----

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| Virginia(State or other jurisdictionof incorporation)                                         |                  | 16-1694602(IRS EmployerIdentification No.) |
|-----------------------------------------------------------------------------------------------|-----------------------|--------------------------------------------|
|                                                                                          |                  |                                       |
|  15521 Midlothian Turnpike, Midlothian, Virginia(Address of principal executive offices) |  23113(Zip Code) |

| Large Accelerated Filer o                                           | Accelerated Filer o         |
|---------------------------------------------------------------------|-----------------------------|
| Non-Accelerated Filer o (Do not check if smaller reporting company) | Smaller Reporting Company x |

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| Part I – Financial Information  |
|--------------------------------------------|
|                                       | Item 1.  Financial Statements |   |
|                                       |   |   |
|                                       | Consolidated Balance Sheets |   |
|                                       | March 31, 2011 (unaudited) and December 31, 2010 | 3 |
|                                       |   |   |
|                                       | Consolidated Statements of Income |   |
|                                       | For the Three Months Ended |   |
|                                       | March 31, 2011 and 2010 (unaudited) | 4 |
|                                       |   |   |
|                                       | Consolidated Statements of Stockholders’ Equity |   |
|                                       | For the Three Months Ended |   |
|                                       | March 31, 2011 and 2010 (unaudited) | 5 |
|                                       |   |   |
|                                       | Consolidated Statements of Cash Flows |   |
|                                       | For the Three Months Ended |   |
|                                       | March 31, 2011 and 2010 (unaudited) | 6 |
|                                       |   |   |
|                                       | Notes to Condensed Consolidated Financial Statements (unaudited) | 7 |
|                                       |   |   |
|                                       | Item 2.  Management’s Discussion and Analysis of Financial Condition |   |
|                                       | and Results of Operations | 21 |
|                                       |   |   |
|                                       | Item 3.  Quantitative and Qualitative Disclosures About Market Risk | 41 |
|                                       |   |   |
|                                       | Item 4. Controls and Procedures | 41 |
|                                       |   |   |
| Part II – Other Information          |   |
|                                       |   |   |
|                                       | Item 1.  Legal Proceedings | 42 |
|                                       |   |   |
|                                       | Item 1A.  Risk Factors | 42 |
|                                       |   |   |
|                                       | Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds | 42 |
|                                       |   |   |
|                                       | Item 3.  Defaults Upon Senior Securities | 42 |
|                                       |   |   |
|                                       | Item 4.  (Removed and Reserved) | 42 |
|                                       |   |   |
|                                       | Item 5.  Other Information | 42 |
|                                       |   |   |
|                                       | Item 6.  Exhibits | 42 |
|                                       |   |   |
| Signatures                                 | 43 |

----

| Village Bank and Trust Financial Corp. and Subsidiary                         |   |
|-------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheets                                                   |   |
| March 31, 2011 and December 31, 2010                                          |   |
|                                                                          |   |   |   |   |   |   |
|                                                                          |   | March 31, |   |   | December 31, |   |
|                                                                          |   | 2011 |   |   | 2010 |   |
|                                                                          |   | (Unaudited) |   |   |   |   |
| Assets                                                                        |   |   |   |   |   |   |
| Cash and due from banks                                                       |   | $ | 12,765,062 |   |   | $ | 9,390,377 |   |
| Federal funds sold                                                            |   |   | 8,751,212 |   |   |   | 2,621,934 |   |
| Investment securities available for sale                                      |   |   | 81,810,230 |   |   |   | 53,597,174 |   |
| Loans held for sale                                                           |   |   | 8,629,602 |   |   |   | 19,871,787 |   |
| Loans                                                                         |   |   |   |   |   |   |   |   |
| Outstandings                                                                  |   |   | 442,720,243 |   |   |   | 453,242,950 |   |
| Allowance for loan losses                                                     |   |   | (7,434,283 | ) |   |   | (7,311,712 | ) |
| Deferred fees and costs                                                       |   |   | 666,247 |   |   |   | 623,851 |   |
|                                                                          |   |   | 435,952,207 |   |   |   | 446,555,089 |   |
| Premises and equipment, net                                                   |   |   | 27,416,915 |   |   |   | 27,437,452 |   |
| Accrued interest receivable                                                   |   |   | 2,536,961 |   |   |   | 2,347,211 |   |
| Bank owned life insurance                                                     |   |   | 5,917,952 |   |   |   | 5,871,765 |   |
| Other real estate owned                                                       |   |   | 13,505,097 |   |   |   | 12,028,111 |   |
| Other assets                                                                  |   |   | 10,978,196 |   |   |   | 12,058,315 |   |
|                                                                          |   |   |   |   |   |   |   |   |
|                                                                          |   | $ | 608,263,434 |   |   | $ | 591,779,215 |   |
|                                                                          |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                          |   |   |   |   |   |   |   |   |
| Liabilities                                                                   |   |   |   |   |   |   |   |   |
| Deposits                                                                      |   |   |   |   |   |   |   |   |
| Noninterest bearing                                                           |   | $ | 46,035,898 |   |   | $ | 41,036,262 |   |
| Interest bearing                                                              |   |   | 458,923,419 |   |   |   | 457,975,931 |   |
|   Total deposits                                                    |   |   | 504,959,317 |   |   |   | 499,012,193 |   |
| Federal Home Loan Bank advances                                               |   |   | 38,750,000 |   |   |   | 28,750,000 |   |
| Long-term debt - trust preferred securities                                   |   |   | 8,764,000 |   |   |   | 8,764,000 |   |
| Other borrowings                                                              |   |   | 5,241,499 |   |   |   | 4,165,430 |   |
| Accrued interest payable                                                      |   |   | 454,712 |   |   |   | 404,801 |   |
| Other liabilities                                                             |   |   | 1,934,474 |   |   |   | 2,362,597 |   |
| Total liabilities                                                             |   |   | 560,104,002 |   |   |   | 543,459,021 |   |
|                                                                          |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                          |   |   |   |   |   |   |   |   |
| Preferred stock, $4 par value, $1,000 liquidation preference,                 |   |   |   |   |   |   |   |   |
|   1,000,000 shares authorized, 14,738 shares issued and outstanding |   |   | 58,952 |   |   |   | 58,952 |   |
| Common stock, $4 par value - 10,000,000 shares authorized                     |   |   |   |   |   |   |   |   |
|   4,243,378 shares issued and oustanding at March 31, 2011          |   |   |   |   |   |   |   |   |
|   4,238,416 shares issued and outstanding at December 31,2010       |   |   | 16,973,512 |   |   |   | 16,953,664 |   |
| Additional paid-in capital                                                    |   |   | 40,643,345 |   |   |   | 40,633,581 |   |
| Retained earnings (deficit)                                                   |   |   | (9,327,890 | ) |   |   | (9,192,552 | ) |
| Common stock warrant                                                          |   |   | 732,479 |   |   |   | 732,479 |   |
| Discount on preferred stock                                                   |   |   | (456,099 | ) |   |   | (492,456 | ) |
| Accumulated other comprehensive loss                                          |   |   | (464,867 | ) |   |   | (373,474 | ) |
| Total stockholders' equity                                                    |   |   | 48,159,432 |   |   |   | 48,320,194 |   |
|                                                                          |   |   |   |   |   |   |   |   |
|                                                                          |   | $ | 608,263,434 |   |   | $ | 591,779,215 |   |
|                                                                          |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements                   |   |   |   |   |   |   |   |   |

----

| Village Bank and Trust Financial Corp. and Subsidiary       |   |
|-------------------------------------------------------------|--------|
| Consolidated Statements of Income                           |   |
| Three Months Ended March 31, 2011 and 2010                  |   |
| (Unaudited)                                                 |   |
|                                                        |   |   |   |   |   |   |
|                                                        |   |   |   |   |   |   |
|                                                        |   | Three Months Ended March 31, |   |
|                                                        |   | 2011 |   |   | 2010 |   |
| Interest income                                             |   |   |   |   |   |   |
| Loans                                                       |   | $ | 7,040,768 |   |   | $ | 7,089,244 |   |
| Investment securities                                       |   |   | 300,326 |   |   |   | 357,120 |   |
| Federal funds sold                                          |   |   | 18,323 |   |   |   | 14,232 |   |
| Total interest income                                       |   |   | 7,359,417 |   |   |   | 7,460,596 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Interest expense                                            |   |   |   |   |   |   |   |   |
| Deposits                                                    |   |   | 2,038,876 |   |   |   | 2,510,967 |   |
| Borrowed funds                                              |   |   | 282,691 |   |   |   | 533,820 |   |
| Total interest expense                                      |   |   | 2,321,567 |   |   |   | 3,044,787 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Net interest income                                         |   |   | 5,037,850 |   |   |   | 4,415,809 |   |
| Provision for loan losses                                   |   |   | 1,003,000 |   |   |   | 500,000 |   |
| Net interest income after provision for loan losses         |   |   | 4,034,850 |   |   |   | 3,915,809 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Noninterest income                                          |   |   |   |   |   |   |   |   |
| Service charges and fees                                    |   |   | 372,950 |   |   |   | 407,689 |   |
| Gain on sale of loans                                       |   |   | 1,372,678 |   |   |   | 1,171,954 |   |
| Gain on sale of assets                                      |   |   | 63,125 |   |   |   | 242,936 |   |
| Rental income                                               |   |   | 151,937 |   |   |   | 103,671 |   |
| Other                                                       |   |   | 94,518 |   |   |   | 227,720 |   |
| Total noninterest income                                    |   |   | 2,055,208 |   |   |   | 2,153,970 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Noninterest expense                                         |   |   |   |   |   |   |   |   |
| Salaries and benefits                                       |   |   | 3,050,116 |   |   |   | 2,767,389 |   |
| Occupancy                                                   |   |   | 493,224 |   |   |   | 509,918 |   |
| Equipment                                                   |   |   | 220,070 |   |   |   | 217,724 |   |
| Supplies                                                    |   |   | 116,159 |   |   |   | 134,362 |   |
| Professional and outside services                           |   |   | 566,354 |   |   |   | 522,809 |   |
| Advertising and marketing                                   |   |   | 122,839 |   |   |   | 89,626 |   |
| Expenses related to foreclosed real estate                  |   |   | 462,316 |   |   |   | 209,828 |   |
| FDIC insurance premium                                      |   |   | 333,208 |   |   |   | 292,168 |   |
| Other operating expense                                     |   |   | 533,652 |   |   |   | 586,805 |   |
| Total noninterest expense                                   |   |   | 5,897,938 |   |   |   | 5,330,629 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Net income before income taxes                              |   |   | 192,120 |   |   |   | 739,150 |   |
| Income tax expense                                          |   |   | 109,400 |   |   |   | 251,311 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Net income                                                  |   |   | 82,720 |   |   |   | 487,839 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Preferred stock dividends and accretion of discount         |   |   | 218,058 |   |   |   | 217,688 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Net income (loss) available to common shareholders          |   | $ | (135,338 | ) |   | $ | 270,151 |   |
|                                                        |   |   |   |   |   |   |   |   |
| Earnings (loss) per share, basic                            |   | $ | (0.03 | ) |   | $ | 0.06 |   |
| Earnings (loss) per share, diluted                          |   | $ | (0.03 | ) |   | $ | 0.06 |   |
|                                                        |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements |   |   |   |   |   |   |   |   |

