   |   |        |   |   |
| Dividends from bank                                                                                    |   | $      | -           |   |   |   | 2,100,000   |   |   |   | 5,300,000 |   |
| Management fees from subsidiaries                                                                      |   |   | 1,512,000   |   |   |   | 672,000     |   |   |   | 672,000 |   |
| Other income                                                                                           |   |   | 124,793     |   |   |   | 605         |   |   |   | 5,306 |   |
| Total income                                                                                           |   |   | 1,636,793   |   |   |   | 2,772,605   |   |   |   | 5,977,306 |   |
| Expenses:                                                                                              |   |   |        |   |   |   |        |   |   |   |   |   |
| General and administrative                                                                             |   |   | 1,834,236   |   |   |   | 2,286,450   |   |   |   | 2,296,202 |   |
| (Loss) earnings before income taxes and  distributions in excess of earnings of subsidiaries |   |   | (197,443    | )      |   |   | 486,155     |   |   |   | 3,681,104 |   |
| Income tax benefit                                                                                     |   |   | 334,387     |   |   |   | 635,290     |   |   |   | 608,353 |   |
| Earnings before distributions  in excess of earnings of subsidiaries                         |   |   | 136,944     |   |   |   | 1,121,445   |   |   |   | 4,289,457 |   |
| Equity in undistributed loss of subsidiaries                                                           |   |   | (26,265,178 | )      |   |   | (15,970,766 | )      |   |   | (1,350,100 | ) |
| Net (loss) earnings                                                                                    |   | $      | (26,128,234 | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |

|                                                                                       |   | 2009   |        |   | 2008   |   |        | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                      |   |   |        |   |   |   |        |   |   |
| Net (loss) earnings                                                                        |   | $      | (26,128,234 | )      |   |   | (14,849,321 | )      |   |   | 2,939,357 |   |
| Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: |   |   |        |   |   |   |        |   |   |   |   |   |
| Depreciation                                                                               |   |   | 17,901      |   |   |   | 43,045      |   |   |   | 47,708 |   |
| Gain on sale of equipment                                                                  |   |   | (7,495      | )      |   |   | -           |   |   |   | (5,306 | ) |
| Gain on sale of investment                                                                 |   |   | (119,998    | )      |   |   | -           |   |   |   | - |   |
| Decrease (Increase) in other assets                                                        |   |   | 2,161,042   |   |   |   | 137,047     |   |   |   | (105,224 | ) |
| (Decrease) Increase in other liabilities                                                   |   |   | (162,567    | )      |   |   | 36,587      |   |   |   | 52,076 |   |
| Equity in undistributed loss of subsidiaries                                               |   |   | 26,265,178  |   |   |   | 15,970,766  |   |   |   | 1,350,100 |   |
| Net cash provided by operating activities                                                  |   |   | 2,025,827   |   |   |   | 1,338,124   |   |   |   | 4,278,711 |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                      |   |   |        |   |   |   |        |   |   |   |   |   |
| Capital infusion to Habersham Bank                                                         |   |   | (3,500,000  | )      |   |   | (2,500,000  | )      |   |   | - |   |
| Purchase of equipment                                                                      |   |   | -           |   |   |   | (1,192      | )      |   |   | (45,705 | ) |
| Proceeds from sale of equipment                                                            |   |   | 7,495       |   |   |   | -           |   |   |   | 34,860 |   |
| Proceeds from sale of investment                                                           |   |   | 719,988     |   |   |   | -           |   |   |   | - |   |
| Net cash used in investing activities                                                      |   |   | (2,772,517  | )      |   |   | (2,501,192  | )      |   |   | (10,845 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                      |   |   |        |   |   |   |        |   |   |   |   |   |
| Issuance of preferred stock                                                                |   |   | 1,000,000   |   |   |   | 3,000,000   |   |   |   | - |   |
| Preferred stock issuance costs                                                             |   |   | (14,852     | )      |   |   | (22,238     | )      |   |   | - |   |
| Payment of cash dividends                                                                  |   |   | (211,232    | )      |   |   | (704,648    | )      |   |   | (2,581,731 | ) |
| Common stock repurchase                                                                    |   |   | -           |   |   |   | -           |   |   |   | (2,190,000 | ) |
| Net cash provided by (used in) financing activities                                        |   |   | 773,916     |   |   |   | 2,273,114   |   |   |   | (4,771,731 | ) |
| Increase (decrease) in cash                                                                |   |   | 27,226      |   |   |   | 1,110,046   |   |   |   | (503,865 | ) |
| Cash at beginning of year                                                                  |   |   | 1,352,342   |   |   |   | 242,296     |   |   |   | 746,161 |   |
| Cash at end of year                                                                        |   | $      | 1,379,568   |   |   |   | 1,352,342   |   |   |   | 242,296 |   |

