----

| Virginia                                                   |       | 16-1694602          |
|------------------------------------------------------------|------------|---------------------|
| (State or other jurisdiction of                            |       | (I.R.S. Employer    |
| incorporation or organization)                             |       | Identification No.) |
|                                                       |       |                |
| 15521 Midlothian Turnpike, Midlothian, Virginia            | 23113      |
| Address of principal executive offices)                    | (Zip code) |
|                                                       |       |
| 804-897-3900                                               |
| (Registrant’s telephone number, including area code) |

----

| Part I – Financial Information |
|--------------------------------------|

|                              | Item 1. Financial Statements                                                                                                                                                                |   |
|-----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                              |                                                                                                                                                                                        |   |
|                              | Consolidated Balance Sheets                                                                                                                                                                 |   |
|                              | June 30, 2010 (unaudited) and December 31, 2009                                                                                                                                             | 3      |
|                              |                                                                                                                                                                                        |   |
|                              | Consolidated Statements of Income                                                                                                                                                           |   |
|                              | For the Three and Six Months Ended                                                                                                                                                          |   |
|                              | June 30, 2010 and 2009 (unaudited)                                                                                                                                                          | 4      |
|                              |                                                                                                                                                                                        |   |
|                              | Consolidated Statements of Stockholders’ Equity                                                                                                                                       |   |
|                              | For the Six Months Ended                                                                                                                                                                    |   |
|                              | June 31, 2010 and 2009 (unaudited                                                                                                                                                           | 5      |
|                              |                                                                                                                                                                                        |   |
|                              | Consolidated Statements of Cash Flows                                                                                                                                                       |   |
|                              | For the Six Months Ended                                                                                                                                                                    |   |
|                              | June 30, 2010 and 2009 (unaudited                                                                                                                                                           | 6      |
|                              |                                                                                                                                                                                        |   |
|                              | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                                                                            | 7      |
|                              |                                                                                                                                                                                        |   |
|                              | Item 2.  Management’s Discussion and Analysis of Financial Condition             and Results of Operations | 18     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                                                                                               | 36     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 4T.  Controls and Procedures                                                                                                                                                 | 36     |
|                              |                                                                                                                                                                                        |   |
| Part II – Other Information |                                                                                                                                                                                        |
|                              |                                                                                                                                                                                        |   |
|                              | Item 1.  Legal Proceedings                                                                                                                                                        | 37     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 1A.  Risk Factors                                                                                                                                                            | 37     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                              | 38     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 3.  Defaults Upon Senior Securities                                                                                                                                          | 38     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 4.  (Removed and Reserved)                                                                                                                                                   | 38     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 5.  Other Information                                                                                                                                                        | 38     |
|                              |                                                                                                                                                                                        |   |
|                              | Item 6.  Exhibits                                                                                                                                                                 | 38     |
|                              |
| Signatures                        | 39                                                                                                                                                                                          |