----

| Village Bank and Trust Financial Corp. and Subsidiary        |   |
|--------------------------------------------------------------|--------|
| Consolidated Statements of Stockholders' Equity              |   |
| and Comprehensive Income                                     |   |
| Three Months Ended March 31, 2011 and 2010                   |   |
| (Unaudited)                                                  |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                         |   |   |   |   |   |   |   | Additional |   |   | Retained |   |   |   |   |   | Discount on |   |   | Other |   |   |   |   |
|                                                         |   | Preferred |   |   | Common |   |   | Paid-in |   |   | Earnings |   |   |   |   |   | Preferred |   |   | Comprehensive |   |   |   |   |
|                                                         |   | Stock |   |   | Stock |   |   | Capital |   |   | (Deficit) |   |   | Warrant |   |   | Stock |   |   | Income (loss) |   |   | Total |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010                                   |   | $ | 58,952 |   |   | $ | 16,953,664 |   |   | $ | 40,633,581 |   |   | $ | (9,192,552 | ) |   | $ | 732,479 |   |   | $ | (492,456 | ) |   | $ | (373,474 | ) |   | $ | 48,320,194 |   |
| Amortization of preferred stock                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   | - |   |
| discount                                                     |   |   | - |   |   |   |   |   |   |   |   |   |   |   | (36,357 | ) |   |   | - |   |   |   | 36,357 |   |   |   |   |   |   |   | - |   |
| Preferred stock dividend                                     |   |   | - |   |   |   | - |   |   |   |   |   |   |   | (181,701 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (181,701 | ) |
| Issuance of common stock                                     |   |   | - |   |   |   | 19,848 |   |   |   | (19,848 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Stock based compensation                                     |   |   |   |   |   |   |   |   |   |   | 29,612 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 29,612 |   |
| Minimum pension adjustment                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (net of income taxes of $1,105)                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,145 |   |   |   | 2,145 |   |
| Net income                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 82,720 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 82,720 |   |
| Change in unrealized gain on                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| investment securities available-for-sale,                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net of reclassification and tax effect                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (93,538 | ) |   |   | (93,538 | ) |
| Total comprehensive income                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (8,673 | ) |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2011                                      |   | $ | 58,952 |   |   | $ | 16,973,512 |   |   | $ | 40,643,345 |   |   | $ | (9,327,890 | ) |   | $ | 732,479 |   |   | $ | (456,099 | ) |   | $ | (464,867 | ) |   | $ | 48,159,432 |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                                   |   | $ | 58,952 |   |   | $ | 16,922,512 |   |   | $ | 40,568,771 |   |   | $ | (8,647,731 | ) |   | $ | 732,479 |   |   | $ | (636,959 | ) |   | $ | (56,205 | ) |   | $ | 48,941,819 |   |
| Amortization of preferred stock                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   | - |   |
| discount                                                     |   |   | - |   |   |   | - |   |   |   |   |   |   |   | (35,988 | ) |   |   | - |   |   |   | 35,988 |   |   |   |   |   |   |   | - |   |
| Preferred stock dividend                                     |   |   | - |   |   |   | - |   |   |   |   |   |   |   | (181,700 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (181,700 | ) |
| Issuance of common stock                                     |   |   | - |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Stock based compensation                                     |   |   |   |   |   |   |   |   |   |   | 30,044 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 30,044 |   |
| Minimum pension adjustment                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| (net of income taxes of $1,105)                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,145 |   |   |   | 2,145 |   |
| Net income                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 487,839 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 487,839 |   |
| Change in unrealized gain on                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| investment securities available-for-sale,                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net of reclassification and tax effect                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 80,871 |   |   |   | 80,871 |   |
| Total comprehensive income                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 570,855 |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2010                                      |   | $ | 58,952 |   |   | $ | 16,922,512 |   |   | $ | 40,598,815 |   |   | $ | (8,377,580 | ) |   | $ | 732,479 |   |   | $ | (600,971 | ) |   | $ | 26,811 |   |   | $ | 49,361,018 |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements. |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Village Bank and Trust Financial Corp. and Subsidiary                                       |   |
|---------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                                                       |   |
| Three Months Ended March 31, 2011 and 2010                                                  |   |
| (Unaudited)                                                                                 |   |
|                                                                                        |   |   |   |   |   |   |
|                                                                                        |   | 2011 |   |   | 2010 |   |
| Cash Flows from Operating Activities                                                        |   |   |   |   |   |   |
| Net income                                                                                  |   | $ | 82,720 |   |   | $ | 487,839 |   |
| Adjustments to reconcile net income to net                                                  |   |   |   |   |   |   |   |   |
| cash provided by operating activities:                                                      |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                               |   |   | 350,499 |   |   |   | 315,000 |   |
| Deferred income taxes                                                                       |   |   | (3,710,085 | ) |   |   | (4,046,825 | ) |
| Provision for loan losses                                                                   |   |   | 1,003,000 |   |   |   | 500,000 |   |
| Write-down of other real estate owned                                                       |   |   | 362,237 |   |   |   | 43,000 |   |
| Gain on securities sold                                                                     |   |   | (63,125 | ) |   |   | (108,213 | ) |
| Gain on loans sold                                                                          |   |   | (1,372,678 | ) |   |   | (1,171,954 | ) |
| (Gain) loss on sale of premises and equipment                                               |   |   | - |   |   |   | (242,936 | ) |
| Gain on sale of other real estate owned                                                     |   |   | (6,467 | ) |   |   | (68,475 | ) |
| Stock compensation expense                                                                  |   |   | 29,612 |   |   |   | 30,044 |   |
| Proceeds from sale of other real estate owned                                               |   |   | 555,152 |   |   |   | 1,568,051 |   |
| Proceeds from sale of mortgage loans                                                        |   |   | 55,513,663 |   |   |   | 49,053,958 |   |
| Origination of mortgage loans for sale                                                      |   |   | (42,898,800 | ) |   |   | (50,901,191 | ) |
| Amortization of premiums and accrection of discounts on securities, net                     |   |   | 26,737 |   |   |   | 209,813 |   |
| (Increase) decrease in interest receivable                                                  |   |   | (189,750 | ) |   |   | 834,122 |   |
| Increase in bank owned life insurance                                                       |   |   | (46,187 | ) |   |   | (57,250 | ) |
| (Increase) decrease  in other assets                                              |   |   | 4,840,536 |   |   |   | 4,326,703 |   |
| Increase (decrease) in interest payable                                                     |   |   | 49,911 |   |   |   | (17,501 | ) |
| Decrease in other liabilities                                                               |   |   | (428,122 | ) |   |   | (274,734 | ) |
| Net cash used in operating activities                                                       |   |   | 14,098,853 |   |   |   | 479,451 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities                                                        |   |   |   |   |   |   |   |   |
| Purchases of available for sale securities                                                  |   |   | (54,960,337 | ) |   |   | (2,950,740 | ) |
| Proceeds from the sale of calls of available for sale securities                            |   |   | 803,100 |   |   |   | 299,054 |   |
| Proceeds from maturities and principal payments of  available for sale securities |   |   | 25,838,844 |   |   |   | 16,162,000 |   |
| Net increase in loans                                                                       |   |   | 7,211,973 |   |   |   | 154,043 |   |
| Purchases of premises and equipment                                                         |   |   | (329,962 | ) |   |   | (335,423 | ) |
| Proceeds from sale of premises and equipment                                                |   |   | - |   |   |   | 377,321 |   |
| Net cash (used in) provided by investing activities                                         |   |   | (21,436,382 | ) |   |   | 13,706,255 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                                                        |   |   |   |   |   |   |   |   |
| Net increase (decrease)  in deposits                                              |   |   | 5,947,124 |   |   |   | 12,692,158 |   |
| Net increase (decrease) in federal home loan bank advances                                  |   |   | 10,000,000 |   |   |   |   |   |
| Net increase (decrease) in other borrowings                                                 |   |   | 1,076,069 |   |   |   | (358,791 | ) |
| Dividends on preferred stock                                                                |   |   | (181,701 | ) |   |   | (181,700 | ) |
| Net cash provided by financing activities                                                   |   |   | 16,841,492 |   |   |   | 12,151,667 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Net increase in cash and cash equivalents                                                   |   |   | 9,503,963 |   |   |   | 26,337,373 |   |
| Cash and cash equivalents, beginning of period                                              |   |   | 12,012,311 |   |   |   | 20,661,820 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Cash and cash equivalents, end of period                                                    |   |  $ | 21,516,274 |   |   | $ | 46,999,193 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Supplemental Schedule of Non Cash Activities                                                |   |   |   |   |   |   |   |   |
| Real estate owned assets acquired in settlement of loans                                    |   |  $ | 2,387,908 |   |   | $ | 978,635 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                                |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |

----

----

|                                                        |   | Three Months Ended March 31, |      |
|-------------------------------------------------------------|--------|------------------------------|-----------|
|                                                        |   | 2011                         |      |   | 2010 |   |
| Numerator                                                   |   |                         |      |   |   |   |
| Net income (loss) - basic and diluted                       |   | $                            | 82,720    |   |   | $ | 487,839 |   |
| Preferred stock dividend and accretion                      |   |                         | 218,058   |   |   |   | 217,689 |   |
| Net income (loss) available to common                       |   |                         |      |   |   |   |   |   |
| shareholders                                                |   | $                            | (135,338  | ) |   | $ | 270,150 |   |
|                                                        |   |                         |      |   |   |   |   |   |
| Denominator                                                 |   |                         |      |   |   |   |   |   |
| Weighted average shares outstanding - basic                 |   |                         | 4,241,945 |   |   |   | 4,230,628 |   |
| Dilutive effect of common stock options and                 |   |                         |      |   |   |   |   |   |
|       restricted stock awards |   |                         | -         |   |   |   | - |   |
|                                                        |   |                         |      |   |   |   |   |   |
| Weighted average shares outstanding - diluted               |   |                         | 4,241,945 |   |   |   | 4,230,628 |   |
|                                                        |   |                         |      |   |   |   |   |   |
| Earnings (loss) per share - basic and diluted               |   |                         |      |   |   |   |   |   |
| Earnings (loss) per share - basic                           |   | $                            | (0.03     | ) |   | $ | 0.06 |   |
| Effect of dilutive common stock options                     |   |                         | -         |   |   |   | - |   |
|                                                        |   |                         |      |   |   |   |   |   |
| Earnings (loss) per share - diluted                         |   | $                            | (0.03     | ) |   | $ | 0.06 |   |
|                                                        |   |                         |      |   |   |   |   |   |

| Loan Portfolio, Net                                            |   |
|----------------------------------------------------------------|--------|
| (In thousands)                                                 |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   | March 31, 2011 |   |   | December 31, 2010 |   |
|                                                           |   | Amount |   |   | % |   |   | Amount |   |   | % |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                     |   | $ | 35,415 |   |   |   | 8.0 | % |   | $ | 37,228 |   |   |   | 8.2 | % |
| Real estate - Construction, land development & other loans |   |   | 87,933 |   |   |   | 19.9 | % |   |   | 90,773 |   |   |   | 20.0 | % |
| Real estate - Commercial                                       |   |   | 166,207 |   |   |   | 37.5 | % |   |   | 173,227 |   |   |   | 38.2 | % |
| Real estate - 1-4 Residential                                  |   |   | 147,696 |   |   |   | 33.4 | % |   |   | 146,647 |   |   |   | 32.4 | % |
| Consumer                                                       |   |   | 5,469 |   |   |   | 1.2 | % |   |   | 5,368 |   |   |   | 1.2 | % |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                                                    |   |   | 442,720 |   |   |   | 100.0 | % |   |   | 453,243 |   |   |   | 100.0 | % |
| Deferred loan cost (unearned income), net                      |   |   | 666 |   |   |   |   |   |   |   | 624 |   |   |   |   |   |
| Less: Allowance for loan losses                                |   |   | (7,434 | ) |   |   |   |   |   |   | (7,312 | ) |   |   |   |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans, net                                               |   | $ | 435,952 |   |   |   |   |   |   | $ | 446,555 |   |   |   |   |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| ·   | Risk rated 1 to 4 loans are considered of sufficient quality to preclude an adverse rating.  1-4 assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk rated 5 loans are defined as having potential weaknesses that deserve management’s close attention; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | Risk rated 6 loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any, and; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk rated 7 loans have all the weaknesses inherent in substandard loans, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                           |   | Risk Rated |        |   | Risk Rated |   |       | Risk Rated |   |   | Risk Rated |   |   | Total  |    |
|----------------------------------------------------------------|--------|------------|-------------|--------|------------|--------|------------|------------|--------|--------|------------|--------|--------|--------|---------|
|                                                           |   |  1-4  |        |   |  5    |   |       |  6    |   |   |  7    |   |   | Loans  |    |
|                                                           |   |       |        |   |       |   |       |       |   |   |       |   |   |   |    |   |   |   |   |
| Commercial                                                     |   | $          | 28,477,734  |   |       | $      | 2,927,082  |       |   | $      | 3,486,526  |   |   | $      | 523,868 |   |   | $ | 35,415,210 |   |
| Real estate - Construction, land development & other loans |   |       | 59,664,988  |   |       |   | 3,750,564  |       |   |   | 24,516,852 |   |   |   | -       |   |   |   | 87,932,404 |   |
| Real estate - Commercial                                       |   |       | 116,749,553 |   |       |   | 23,635,110 |       |   |   | 25,629,443 |   |   |   | 193,251 |   |   |   | 166,207,357 |   |
| Real estate - 1-4 Residential                                  |   |       | 131,407,250 |   |       |   | 5,892,408  |       |   |   | 10,232,721 |   |   |   | 163,825 |   |   |   | 147,696,204 |   |
| Consumer                                                       |   |       | 4,313,495   |   |       |   | 745,905    |       |   |   | 302,702    |   |   |   | 106,966 |   |   |   | 5,469,068 |   |
|                                                           |   |       |        |   |       |   |       |       |   |   |       |   |   |   |    |   |   |   |   |   |
| Total loans                                                    |   | $          | 340,613,020 |   |       | $      | 36,951,069 |       |   | $      | 64,168,244 |   |   | $      | 987,910 |   |   | $ | 442,720,243 |   |
|                                                           |   |       |        |   |       |   |       |       |   |   |       |   |   |   |    |   |   |   |   |   |

|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        | Recorded        |   |
|----------------------------------------------------------------|--------|------------|------------|--------|------------|--------|-----------|---------|--------|--------|------------|--------|--------|---------|------------|--------|--------|--------|-------------|-----------------|--------|
|                                                           |   |       |       |   |       |   |      | Greater |   |   |       |   |   |    |       |   |   |   |        | Investment > |   |
|                                                           |   | 30-59 Days |       |   | 60-89 Days |   |      | Than    |   |   | Total Past |   |   |    |       |   | Total  |   |        | 90 Days and     |   |
|                                                           |   | Past Due   |       |   | Past Due   |   |      | 90 Days |   |   | Due        |   |   | Current |       |   | Loans  |   |        | Accruing        |   |
|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        |            |   |
| Commercial                                                     |   | $          | 381,958    |   |       | $      | 381,974   |    |   | $      | 11,926     |   |   | $       | 775,858    |   |   | $      | 34,639,352  |            |   | $ | 35,415,210 |   |   | $ | 11,926 |   |
| Real estate - Construction, land development & other loans |   |       | 4,017,664  |   |       |   | 196,564   |    |   |   | -          |   |   |    | 4,214,228  |   |   |   | 83,718,176  |            |   |   | 87,932,404 |   |   |   | - |   |
| Real estate - Commercial                                       |   |       | 3,517,265  |   |       |   | 268,443   |    |   |   | 173,213    |   |   |    | 3,958,921  |   |   |   | 162,248,436 |            |   |   | 166,207,357 |   |   |   | 173,213 |   |
| Real estate - 1-4 Residential                                  |   |       | 5,503,828  |   |       |   | 1,625,973 |    |   |   | 228,175    |   |   |    | 7,357,976  |   |   |   | 140,338,228 |            |   |   | 147,696,204 |   |   |   | 228,175 |   |
| Consumer                                                       |   |       | 106,659    |   |       |   | -         |    |   |   | 26,574     |   |   |    | 133,233    |   |   |   | 5,335,835   |            |   |   | 5,469,068 |   |   |   | 26,574 |   |
|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        |            |   |   |   |   |   |   |   |   |
|      Total                            |   | $          | 13,527,374 |   |       | $      | 2,472,954 |    |   | $      | 439,888    |   |   | $       | 16,440,216 |   |   | $      | 426,280,027 |            |   | $ | 442,720,243 |   |   | $ | 439,888 |   |
|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        |            |   |   |   |   |   |   |   |   |

----

|                                                           |   |        |       |   | Recorded Investment |   |       |           |   |   |       |   |
|----------------------------------------------------------------|--------|-------------|------------|--------|---------------------|--------|------------|----------------|--------|--------|------------|--------|
|                                                           |   | Unpaid      |       |   |                |   |       |           |   |   | Recorded   |   |   |   |   |   |   |   |
|                                                           |   | Contractual |       |   | Total               |   |       | Recorded       |   |   | Investment |   |   |   |   |   | Recorded |   |
|                                                           |   | Principal   |       |   | Recorded            |   |       | Investment     |   |   | With No    |   |   | Related |   |   | Average |   |
| Description of Loans                                           |   | Balance     |       |   | Investment          |   |       | with Allowance |   |   | Allowance  |   |   | Allowance |   |   | Investment |   |
|                                                           |   |        |       |   |                |   |       |           |   |   |       |   |   |   |   |   |   |   |
| Commercial                                                     |   | $           | 3,128,283  |   |                | $      | 2,936,225  |           |   |   |       |   | $ | 2,936,225 |   |   |   |   |   | $ | 2,342,004 |   |
| Real estate - Construction, land development & other loans |   |        | 7,937,685  |   |                |   | 6,793,373  |           |   | $      | 372,155    |   |   |   | 6,421,218 |   |   | $ | 50,000 |   |   |   | 5,726,924 |   |
| Real estate - Commercial                                       |   |        | 2,032,248  |   |                |   | 1,603,604  |           |   |   |       |   |   |   | 1,603,604 |   |   |   |   |   |   |   | 5,589,010 |   |
| Real estate - 1-4 Residential                                  |   |        | 7,096,355  |   |                |   | 6,080,588  |           |   |   | 236,991    |   |   |   | 5,843,597 |   |   |   | 41,500 |   |   |   | 5,153,596 |   |
| Consumer                                                       |   |        | 155,854    |   |                |   | 153,782    |           |   |   | -          |   |   |   | 153,782 |   |   |   | - |   |   |   | 117,295 |   |
|                                                           |   |        |       |   |                |   |       |           |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   | $           | 20,350,425 |   |                | $      | 17,567,572 |           |   | $      | 609,146    |   |   | $ | 16,958,426 |   |   | $ | 91,500 |   |   | $ | 18,928,829 |   |