----

| (25) | Quarterly Financial Data (Unaudited) |
|------|--------------------------------------|

|                               |   | Quarter Ended |       |
|------------------------------------|--------|---------------|------------|
|                               |   | March 31,2009 |       |   | June 30,2009 |   |   | September 30,2009 |   |   | December 31,2009 |   |
| Interest income                    |   | $             | 5,687,221  |   |   |   | 5,323,790 |   |   |   | 5,135,460 |   |   |   | 4,239,800 |   |
| Interest expense                   |   |          | 3,217,344  |   |   |   | 3,161,999 |   |   |   | 2,987,200 |   |   |   | 2,381,432 |   |
| Net interest income                |   |          | 2,469,877  |   |   |   | 2,161,791 |   |   |   | 2,148,260 |   |   |   | 1,858,368 |   |
| Provision for loan losses          |   |          | 1,780,000  |   |   |   | 1,300,000 |   |   |   | 7,400,000 |   |   |   | 2,996,000 |   |
| Securities gains (losses), net     |   |          | 58,068     |   |   |   | 256,122 |   |   |   | 54,871 |   |   |   | 144,407 |   |
| Net loss                           |   |          | (1,655,191 | ) |   |   | (1,599,898 | ) |   |   | (5,968,847 | ) |   |   | (16,904,298 | ) |
| Net loss per share – basic   |   |          | (.60       | ) |   |   | (.58 | ) |   |   | (2.14 | ) |   |   | (6.02 | ) |
| Net loss per share – diluted |   |          | (.60       | ) |   |   | (.58 | ) |   |   | (2.14 | ) |   |   | (6.02 | ) |

|                                          |   | Quarter Ended |      |
|-----------------------------------------------|--------|---------------|-----------|
|                                          |   | March 31,2008 |      |   | June 30,2008 |   |   | September 30,2008 |   |   | December 31,2008 |   |
| Interest income                               |   | $             | 7,603,340 |   |   |   | 6,834,602 |   |   |   | 6,211,641 |   |   |   | 5,484,999 |   |
| Interest expense                              |   |          | 4,007,158 |   |   |   | 3,565,705 |   |   |   | 3,357,434 |   |   |   | 3,405,517 |   |
| Net interest income                           |   |          | 3,596,182 |   |   |   | 3,268,897 |   |   |   | 2,854,207 |   |   |   | 2,079,482 |   |
| Securities gains (losses), net                |   |          | 127,112   |   |   |   | 161,489 |   |   |   | 27,370 |   |   |   | 46,798 |   |
| Provision for loan losses                     |   |          | 423,000   |   |   |   | 654,000 |   |   |   | 6,293,000 |   |   |   | 8,650,862 |   |
| Net earnings (loss)                           |   |          | 58,942    |   |   |   | (375,160 | ) |   |   | (4,291,332 | ) |   |   | (10,241,771 | ) |
| Net earnings (loss) per share – basic   |   |          | .02       |   |   |   | (.13 | ) |   |   | (1.52 | ) |   |   | (3.63 | ) |
| Net earnings (loss) per share – diluted |   |          | .02       |   |   |   | (.13 | ) |   |   | (1.52 | ) |   |   | (3.63 | ) |

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