----

| Village Bank and Trust Financial Corp. and Subsidiary |
|-------------------------------------------------------|
| Consolidated Balance Sheets                           |
| June 30, 2010 (Unaudited) and December 31, 2009       |
|                                                                    |   |              |   |                                                   |
|-------------------------------------------------------------------------|--------|-------------------|--------|--------------------------------------------------------|
|                                                                    |   | June 30,          |   | December 31,                                           |
|                                                                    |   | 2010              |   |         2009 * |
| Assets                                                                  |   |              |   |                                                   |
| Cash and due from banks                                                 | $      |  31,335,272  | $      |  13,884,581                                       |
| Federal funds sold                                                      |   |  12,037,402  |   |  6,777,239                                        |
| Investment securities available for sale                                |   |  24,199,460  |   |  54,857,211                                       |
| Loans held for sale                                                     |   |  23,473,948  |   |  7,506,252                                        |
| Loans                                                                   |   |              |   |                                                   |
| Outstandings                                                            |   |  463,499,004 |   |  467,359,664                                      |
| Allowance for loan losses                                               |   |  (9,499,964) |   |  (10,521,931)                                     |
| Deferred costs                                                          |   |  474,467     |   |  208,883                                          |
|                                                                    |   |  454,473,507 |   |  457,046,616                                      |
| Premises and equipment, net                                             |   |  27,630,756  |   |  27,799,084                                       |
| Accrued interest receivable                                             |   |  2,610,181   |   |  3,366,718                                        |
| Bank owned life insurance                                               |   |  5,772,771   |   |  5,431,002                                        |
| Other real estate owned                                                 |   |  11,815,767  |   |  11,278,532                                       |
| Other assets                                                            |   |  13,149,467  |   |  14,046,120                                       |
|                                                                    |   |              |   |                                                   |
|                                                                    | $      |  606,498,531 | $      |  601,993,355                                      |
|                                                                    |   |              |   |                                                   |
| Liabilities and Stockholders' Equity                                    |   |              |   |                                                   |
| Liabilities                                                             |   |              |   |                                                   |
| Deposits                                                                | $      |  503,536,765 | $      |  498,285,124                                      |
| Trust preferred securities                                              |   |  8,764,000   |   |  8,764,000                                        |
| Federal home loan bank advances                                         |   |  28,750,000  |   |  29,000,000                                       |
| Other borrowings                                                        |   |  13,935,488  |   |  14,829,521                                       |
| Accrued interest payable                                                |   |  450,540     |   |  501,069                                          |
| Other liabilities                                                       |   |  2,463,838   |   |  2,765,550                                        |
| Total liabilities                                                       |   |  557,900,631 |   |  554,145,264                                      |
|                                                                    |   |              |   |                                                   |
| Stockholders' equity                                                    |   |              |   |                                                   |
| Preferred stock, $4 par value, $1,000 liquidation preference,           |   |  58,952      |   |  58,952                                           |
|  1,000,000 shares authorized, 14,738 shares issued and outstanding |   |              |   |                                                   |
| Common stock, $4 par value - 10,000,000 shares authorized;              |   |  16,953,664  |   |  16,922,512                                       |
|  4,238,416 shares issued and outstanding at June 30, 2010          |   |              |   |                                                   |
|  and 4,230,628 at December 31, 2009                                |   |              |   |                                                   |
| Additional paid-in capital                                              |   |  40,587,801  |   |  40,568,771                                       |
| Retained earnings deficit                                               |   |  (9,231,328) |   |  (9,741,459)                                      |
| Warrant Surplus                                                         |   |  732,479     |   |  732,479                                          |
| Discount on preferred stock                                             |   |  (564,891)   |   |  (636,959)                                        |
| Accumulated other comprehensive income (loss)                           |   |  61,223      |   |  (56,205)                                         |
| Total stockholders' equity                                              |   |  48,597,900  |   |  47,848,091                                       |
|                                                                    |   |              |   |                                                   |
|                                                                    | $      |  606,498,531 | $      |  601,993,355                                      |

|                                                                                                     |   |   |   |   |   |
|----------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| *  Certain December 31, 2009 amounts have been revised.  See Note 2 to the condensed |   |   |   |
| consolidated financial statements                                                                        |   |   |   |   |   |
|                                                                                                     |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                                             |   |   |   |   |   |