|                                            |   |       |   |   | Real estate      |   |   |        |   |   |            |   |   |     |   |   |   |   |
|-------------------------------------------------|--------|------------|--------|--------|------------------|--------|--------|-------------|--------|--------|-----------------|--------|--------|----------|--------|--------|--------|--------|
|                                            |   |       |   |   | Construction,    |   |   |        |   |   |            |   |   |     |   |   |   |   |
|                                            |   |       |   |   | land development |   |   | Real estate |   |   | Real estate     |   |   |     |   |   |   |   |
|                                            |   | Commercial |   |   | and other        |   |   | Commercial  |   |   | 1-4 Residential |   |   | Consumer |   |   | Total  |   |
|                                            |   |       |   |   |             |   |   |        |   |   |            |   |   |     |   |   |   |   |
| Balance December 31, 2011                       |   |       | 819    |   |             |   | 2,265  |        |   |   | 2,899           |   |   |     | 1,090  |   |   |   | 239 |   |   |   | 7,312 |   |
|       Charge-offs |   |       | (474   | )      |             |   | (83    | )           |   |   | (327            | )      |   |     | -      |   |   |   | - |   |   |   | (884 | ) |
|       Recoveries  |   |       | 2      |   |             |   | -      |        |   |   |            |   |   |     | 1      |   |   |   | - |   |   |   | 3 |   |
|       Provision   |   |       | 300    |   |             |   | 500    |        |   |   | 203             |   |   |     |   |   |   |   |   |   |   |   | 1,003 |   |
|                                            |   |       |   |   |             |   |   |        |   |   |            |   |   |     |   |   |   |   |   |   |   |   |   |   |
| March 31, 2011                                  |   |       | 647    |   |             |   | 2,682  |        |   |   | 2,775           |   |   |     | 1,091  |   |   |   | 239 |   |   |   | 7,434 |   |
|                                            |   |       |   |   |             |   |   |        |   |   |            |   |   |     |   |   |   |   |   |   |   |   |   |   |
|                                            |   |       |   |   |             |   |   |        |   |   |            |   |   |     |   |   |   |   |   |   |   |   |   |   |
|                                            |   |       |   |   |             |   |   |        |   |   |            |   |   |     |   |   |   |   |   |   |   |   |   |   |
|                                            |   |       |   |   |             |   |   |        |   |   |            |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Balance December 31, 2009                       |   |       | 710    |   |             |   | 3,500  |        |   |   | 4,442           |   |   |     | 355    |   |   |   | 1,515 |   |   |   | 10,522 |   |
|       Charge-offs |   |       | (183   | )      |             |   | (1,881 | )           |   |   | (5,067          | )      |   |     | (191   | )      |   |   | (1,044 | ) |   |   | (8,366 | ) |
|       Recoveries  |   |       | 2      |   |             |   | 121    |        |   |   | 187             |   |   |     | 2      |   |   |   | 2 |   |   |   | 314 |   |
|       Provision   |   |       | 290    |   |             |   | 1,159  |        |   |   | 2,703           |   |   |     | 73     |   |   |   | 617 |   |   |   | 4,842 |   |
|                                            |   |       |   |   |             |   |   |        |   |   |            |   |   |     |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                               |   |       | 819    |   |             |   | 2,899  |        |   |   | 2,265           |   |   |     | 239    |   |   |   | 1,090 |   |   |   | 7,312 |   |

----

| Investment Securities Available-for-Sale |   |
|------------------------------------------|--------|
| (Dollars in thousands)                   |   |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |   |   |   |   |   |   | Gross |   |   | Gross |   |   | Estimated |   |   |   |   |
|                                     |   | Par |   |   | Amortized |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |   | Average |   |
|                                     |   | Value |   |   | Cost |   |   | Gains |   |   | Losses |   |   | Value |   |   | Yield |   |
| March 31, 2011                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Treasuries                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One to five years                        |   | $ | 36,000 |   |   | $ | 36,016 |   |   |   | - |   |   | $ | (67 | ) |   | $ | 35,949 |   |   |   | 0.17 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Government Agencies                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Five to ten years                        |   |   | 6,000 |   |   |   | 5,998 |   |   |   | 1 |   |   |   | (111 | ) |   |   | 5,888 |   |   |   | 2.62 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One to five years                        |   |   | 192 |   |   |   | 203 |   |   |   | - |   |   |   | (7 | ) |   |   | 196 |   |   |   | 2.68 | % |
| Five to ten years                        |   |   | 1,964 |   |   |   | 2,002 |   |   |   | - |   |   |   | (27 | ) |   |   | 1,975 |   |   |   | 2.47 | % |
| More than ten years                      |   |   | 30,489 |   |   |   | 30,893 |   |   |   | 169 |   |   |   | (208 | ) |   |   | 30,854 |   |   |   | 2.89 | % |
| Total                                    |   |   | 32,645 |   |   |   | 33,098 |   |   |   | 169 |   |   |   | (242 | ) |   |   | 33,025 |   |   |   | 2.86 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipals                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| More than ten years                      |   |   | 6,000 |   |   |   | 6,059 |   |   |   | - |   |   |   | (290 | ) |   |   | 5,769 |   |   |   | 4.69 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other investments                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| More than ten years                      |   |   | 1,178 |   |   |   | 1,178 |   |   |   | 1 |   |   |   |   |   |   |   | 1,179 |   |   |   | 0.67 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total investment securities              |   | $ | 81,823 |   |   | $ | 82,349 |   |   | $ | 171 |   |   | $ | (710 | ) |   | $ | 81,810 |   |   |   | 1.76 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Treasuries                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One to five years                        |   | $ | 28,000 |   |   | $ | 28,017 |   |   | $ | - |   |   | $ | - |   |   | $ | 28,017 |   |   |   | 0.22 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Government Agencies                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Five to ten years                        |   |   | 3,000 |   |   |   | 3,000 |   |   |   |   |   |   |   | (111 | ) |   |   | 3,000 |   |   |   | 2.00 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One to five years                        |   |   | 686 |   |   |   | 703 |   |   |   | 31 |   |   |   | (10 | ) |   |   | 734 |   |   |   | 4.90 | % |
| More than ten years                      |   |   | 14,410 |   |   |   | 14,796 |   |   |   | 91 |   |   |   | (58 | ) |   |   | 14,887 |   |   |   | 2.86 | % |
| Total                                    |   |   | 15,096 |   |   |   | 15,499 |   |   |   | 122 |   |   |   | (68 | ) |   |   | 15,621 |   |   |   | 5.39 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipals                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| More than ten years                      |   |   | 6,000 |   |   |   | 6,060 |   |   |   | - |   |   |   | (337 | ) |   |   | 6,060 |   |   |   | 4.69 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other investments                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| More than ten years                      |   |   | 1,418 |   |   |   | 1,418 |   |   |   | - |   |   |   | (3 | ) |   |   | 1,418 |   |   |   | 0.69 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total investment securities              |   | $ | 53,514 |   |   | $ | 53,994 |   |   | $ | 122 |   |   | $ | (519 | ) |   | $ | 54,116 |   |   |   | 2.32 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                       |   | Securities in a loss   |   |   | Securities in a loss   |   |   |       |   |   |       |   |
|----------------------------|--------|------------------------|--------|--------|------------------------|--------|--------|------------|--------|--------|------------|--------|
|                       |   | Position for less than |   |   | Position for more than |   |   |       |   |   |       |   |
|                       |   | 12 Months              |   |   | 12 Months              |   |   | Total      |   |
|                       |   | Fair                   |   |   | Unrealized             |   |   | Fair Value |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| March 31, 2011             |   | Value                  |   |   | Losses                 |   |   | (Loss)     |   |   | Losses     |   |   | Value |   |   | Losses |   |
|                       |   | (in thousands)         |   |
| Investment Securities      |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |
| available for sale         |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |
| US Government Agencies     |   | $                      | 40,337 |   |                   | $      | (178   | )          |   | $      | -          |   |   | $ | - |   |   | $ | 40,337 |   |   | $ | (178 | ) |
| Mortgage-backed securities |   |                   | 19,598 |   |                   |   | (230   | )          |   |   | 396        |   |   |   | (11 | ) |   |   | 19,994 |   |   |   | (241 | ) |
| Municipals                 |   |                   | 5,769  |   |                   |   | (290   | )          |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                      |   | $                      | 65,704 |   |                   | $      | (698   | )          |   | $      | 396        |   |   | $ | (11 | ) |   | $ | 60,331 |   |   | $ | (419 | ) |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   | Securities in a loss   |   |   | Securities in a loss   |   |   |       |   |   |       |   |   |   |
|                       |   | Position for less than |   |   | Position for more than |   |   |       |   |   |       |   |   |   |
|                       |   | 12 Months              |   |   | 12 Months              |   |   | Total      |   |
|                       |   | Fair                   |   |   | Unrealized             |   |   | Fair Value |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                       |   | Value                  |   |   | Losses                 |   |   | (Loss)     |   |   | Losses     |   |   | Value |   |   | Losses |   |
| December 31, 2010          |   | (in thousands)         |   |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment Securities      |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available for sale         |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Treasuries              |   | $                      | 30,286 |   |                   | $      | (114   | )          |   | $      | -          |   |   | $ | - |   |   | $ | 30,286 |   |   | $ | (114 | ) |
| Mortgage-backed securities |   |                   | 7,079  |   |                   |   | (68    | )          |   |   |       |   |   |   |   |   |   |   | 7,079 |   |   |   | (68 | ) |
| Municipals                 |   |                   | 5,723  |   |                   |   | (337   | )          |   |   | -          |   |   |   | - |   |   |   | 5,723 |   |   |   | (337 | ) |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                      |   | $                      | 43,088 |   |                   | $      | (519   | )          |   | $      | -          |   |   | $ | - |   |   | $ | 43,088 |   |   | $ | (519 | ) |
|                       |   |                   |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                               |   | March 31, 2011 |        |   | December 31, 2010 |   |
|------------------------------------|--------|----------------|-------------|--------|-------------------|--------|
|                               |   | Amount         |        |   | %                 |   |   | Amount |   |   | % |   |
|                               |   |           |        |   |              |   |   |   |   |   |   |   |
| Noninterest bearing demand         |   | $              | 46,035,898  |   |              |   | 9.12 | % |   | $ | 41,036,262 |   |   |   | 8.22 | % |
| Interest checking accounts         |   |           | 36,973,233  |   |              |   | 7.32 | % |   |   | 33,291,777 |   |   |   | 6.67 | % |
| Money market accounts              |   |           | 91,235,718  |   |              |   | 18.07 | % |   |   | 90,156,362 |   |   |   | 18.07 | % |
| Savings accounts                   |   |           | 11,828,752  |   |              |   | 2.34 | % |   |   | 10,538,023 |   |   |   | 2.11 | % |
| Time deposits of $100,000 and over |   |           | 141,987,439 |   |              |   | 28.12 | % |   |   | 140,846,619 |   |   |   | 28.23 | % |
| Other time deposits                |   |           | 176,898,277 |   |              |   | 35.03 | % |   |   | 183,143,150 |   |   |   | 36.70 | % |
|                               |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total                              |   | $              | 504,959,317 |   |              |   | 100.00 | % |   | $ | 499,012,193 |   |   |   | 100.00 | % |
|                               |   |           |        |   |              |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                 |   | Three Months Ended March 31, |    |
|----------------------|--------|------------------------------|---------|
|                 |   | 2011                         |    |   | 2010 |   |
|                 |   |                         |    |   | Weighted |   |   |   |   |   |   |   |   |   |   |   | Weighted |   |   |   |   |   |   |   |
|                 |   |                         |    |   | Average |   |   |   |   |   |   |   |   |   |   |   | Average |   |   |   |   |   |   |   |
|                 |   |                         |    |   | Exercise |   |   | Fair Value |   |   | Intrinsic |   |   |   |   |   | Exercise |   |   | Fair Value |   |   | Intrinsic |   |
|                 |   | Options                      |    |   | Price |   |   | Per Share |   |   | Value |   |   | Options |   |   | Price |   |   | Per Share |   |   | Value |   |
|                 |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options outstanding, |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| beginning of period  |   |                         | 310,205 |   |   | $ | 9.48 |   |   | $ | 4.73 |   |   |   |   |   |   | 336,005 |   |   | $ | 9.58 |   |   | $ | 4.75 |   |   |   |   |
| Granted              |   |                         | -       |   |   |   | - |   |   |   | - |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |
| Forfeited            |   |                         | -       |   |   |   | - |   |   |   |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |
| Exercised            |   |                         | -       |   |   |   | - |   |   |   | - |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |
| Options outstanding, |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| end of period        |   |                         | 310,205 |   |   | $ | 9.48 |   |   | $ | 4.73 |   |   | $ | - |   |   |   | 336,005 |   |   | $ | 9.58 |   |   | $ | 4.75 |   |   | $ | - |   |
| Options exercisable, |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| end of period        |   |                         | 291,350 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 300,650 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                 |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| ·   | Level 1 Inputs — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 2Inputs — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 Inputs- Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                             |   | Fair Value Measurement  |   |
|----------------------------------|--------|-------------------------|--------|
|                             |   | at March 31, 2011 Using |   |
|                             |   | (in thousands)          |   |
|                             |   |                    |   |   | Quoted Prices |   |   |   |   |   |   |   |
|                             |   |                    |   |   | in Active |   |   | Other |   |   | Significant |   |
|                             |   |                    |   |   | Markets for |   |   | Observable |   |   | Unobservable |   |
|                             |   | Carrying                |   |   | Identical Assets |   |   | Inputs |   |   | Inputs |   |
|                             |   | Value                   |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Financial Assets - Recurring     |   |                    |   |   |   |   |   |   |   |   |   |   |
| US Treasuries                    |   | $                       | 35,949 |   |   | $ | 35,949 |   |   | $ | - |   |   | $ | - |   |
| US Government Agencies           |   |                    | 5,888  |   |   |   | - |   |   |   | 5,888 |   |   |   | - |   |
| MBS                              |   |                    | 33,025 |   |   |   | - |   |   |   | 33,025 |   |   |   | - |   |
| Municipals                       |   |                    | 5,769  |   |   |   | - |   |   |   | 5,769 |   |   |   | - |   |
| Other available for sale(1)      |   |                    | 1,179  |   |   |   | - |   |   |   | 1,179 |   |   |   | - |   |
|                             |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Assets - Non-Recurring |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans                   |   |                    | 17,568 |   |   |   | - |   |   |   | 9,167 |   |   |   | 8,401 |   |
| Real estate owned                |   |                    | 13,505 |   |   |   | - |   |   |   | - |   |   |   | 13,505 |   |
| Residential loans held for sale  |   |                    | 8,630  |   |   |   | - |   |   |   | 8,630 |   |   |   | - |   |

|                             |   | Fair Value Measurement  |   |
|----------------------------------|--------|-------------------------|--------|
|                             |   | at March 31, 2010 Using |   |
|                             |   | (in thousands)          |   |
|                             |   |                    |   |   | Quoted Prices |   |   |   |   |   |   |   |
|                             |   |                    |   |   | in Active |   |   | Other |   |   | Significant |   |
|                             |   |                    |   |   | Markets for |   |   | Observable |   |   | Unobservable |   |
|                             |   | Carrying                |   |   | Identical Assets |   |   | Inputs |   |   | Inputs |   |
|                             |   | Value                   |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Financial Assets - Recurring     |   |                    |   |   |   |   |   |   |   |   |   |   |
| US Government Agencies           |   | $                       | 33,385 |   |   | $ | - |   |   | $ | 33,385 |   |   | $ | - |   |
| MBS                              |   |                    | 3,903  |   |   |   | - |   |   |   | 3,903 |   |   |   | - |   |
| Municipals                       |   |                    | 2,110  |   |   |   | - |   |   |   | 1,027 |   |   |   | - |   |
| Other available for sale(1)      |   |                    | 1,970  |   |   |   | - |   |   |   | 1,970 |   |   |   | - |   |
|                             |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Assets - Non-Recurring |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans                   |   |                    | 33,255 |   |   |   | - |   |   |   | - |   |   |   | 33,255 |   |
| Real estate owned                |   |                    | 10,715 |   |   |   | - |   |   |   | - |   |   |   | 11,279 |   |
| Residential loans held for sale  |   |                    | 10,525 |   |   |   | - |   |   |   | 10,525 |   |   |   | - |   |
|                             |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Excludes restricted stock.   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                         |   | Impaired       |   |   | Real Estate |   |   |         |   |
|----------------------------------------------|--------|----------------|--------|--------|-------------|--------|--------|--------------|--------|
|                                         |   | Loans          |   |   | Owned       |   |   | Total Assets |   |
|                                         |   | (in thousands) |   |
|                                         |   |           |   |   |        |   |   |         |   |
| Balance at December 31, 2010                 |   | $              | 8,401  |   |        | $      | 12,028 |         |   | $ | 20,429 |   |
|                                         |   |           |   |   |        |   |   |         |   |   |   |   |
| Total realized and unrealized gains (losses) |   |           |   |   |        |   |   |         |   |   |   |   |
| Included in earnings                         |   |           | -      |   |        |   | 6      |         |   |   | 6 |   |
| Included in other comprehensive income       |   |           | -      |   |        |   | -      |         |   |   | - |   |
| Net transfers in and/or out of Level 3       |   |           | 9,167  |   |        |   | 1,471  |         |   |   | 10,638 |   |
|                                         |   |           |   |   |        |   |   |         |   |   |   |   |
| Balance at March 31, 2011                    |   | $              | 17,568 |   |        | $      | 13,505 |         |   | $ | 31,073 |   |
|                                         |   |           |   |   |        |   |   |         |   |   |   |   |

----

|                                     |   | March 31, |        |   | December 31, |   |
|------------------------------------------|--------|-----------|-------------|--------|--------------|--------|
|                                     |   | 2011      |        |   | 2010         |   |
|                                     |   | Carrying  |        |   | Estimated    |   |   | Carrying |   |   | Estimated |   |
|                                     |   | Value     |        |   | Fair Value   |   |   | Value |   |   | Fair Value |   |
|                                     |   |      |        |   |         |   |   |   |   |   |   |   |
| Financial assets                         |   |      |        |   |         |   |   |   |   |   |   |   |
| Cash and cash equivalents                |   | $         | 21,516,274  |   |         | $      | 21,516,274 |   |   | $ | 12,012,311 |   |   | $ | 12,012,311 |   |
| Investment securities available for sale |   |      | 81,810,230  |   |         |   | 81,810,230 |   |   |   | 53,597,174 |   |   |   | 53,597,174 |   |
| Loans held for sale                      |   |      | 8,629,602   |   |         |   | 8,629,602 |   |   |   | 19,871,787 |   |   |   | 19,871,787 |   |
| Loans                                    |   |      | 435,952,207 |   |         |   | 441,171,086 |   |   |   | 446,555,089 |   |   |   | 451,155,101 |   |
| Accrued interest receivable              |   |      | 2,536,961   |   |         |   | 2,536,961 |   |   |   | 2,347,211 |   |   |   | 2,347,211 |   |
|                                     |   |      |        |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities                    |   |      |        |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                 |   |      | 504,959,317 |   |         |   | 506,940,411 |   |   |   | 499,012,193 |   |   |   | 501,222,836 |   |
| FHLB borrowings                          |   |      | 38,750,000  |   |         |   | 38,996,062 |   |   |   | 28,750,000 |   |   |   | 28,883,669 |   |
| Trust preferred securities               |   |      | 8,764,000   |   |         |   | 8,764,000 |   |   |   | 8,764,000 |   |   |   | 8,764,000 |   |
| Other borrowings                         |   |      | 5,241,499   |   |         |   | 5,241,499 |   |   |   | 4,165,430 |   |   |   | 4,165,430 |   |
| Accrued interest payable                 |   |      | 454,712     |   |         |   | 454,712 |   |   |   | 404,801 |   |   |   | 404,801 |   |
|                                     |   |      |        |   |         |   |   |   |   |   |   |   |   |   |   |   |

----

----

----

| ·   | the risks of changes in interest rates on levels, composition and costs of deposits, loan demand, and the values and liquidity of loan collateral, securities, and interest sensitive assets and liabilities; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes in assumptions underlying the establishment of allowances for loan losses, and other estimates; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | changes in market conditions, specifically declines in the residential and commercial real estate market, volatility and disruption of the capital and credit markets, soundness of other financial institutions we do business with; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | risks inherent in making loans such as repayment risks and fluctuating collateral values; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | changes in operations of Village Bank Mortgage Corporation as a result of the activity in the residential real estate market; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | legislative and regulatory changes, including the Financial Reform Act and other changes in banking, securities, and tax laws and regulations and their application by our regulators, and changes in scope and cost of FDIC insurance and other coverages; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | exposure to repurchase loans sold to investors for which borrowers failed to provide full and accurate information on or related to their loan application or for which appraisals have not been acceptable or when the loan was not underwritten in accordance with the loan program specified by the loan investor; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the effects of future economic, business and market conditions; |
|--------------------|-----------------------------------------------------------------|

| ·   | governmental monetary and fiscal policies; |
|--------------------|--------------------------------------------|

| ·   | changes in accounting policies, rules and practices; |
|--------------------|------------------------------------------------------|

| ·   | maintaining capital levels adequate to remain well capitalized; |
|--------------------|-----------------------------------------------------------------|

| ·   | reliance on our management team, including our ability to attract and retain key personnel; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | demand, development and acceptance of new products and services; |
|--------------------|------------------------------------------------------------------|

| ·   | problems with technology utilized by us; |
|--------------------|------------------------------------------|

| ·   | changing trends in customer profiles and behavior; and |
|--------------------|--------------------------------------------------------|

| ·   | other factors described from time to time in our reports filed with the SEC. |
|--------------------|------------------------------------------------------------------------------|