----

| Village Bank and Trust Financial Corp. and Subsidiary       |
|-------------------------------------------------------------|
| Consolidated Statements of Income                           |
| For the Three and Six Months Ended June 30, 2010 and 2009   |
|                                                        |   |   |   |   |   |   |   |   |
|                                                        |   | Three Months Ended June 30, |   | Six Months Ended June 30, |
|                                                        |   | 2010 |   | 2009 |   | 2010 |   | 2009 |
| Interest income                                             |   |   |   |   |   |   |   |   |
| Loans                                                       |   $ |  7,214,558 |   $ |  8,136,161 |   $ |  14,303,802 |   $ |  16,145,858 |
| Investment securities                                       |   |  285,797 |   |  286,519 |   |  642,917 |   |  622,977 |
| Federal funds sold                                          |   |  16,004 |   |  5,136 |   |  30,236 |   |  12,409 |
| Total interest income                                       |   |  7,516,359 |   |  8,427,816 |   |  14,976,955 |   |  16,781,244 |
|                                                        |   |   |   |   |   |   |   |   |
| Interest expense                                            |   |   |   |   |   |   |   |   |
| Deposits                                                    |   |  2,278,519 |   |  3,824,352 |   |  4,789,486 |   |  7,827,808 |
| Borrowed funds                                              |   |  536,244 |   |  435,569 |   |  1,070,064 |   |  878,874 |
| Total interest expense                                      |   |  2,814,763 |   |  4,259,921 |   |  5,859,550 |   |  8,706,682 |
|                                                        |   |   |   |   |   |   |   |   |
| Net interest income                                         |   |  4,701,596 |   |  4,167,895 |   |  9,117,405 |   |  8,074,562 |
| Provision for loan losses                                   |   |  1,240,000 |   |  3,100,000 |   |  1,740,000 |   |  4,200,000 |
| Net interest income after provision                         |   |   |   |   |   |   |   |   |
| for loan losses                                             |   |  3,461,596 |   |  1,067,895 |   |  7,377,405 |   |  3,874,562 |
|                                                        |   |   |   |   |   |   |   |   |
| Noninterest income                                          |   |   |   |   |   |   |   |   |
| Service charges and fees                                    |   |  515,293 |   |  452,636 |   |  890,573 |   |  825,755 |
| Gain on sale of loans                                       |   |  1,633,861 |   |  1,509,971 |   |  2,838,224 |   |  2,453,087 |
| Gain (loss) on sale of assets                               |   |  489,162 |   |  (38,234) |   |  840,941 |   |  (37,873) |
| Rental income                                               |   |  109,831 |   |  40,349 |   |  213,502 |   |  82,019 |
| Other                                                       |   |  238,578 |   |  71,022 |   |  358,085 |   |  169,141 |
| Total noninterest income                                    |   |  2,986,725 |   |  2,035,744 |   |  5,141,325 |   |  3,492,129 |
|                                                        |   |   |   |   |   |   |   |   |
| Noninterest expense                                         |   |   |   |   |   |   |   |   |
| Salaries and benefits                                       |   |  2,987,115 |   |  2,558,276 |   |  5,754,504 |   |  5,022,890 |
| Occupancy                                                   |   |  472,227 |   |  417,457 |   |  982,145 |   |  861,500 |
| Equipment                                                   |   |  220,760 |   |  202,305 |   |  439,114 |   |  457,924 |
| Supplies                                                    |   |  116,824 |   |  124,773 |   |  251,186 |   |  250,598 |
| Professional and outside services                           |   |  493,810 |   |  456,108 |   |  1,016,619 |   |  891,749 |
| Advertising and marketing                                   |   |  136,034 |   |  86,675 |   |  225,660 |   |  158,170 |
| Other real estate owned expenses                            |   |  471,508 |   |  905,592 |   |  681,336 |   |  945,515 |
| Other operating expense                                     |   |  853,406 |   |  1,052,343 |   |  1,732,379 |   |  1,592,081 |
| Total noninterest expense                                   |   |  5,751,684 |   |  5,803,529 |   |  11,082,943 |   |  10,180,427 |
|                                                        |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes                       |   |  696,637 |   |  (2,699,890) |   |  1,435,787 |   |  (2,813,736) |
| Income tax expense (benefit)                                |   |  236,856 |   |  (917,962) |   |  488,167 |   |  (956,671) |
|                                                        |   |   |   |   |   |   |   |   |
| Net income (loss)                                           |   |  459,781 |   |  (1,781,928) |   |  947,620 |   |  (1,857,065) |
|                                                        |   |   |   |   |   |   |   |   |
| Preferred stock dividends and amortization of discount      |   |  219,754 |   |  123,153 |   |  437,489 |   |  123,153 |
| Net income (loss) available to common                       |   |   |   |   |   |   |   |   |
| shareholders                                                |   $ |  240,027 |   $ |   (1,905,081) |   $ |  $ 510,131 |   $ |  (1,980,218) |
|                                                        |   |   |   |   |   |   |   |   |
| Earnings (loss) per share, basic                            |   $ |         0.06 |   $ |           (0.45) |   $ |         0.12 |   $ |           (0.47) |
| Earnings (loss) per share, diluted                          |  $ |          0.06 |   $ |          (0.45) |   $ |         0.12 |   $ |           (0.47) |
|                                                        |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements |   |   |   |   |   |   |