----

----

----

| Quarter Ended      |   |   |
|--------------------|--------|--------|
|               |   |   |
| December 31, 2009  |   | 3.18%  |
| March 31, 2010     |   | 3.26%  |
| June 30, 2010      |   | 3.46%  |
| September 30, 2010 |   | 3.74%  |
| December 31, 2010  |   | 3.84%  |
| March 31, 2011     |   | 3.79%  |

----

----

| Average Balance Sheets                       |   |
|----------------------------------------------|--------|
| (In thousands)                               |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   | Three Months Ended March 31, 2011 |   |   | Three Months Ended March 31, 2010 |   |
|                                         |   |   |   |   | Interest |   |   | Annualized |   |   |   |   |   | Interest |   |   | Annualized |   |
|                                         |   | Average |   |   | Income/ |   |   | Yield |   |   | Average |   |   | Income/ |   |   | Yield |   |
|                                         |   | Balance |   |   | Expense |   |   | Rate |   |   | Balance |   |   | Expense |   |   | Rate |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                        |   | $ | 449,528 |   |   | $ | 6,919 |   |   |   | 6.24 | % |   | $ | 469,676 |   |   | $ | 7,000 |   |   |   | 6.04 | % |
| Investment securities                        |   |   | 46,919 |   |   |   | 300 |   |   |   | 2.59 | % |   |   | 46,280 |   |   |   | 357 |   |   |   | 3.13 | % |
| Loans held for sale                          |   |   | 8,806 |   |   |   | 122 |   |   |   | 5.62 | % |   |   | 7,208 |   |   |   | 89 |   |   |   | 5.01 | % |
| Federal funds and other                      |   |   | 33,456 |   |   |   | 18 |   |   |   | 0.22 | % |   |   | 26,226 |   |   |   | 14 |   |   |   | 0.22 | % |
| Total interest earning assets                |   |   | 538,709 |   |   |   | 7,359 |   |   |   | 5.54 | % |   |   | 549,390 |   |   |   | 7,460 |   |   |   | 5.51 | % |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses and deferred fees  |   |   | (7,308 | ) |   |   |   |   |   |   |   |   |   |   | (10,582 | ) |   |   |   |   |   |   |   |   |
| Cash and due from banks                      |   |   | 8,500 |   |   |   |   |   |   |   |   |   |   |   | 12,031 |   |   |   |   |   |   |   |   |   |
| Premises and equipment, net                  |   |   | 27,454 |   |   |   |   |   |   |   |   |   |   |   | 27,774 |   |   |   |   |   |   |   |   |   |
| Other assets                                 |   |   | 32,483 |   |   |   |   |   |   |   |   |   |   |   | 34,324 |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                 |   | $ | 599,838 |   |   |   |   |   |   |   |   |   |   | $ | 612,937 |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking                            |   | $ | 33,402 |   |   | $ | 63 |   |   |   | 0.76 | % |   | $ | 37,222 |   |   | $ | 135 |   |   |   | 1.47 | % |
| Money market                                 |   |   | 92,997 |   |   |   | 203 |   |   |   | 0.89 | % |   |   | 111,145 |   |   |   | 370 |   |   |   | 1.35 | % |
| Savings                                      |   |   | 11,239 |   |   |   | 20 |   |   |   | 0.72 | % |   |   | 9,391 |   |   |   | 26 |   |   |   | 1.12 | % |
| Certificates                                 |   |   | 319,826 |   |   |   | 1,752 |   |   |   | 2.22 | % |   |   | 309,218 |   |   |   | 1,980 |   |   |   | 2.60 | % |
| Total                                        |   |   | 457,464 |   |   |   | 2,038 |   |   |   | 1.81 | % |   |   | 466,976 |   |   |   | 2,511 |   |   |   | 2.18 | % |
| Borrowings                                   |   |   | 48,547 |   |   |   | 283 |   |   |   | 2.36 | % |   |   | 55,234 |   |   |   | 534 |   |   |   | 3.92 | % |
| Total interest bearing liabilities           |   |   | 506,011 |   |   |   | 2,321 |   |   |   | 1.86 | % |   |   | 522,210 |   |   |   | 3,045 |   |   |   | 2.36 | % |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest bearing deposits                 |   |   | 44,234 |   |   |   |   |   |   |   |   |   |   |   | 38,001 |   |   |   |   |   |   |   |   |   |
| Other liabilities                            |   |   | 1,730 |   |   |   |   |   |   |   |   |   |   |   | 3,430 |   |   |   |   |   |   |   |   |   |
| Total liabilities                            |   |   | 551,975 |   |   |   |   |   |   |   |   |   |   |   | 563,641 |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity capital                               |   |   | 47,864 |   |   |   |   |   |   |   |   |   |   |   | 49,297 |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and capital                |   | $ | 599,839 |   |   |   |   |   |   |   |   |   |   | $ | 612,938 |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income before provision for L/L |   |   |   |   |   | $ | 5,038 |   |   |   |   |   |   |   |   |   |   | $ | 4,415 |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest spread - average yield on interest  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| earning assets, less average rate on         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest bearing liabilities                 |   |   |   |   |   |   |   |   |   |   | 3.68 | % |   |   |   |   |   |   |   |   |   |   | 3.15 | % |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Annualized net interest margin (net          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest income expressed as                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| percentage of average earning assets)        |   |   |   |   |   |   |   |   |   |   | 3.79 | % |   |   |   |   |   |   |   |   |   |   | 3.26 | % |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                       |   | March 31, |   |   | Dec 31, |   |   | Sept 30, |   |   | June 30, |   |   | March 31, |   |
|----------------------------|--------|-----------|--------|--------|---------|--------|--------|----------|--------|--------|----------|--------|--------|-----------|--------|
|                       |   | 2011      |   |   | 2010    |   |   | 2010     |   |   | 2010     |   |   | 2010      |   |
|                       |   |      |   |   |    |   |   |     |   |   |     |   |   |      |   |
| Nonaccrual loans           |   |      |   |   |    |   |   |     |   |   |     |   |   |      |   |
| Number                     |   |      | 97     |   |    |   | 106    |     |   |   | 117      |   |   |      | 132    |   |   |   | 130 |   |
| Amount                     |   | $         | 17,568 |   |    | $      | 20,324 |     |   | $      | 23,943   |   |   | $         | 31,106 |   |   | $ | 33,255 |   |
| Other real estate owned    |   |      | 13,505 |   |    |   | 12,028 |     |   |   | 12,941   |   |   |      | 11,816 |   |   |   | 10,715 |   |
|                       |   |      |   |   |    |   |   |     |   |   |     |   |   |      |   |   |   |   |   |   |
| Nonperforming assets       |   | $         | 31,073 |   |    | $      | 32,352 |     |   | $      | 36,884   |   |   | $         | 42,922 |   |   | $ | 43,970 |   |
|                       |   |      |   |   |    |   |   |     |   |   |     |   |   |      |   |   |   |   |   |   |
| Percentage of total assets |   |      | 5.11   | %      |    |   | 5.47   | %        |   |   | 6.32     | %      |   |      | 7.08   | % |   |   | 7.14 | % |
|                       |   |      |   |   |    |   |   |     |   |   |     |   |   |      |   |   |   |   |   |   |

----

|                                        |   | Mar 31, |   |   | Dec 31, |   |   | Sept 30, |   |   | June 30, |   |   | Mar 31, |   |
|---------------------------------------------|--------|---------|--------|--------|---------|--------|--------|----------|--------|--------|----------|--------|--------|---------|--------|
|                                        |   | 2011    |   |   | 2010    |   |   | 2010     |   |   | 2010     |   |   | 2010    |   |
|                                        |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |
| Loans 90 days past due and                  |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |
| still accruing                              |   | $       | 440    |   |    | $      | 315    |     |   | $      | 738      |   |   | $       | 959    |   |   | $ | 2,535 |   |
|                                        |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
| Restructured loans                          |   |    | 25,932 |   |    |   | 21,695 |     |   |   | 21,703   |   |   |    | 16,722 |   |   |   | 16,737 |   |
|                                        |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
| Nonaccrual loans                            |   |    | 17,568 |   |    |   | 20,324 |     |   |   | 23,943   |   |   |    | 31,106 |   |   |   | 33,255 |   |
|                                        |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
| Other real estate owned                     |   |    | 13,505 |   |    |   | 12,028 |     |   |   | 12,941   |   |   |    | 11,816 |   |   |   | 10,715 |   |
|                                        |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
| Allowance for loan losses                   |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
|   Beginning balance                    |   | $       | 7,312  |   |    | $      | 9,819  |     |   | $      | 9,500    |   |   | $       | 9,091  |   |   | $ | 10,522 |   |
|   Provision for loan losses            |   |    | 1,003  |   |    |   | 1,692  |     |   |   | 1,410    |   |   |    | 1,240  |   |   |   | 500 |   |
|   Charge-offs                          |   |    | (883   | )      |    |   | (4,207 | )        |   |   | (1,091   | )      |   |    | (954   | ) |   |   | (2,114 | ) |
|   Recoveries                           |   |    | 2      |   |    |   | 8      |     |   |   | -        |   |   |    | 123    |   |   |   | 183 |   |
|   Ending balance                       |   | $       | 7,434  |   |    | $      | 7,312  |     |   | $      | 9,819    |   |   | $       | 9,500  |   |   | $ | 9,091 |   |
|                                        |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
| Ratios                                      |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
|   Allowance for loan losses to         |   |    |   |   |    |   |   |     |   |   |     |   |   |    |   |   |   |   |   |   |
|   Loans, net of unearned income   |   |    | 1.68   | %      |    |   | 1.61   | %        |   |   | 2.14     | %      |   |    | 2.05   | % |   |   | 1.96 | % |
|   Nonaccrual loans                     |   |    | 42.32  | %      |    |   | 35.98  | %        |   |   | 41.01    | %      |   |    | 30.54  | % |   |   | 27.34 | % |
|   Nonperforming assets to total assets |   |    | 5.11   | %      |    |   | 5.47   | %        |   |   | 6.32     | %      |   |    | 7.08   | % |   |   | 7.14 | % |

----

| Loan Portfolio, Net                                            |   |
|----------------------------------------------------------------|--------|
| (In thousands)                                                 |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   | March 31, 2011 |   |   | December 31, 2010 |   |
|                                                           |   | Amount |   |   | % |   |   | Amount |   |   | % |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                     |   | $ | 35,415 |   |   |   | 8.0 | % |   | $ | 37,228 |   |   |   | 8.2 | % |
| Real estate - Construction, land development & other loans |   |   | 87,933 |   |   |   | 19.9 | % |   |   | 90,773 |   |   |   | 20.0 | % |
| Real estate - Commercial                                       |   |   | 166,207 |   |   |   | 37.5 | % |   |   | 173,227 |   |   |   | 38.2 | % |
| Real estate - 1-4 Residential                                  |   |   | 147,696 |   |   |   | 33.4 | % |   |   | 146,647 |   |   |   | 32.4 | % |
| Consumer                                                       |   |   | 5,469 |   |   |   | 1.2 | % |   |   | 5,368 |   |   |   | 1.2 | % |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                                                    |   |   | 442,720 |   |   |   | 100.0 | % |   |   | 453,243 |   |   |   | 100.0 | % |
| Deferred loan cost (unearned income), net                      |   |   | 666 |   |   |   |   |   |   |   | 624 |   |   |   |   |   |
| Less: Allowance for loan losses                                |   |   | (7,434 | ) |   |   |   |   |   |   | (7,312 | ) |   |   |   |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans, net                                               |   | $ | 435,952 |   |   |   |   |   |   | $ | 446,555 |   |   |   |   |   |

----

| ·   | Risk rated 1 to 4 loans are considered of sufficient quality to preclude an adverse rating.  1-4 assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk rated 5 loans are defined as having potential weaknesses that deserve management’s close attention; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | Risk rated 6 loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any, and; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk rated 7 loans have all the weaknesses inherent in substandard loans, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                           |   | Risk Rated |        |   | Risk Rated |   |       | Risk Rated |   |   | Risk Rated |   |   | Total  |    |
|----------------------------------------------------------------|--------|------------|-------------|--------|------------|--------|------------|------------|--------|--------|------------|--------|--------|--------|---------|
|                                                           |   |  1-4  |        |   |  5    |   |       |  6    |   |   |  7    |   |   | Loans  |    |
|                                                           |   |       |        |   |       |   |       |       |   |   |       |   |   |   |    |   |   |   |   |
| Commercial                                                     |   | $          | 28,477,734  |   |       | $      | 2,927,082  |       |   | $      | 3,486,526  |   |   | $      | 523,868 |   |   | $ | 35,415,210 |   |
| Real estate - Construction, land development & other loans |   |       | 59,664,988  |   |       |   | 3,750,564  |       |   |   | 24,516,852 |   |   |   | -       |   |   |   | 87,932,404 |   |
| Real estate - Commercial                                       |   |       | 116,749,553 |   |       |   | 23,635,110 |       |   |   | 25,629,443 |   |   |   | 193,251 |   |   |   | 166,207,357 |   |
| Real estate - 1-4 Residential                                  |   |       | 131,407,250 |   |       |   | 5,892,408  |       |   |   | 10,232,721 |   |   |   | 163,825 |   |   |   | 147,696,204 |   |
| Consumer                                                       |   |       | 4,313,495   |   |       |   | 745,905    |       |   |   | 302,702    |   |   |   | 106,966 |   |   |   | 5,469,068 |   |
|                                                           |   |       |        |   |       |   |       |       |   |   |       |   |   |   |    |   |   |   |   |   |
| Total loans                                                    |   | $          | 340,613,020 |   |       | $      | 36,951,069 |       |   | $      | 64,168,244 |   |   | $      | 987,910 |   |   | $ | 442,720,243 |   |
|                                                           |   |       |        |   |       |   |       |       |   |   |       |   |   |   |    |   |   |   |   |   |

|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        | Recorded        |   |
|----------------------------------------------------------------|--------|------------|------------|--------|------------|--------|-----------|---------|--------|--------|------------|--------|--------|---------|------------|--------|--------|--------|-------------|-----------------|--------|
|                                                           |   |       |       |   |       |   |      | Greater |   |   |       |   |   |    |       |   |   |   |        | Investment > |   |
|                                                           |   | 30-59 Days |       |   | 60-89 Days |   |      | Than    |   |   | Total Past |   |   |    |       |   | Total  |   |        | 90 Days and     |   |
|                                                           |   | Past Due   |       |   | Past Due   |   |      | 90 Days |   |   | Due        |   |   | Current |       |   | Loans  |   |        | Accruing        |   |
|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        |            |   |
| Commercial                                                     |   | $          | 381,958    |   |       | $      | 381,974   |    |   | $      | 11,926     |   |   | $       | 775,858    |   |   | $      | 34,639,352  |            |   | $ | 35,415,210 |   |   | $ | 11,926 |   |
| Real estate - Construction, land development & other loans |   |       | 4,017,664  |   |       |   | 196,564   |    |   |   | -          |   |   |    | 4,214,228  |   |   |   | 83,718,176  |            |   |   | 87,932,404 |   |   |   | - |   |
| Real estate - Commercial                                       |   |       | 3,517,265  |   |       |   | 268,443   |    |   |   | 173,213    |   |   |    | 3,958,921  |   |   |   | 162,248,436 |            |   |   | 166,207,357 |   |   |   | 173,213 |   |
| Real estate - 1-4 Residential                                  |   |       | 5,503,828  |   |       |   | 1,625,973 |    |   |   | 228,175    |   |   |    | 7,357,976  |   |   |   | 140,338,228 |            |   |   | 147,696,204 |   |   |   | 228,175 |   |
| Consumer                                                       |   |       | 106,659    |   |       |   | -         |    |   |   | 26,574     |   |   |    | 133,233    |   |   |   | 5,335,835   |            |   |   | 5,469,068 |   |   |   | 26,574 |   |
|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        |            |   |   |   |   |   |   |   |   |
|      Total                            |   | $          | 13,527,374 |   |       | $      | 2,472,954 |    |   | $      | 439,888    |   |   | $       | 16,440,216 |   |   | $      | 426,280,027 |            |   | $ | 442,720,243 |   |   | $ | 439,888 |   |
|                                                           |   |       |       |   |       |   |      |    |   |   |       |   |   |    |       |   |   |   |        |            |   |   |   |   |   |   |   |   |

----

|                                                           |   |        |       |   | Recorded Investment |   |       |           |   |   |       |   |
|----------------------------------------------------------------|--------|-------------|------------|--------|---------------------|--------|------------|----------------|--------|--------|------------|--------|
|                                                           |   | Unpaid      |       |   |                |   |       |           |   |   | Recorded   |   |   |   |   |   |   |   |
|                                                           |   | Contractual |       |   | Total               |   |       | Recorded       |   |   | Investment |   |   |   |   |   | Recorded |   |
|                                                           |   | Principal   |       |   | Recorded            |   |       | Investment     |   |   | With No    |   |   | Related |   |   | Average |   |
| Description of Loans                                           |   | Balance     |       |   | Investment          |   |       | with Allowance |   |   | Allowance  |   |   | Allowance |   |   | Investment |   |
|                                                           |   |        |       |   |                |   |       |           |   |   |       |   |   |   |   |   |   |   |
| Commercial                                                     |   | $           | 3,128,283  |   |                | $      | 2,936,225  |           |   |   |       |   | $ | 2,936,225 |   |   |   |   |   | $ | 2,342,004 |   |
| Real estate - Construction, land development & other loans |   |        | 7,937,685  |   |                |   | 6,793,373  |           |   | $      | 372,155    |   |   |   | 6,421,218 |   |   | $ | 50,000 |   |   |   | 5,726,924 |   |
| Real estate - Commercial                                       |   |        | 2,032,248  |   |                |   | 1,603,604  |           |   |   |       |   |   |   | 1,603,604 |   |   |   |   |   |   |   | 5,589,010 |   |
| Real estate - 1-4 Residential                                  |   |        | 7,096,355  |   |                |   | 6,080,588  |           |   |   | 236,991    |   |   |   | 5,843,597 |   |   |   | 41,500 |   |   |   | 5,153,596 |   |
| Consumer                                                       |   |        | 155,854    |   |                |   | 153,782    |           |   |   | -          |   |   |   | 153,782 |   |   |   | - |   |   |   | 117,295 |   |
|                                                           |   |        |       |   |                |   |       |           |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   | $           | 20,350,425 |   |                | $      | 17,567,572 |           |   | $      | 609,146    |   |   | $ | 16,958,426 |   |   | $ | 91,500 |   |   | $ | 18,928,829 |   |

----

----

| Analysis of Allowance for Loan Losses                                      |   |
|----------------------------------------------------------------------------|--------|
| (in thousands)                                                             |   |
|                                                                       |   |   |   |   |   |   |
|                                                                       |   | Three Months Ended |   |
|                                                                       |   | March 31, |   |
|                                                                       |   | 2011 |   |   | 2010 |   |
|                                                                       |   |   |   |   |   |   |
| Beginning balance                                                          |   | $ | 7,312 |   |   | $ | 10,522 |   |
| Provision for loan losses                                                  |   |   | 1,003 |   |   |   | 500 |   |
| Charge-offs                                                                |   |   |   |   |   |   |   |   |
|   Commercial                                                     |   |   | (327 | ) |   |   | (957 | ) |
|   Real estate - Construction, land development & other loans |   |   | - |   |   |   | (1,034 | ) |
|   Real estate - Commercial                                       |   |   | (474 | ) |   |   | (4 | ) |
|   Real estate - 1-4 Residential                                  |   |   | - |   |   |   | (115 | ) |
|   Consumer                                                       |   |   | (83 | ) |   |   | (4 | ) |
|                                                                       |   |   | (884 | ) |   |   | (2,114 | ) |
| Recoveries                                                                 |   |   |   |   |   |   |   |   |
|   Commercial                                                     |   |   | - |   |   |   | 183 |   |
|   Real estate - Construction, land development & other loans |   |   | - |   |   |   | - |   |
|   Real estate - Commercial                                       |   |   | 2 |   |   |   | - |   |
|   Real estate - 1-4 Residential                                  |   |   | 1 |   |   |   | - |   |
|   Consumer                                                       |   |   | - |   |   |   | - |   |
|                                                                       |   |   | 3 |   |   |   | 183 |   |
| Net charge-offs                                                            |   |   | (881 | ) |   |   | (1,931 | ) |
|                                                                       |   |   |   |   |   |   |   |   |
| Ending balance                                                             |   | $ | 7,434 |   |   | $ | 9,091 |   |
|                                                                       |   |   |   |   |   |   |   |   |
| Loans outstanding at end of year(1)                                        |   | $ | 443,386 |   |   | $ | 464,105 |   |
| Ratio of allowance for loan losses as                                      |   |   |   |   |   |   |   |   |
| a percent of loans outstanding at                                          |   |   |   |   |   |   |   |   |
| end of year                                                                |   |   | 1.68 | % |   |   | 1.96 | % |
|                                                                       |   |   |   |   |   |   |   |   |
| Average loans outstanding for the year(1)                                  |   | $ | 449,528 |   |   | $ | 469,676 |   |
| Ratio of net charge-offs to average loans                                  |   |   |   |   |   |   |   |   |
| outstanding for the year                                                   |   |   | 0.20 | % |   |   | 0.41 | % |
|                                                                       |   |   |   |   |   |   |   |   |
| (1) Loans are net of unearned income.                                      |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |

----

----

| Analysis of Capital                    |   |
|----------------------------------------|--------|
| (in thousands)                         |   |
|                                   |   |   |   |   |   |   |
|                                   |   | March 31, |   |   | December 31, |   |
|                                   |   | 2011 |   |   | 2010 |   |
|                                   |   |   |   |   |   |   |
| Tier 1 capital                         |   |   |   |   |   |   |
| Preferred stock                        |   | $ | 59 |   |   | $ | 59 |   |
| Common stock                           |   |   | 16,974 |   |   |   | 16,954 |   |
| Additional paid-in capital             |   |   | 40,643 |   |   |   | 40,634 |   |
| Retained earnings (deficit)            |   |   | (9,328 | ) |   |   | (9,193 | ) |
| Warrant Surplus                        |   |   | 732 |   |   |   | 732 |   |
| Discount on preferred stock            |   |   | (456 | ) |   |   | (492 | ) |
| Qualifying trust preferred securities  |   |   | 8,764 |   |   |   | 8,764 |   |
| Total equity                           |   |   | 57,388 |   |   |   | 57,458 |   |
| Less: goodwill                         |   |   | - |   |   |   | - |   |
| Total Tier 1 capital                   |   |   | 57,388 |   |   |   | 57,458 |   |
|                                   |   |   |   |   |   |   |   |   |
| Tier 2 capital                         |   |   |   |   |   |   |   |   |
| Allowance for loan losses              |   |   | 5,709 |   |   |   | 5,900 |   |
| Total Tier 2 capital                   |   |   | 5,709 |   |   |   | 5,900 |   |
|                                   |   |   |   |   |   |   |   |   |
| Total risk-based capital               |   |   | 63,097 |   |   |   | 63,358 |   |
|                                   |   |   |   |   |   |   |   |   |
| Risk-weighted assets                   |   | $ | 461,508 |   |   | $ | 470,662 |   |
|                                   |   |   |   |   |   |   |   |   |
| Average assets                         |   | $ | 574,028 |   |   | $ | 596,765 |   |
|                                   |   |   |   |   |   |   |   |   |
| Capital ratios                         |   |   |   |   |   |   |   |   |
| Leverage ratio (Tier 1 capital to      |   |   |   |   |   |   |   |   |
| average assets)                        |   |   | 10.00 | % |   |   | 9.63 | % |
| Tier 1 capital to risk-weighted assets |   |   | 12.43 | % |   |   | 12.21 | % |
| Total capital to risk-weighted assets  |   |   | 13.67 | % |   |   | 13.46 | % |
| Equity to total assets                 |   |   | 7.92 | % |   |   | 8.17 | % |
|                                   |   |   |   |   |   |   |   |   |

----

----

| Village Bank and Trust Financial Corp.                                                                                 |   |
|------------------------------------------------------------------------------------------------------------------------|--------|
| Interest Rate Sensitivity GAP Analysis                                                                                 |   |
| March 31, 2011                                                                                                         |   |
| (in thousands)                                                                                                         |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   | Within 3 |   |   | 3 to 6 |   |   | 6 to 12 |   |   | 13 to 36 |   |   | More than |   |   |   |   |
|                                                                                                                   |   | Months |   |   | Months |   |   | Months |   |   | Months |   |   | 36 Months |   |   | Total |   |
| Interest Rate Sensitive Assets                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed rate                                                                                                             |   | $ | 21,820 |   |   | $ | 13,206 |   |   | $ | 33,748 |   |   | $ | 35,785 |   |   | $ | 132,148 |   |   | $ | 236,707 |   |
| Variable rate                                                                                                          |   |   | 101,749 |   |   |   | 5,063 |   |   |   | 9,745 |   |   |   | 23,501 |   |   |   | 65,955 |   |   |   | 206,013 |   |
| Investment securities                                                                                                  |   |   | 32,000 |   |   |   | - |   |   |   | 83 |   |   |   | 29 |   |   |   | 49,698 |   |   |   | 81,810 |   |
| Loans held for sale                                                                                                    |   |   | 8,630 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 8,630 |   |
| Federal funds sold                                                                                                     |   |   | 8,751 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 8,751 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total rate sensitive assets                                                                                            |   |   | 172,950 |   |   |   | 18,269 |   |   |   | 43,576 |   |   |   | 59,315 |   |   |   | 247,801 |   |   |   | 541,911 |   |
| Cumulative rate sensitive assets                                                                                       |   |   | 172,950 |   |   |   | 191,219 |   |   |   | 234,795 |   |   |   | 294,110 |   |   |   | 541,911 |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Rate Sensitive Liabilities                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking (2)                                                                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 36,973 |   |   |   | - |   |   |   | 36,973 |   |
| Money market accounts                                                                                                  |   |   | 91,236 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 91,236 |   |
| Savings (2)                                                                                                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 11,829 |   |   |   | - |   |   |   | 11,829 |   |
| Certificates of deposit                                                                                                |   |   | 61,957 |   |   |   | 41,078 |   |   |   | 61,365 |   |   |   | 101,389 |   |   |   | 53,097 |   |   |   | 318,886 |   |
| FHLB advances                                                                                                          |   |   | 5,000 |   |   |   | 1,000 |   |   |   | 1,000 |   |   |   | 18,750 |   |   |   | 13,000 |   |   |   | 38,750 |   |
| Trust Preferred Securities                                                                                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 8,764 |   |   |   | 8,764 |   |
| Federal funds purchased                                                                                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other borrowings                                                                                                       |   |   | 5,241 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,241 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total rate sensitive liabilities                                                                                       |   |   | 163,434 |   |   |   | 42,078 |   |   |   | 62,365 |   |   |   | 168,941 |   |   |   | 74,861 |   |   |   | 511,679 |   |
| Cumulative rate sensitive liabilities                                                                                  |   |   | 163,434 |   |   |   | 205,512 |   |   |   | 267,877 |   |   |   | 436,818 |   |   |   | 511,679 |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rate sensitivity gap for period                                                                                        |   | $ | 9,516 |   |   | $ | (23,809 | ) |   | $ | (18,789 | ) |   | $ | (109,626 | ) |   | $ | 172,940 |   |   | $ | 30,232 |   |
| Cumulative rate sensitivity gap                                                                                        |   | $ | 9,516 |   |   | $ | (14,293 | ) |   | $ | (33,082 | ) |   | $ | (142,708 | ) |   | $ | 30,232 |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of cumulative gap to total assets                                                                                |   |   | 1.6 | % |   |   | (2.4 | )% |   |   | (5.4 | )% |   |   | (23.5 | )% |   |   | 5.0 | % |   |   |   |   |
| Ratio of cumulative rate sensitive                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets to cumulative rate sensitive                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| liabilities                                                                                                            |   |   | 105.8 | % |   |   | 93.0 | % |   |   | 87.7 | % |   |   | 67.3 | % |   |   | 105.9 | % |   |   |   |   |
| Ratio of cumulative gap to cumulative                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| rate sensitive assets                                                                                                  |   |   | 5.5 | % |   |   | (7.5 | )% |   |   | (14.1 | )% |   |   | (48.5 | )% |   |   | 5.6 | % |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Includes nonaccrual loans of approximately $17,568,000, which are spread throughout the categories.                |   |   |   |   |   |   |   |   |   |
| (2) Management believes that interest checking and savings accounts are generally not sensitive to changes in interest |   |   |   |   |   |   |   |   |   |
| rates and therefore has placed such deposits in the "13 to 36 months" category.                                        |   |   |   |   |   |   |   |   |   |

----

----

----

----

----

|   | 31.1 | Certification of Chief Executive Officer |
|--------|------|------------------------------------------|

|   | 31.2 | Certification of Chief Financial Officer |
|--------|------|------------------------------------------|

|   | 32.1 | Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
|--------|------|-----------------------------------------------------------------------------------------------------|

----

|                     | VILLAGE BANK AND TRUST FINANCIAL CORP. |                       |
|--------------------------|----------------------------------------|----------------------------|
|                     | (Registrant)                           |                       |
|                     |                                   |                       |   |
| Date:  May 13, 2011 | By:                                    | /s/ Thomas W. Winfree |   |
|                     |                                   | Thomas W. Winfree     |   |
|                     |                                   | President and              |   |
|                     |                                   | Chief Executive Officer    |   |

|                     |   |                               |   |
|--------------------------|--------|------------------------------------|--------|
| Date:  May 13, 2011 | By:    | /s/ C. Harril Whitehurst, Jr. |   |
|                     |   | Senior Vice President and          |   |
|                     |   | Chief Financial Officer            |   |
|                     |   |                               |   |

----

| Exhibit  |   |
|---------------|--------|

| Number | Document |
|--------|----------|

|    32.1 | Statement of Chief Executive Officer and Chief Financial Officer |
|------------------------|------------------------------------------------------------------|

|   | Pursuant to 18 U.S.C. Section 1350 |
|--------|------------------------------------|

----