----

| Village Bank and Trust Financial Corp. and Subsidiary                                                                                                 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| Consolidated Statements of Stockholders' Equity                                                                                                       |
| For the Six Months Ended June 30, 2010 and 2009                                                                                                       |
|                                                                                                                                                  |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |
|                                                                                                                                                  |   |   |   |   |   | Additional |   | Retained |   |   |   | Discount on |   | Other |   |   |
|                                                                                                                                                  |   | Prefered |   | Common |   | Paid-in |   | Earnings |   |   |   | Preferred |   | Comprehensive |   |   |
|                                                                                                                                                  |   | Stock |   | Stock |   | Capital |   | (Deficit) |   | Warrant |   |  Stock |   | Income (loss) |   | Total |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009 *                                                                                                                          |   $ |  58,952 |   $ |  16,922,512 |   $ |  40,568,771 |   $ |  (9,741,459) |   $ |  732,479 |   $ |  (636,959) |   $ |  (56,205) |   $ |  47,848,091 |
| Amortization of preferred stock                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         discount                                                                                              |   |  - |   |  - |   |  - |   |  (72,068) |   |  - |   |  72,068 |   |  - |   |  - |
| Preferred stock dividend                                                                                                                              |   |  - |   |  - |   |  - |   |  (365,421) |   |  - |   |  - |   |  - |   |  (365,421) |
| Issuance of common stock                                                                                                                              |   |  - |   |  31,152 |   |  (31,152) |   |  - |   |  - |   |  - |   |  - |   |  - |
| Stock based compensation                                                                                                                              |   |  - |   |  - |   |  50,182 |   |  - |   |  - |   |  - |   |  - |   |  50,182 |
| Net income                                                                                                                                            |   |  - |   |  - |   |  - |   |  947,620 |   |  - |   |  - |   |  - |   |  947,620 |
| Minimum pension adjustment                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        (net of income taxes of 2,210)                                                                              |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |   |  4,290 |   |  4,290 |
| Change in unrealized gain                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (loss) on securities                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available for sale (net of                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income  taxes of $58,283)                                                                                                                   |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |   |  113,138 |   |  113,138 |
| Total comprehensive                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income (loss)                                                                                                                                         |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |   |  1,065,048 |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2010                                                                                                                                |   $ |  58,952 |   $ |  16,953,664 |   $ |  40,587,801 |   $ |  (9,231,328) |   $ |  732,479 |   $ |  (564,891) |   $ |  61,223 |   $ |  48,597,900 |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                                                                                                                            |   $ |  - |   $ |  16,917,488 |   $ |  25,737,048 |   $ |  3,453,788 |   $ |  - |   $ |  - |   $ |  54,250 |   $ |  46,162,574 |
| Issuance of preferred stock                                                                                                                           |   |  58,952 |   |   |   |  14,679,048 |   |  - |   |  732,479 |   |  (732,479) |   |   |   |  14,738,000 |
| Amortization of preferred stock                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         discount                                                                                              |   |  - |   |  - |   |  - |   |  (23,818) |   |  - |   |  23,818 |   |  - |   |  - |
| Preferred stock dividend                                                                                                                              |   |  - |   |  - |   |  - |   |  (123,153) |   |  - |   |  - |   |  - |   |  (123,153) |
| Issuance of common stock                                                                                                                              |   |  - |   |  5,024 |   |  (5,024) |   |  - |   |  - |   |  - |   |  - |   |  - |
| Stock based compensation                                                                                                                              |   |  - |   |  - |   |  87,260 |   |  - |   |  - |   |  - |   |  - |   |  87,260 |
| Net income (loss)                                                                                                                                     |   |  - |   |  - |   |  - |   |  (1,857,066) |   |  - |   |  - |   |  - |   |  (1,857,066) |
| Minimum pension adjustment                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        (net of income taxes of $1,459)                                                                             |   |  - |   |  - |   |  - |   |  - |   |   |   |   |   |  4,290 |   |  4,290 |
| Change in unrealized gain                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (loss) on securities                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available for sale (net of income                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  taxes of $54,089)                                                                                                                               |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |   |  (130,186) |   |  (130,186) |
| Total comprehensive                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income (loss)                                                                                                                                         |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |   |  (1,982,962) |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2009                                                                                                                                |   $ |  58,952 |   $ |  16,922,512 |   $ |  40,498,332 |   $ |  1,449,751 |   $ |  $732,479 |   $ |  (708,661) |   $ |  (71,646) |   $ |  $58,881,719 |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *  Certain December  31, 2009 amounts have been revised.  See Note 2 to the condensed consolidated financial statements |   |   |   |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Village Bank and Trust Financial Corp. and Subsidiary                   |
|-------------------------------------------------------------------------|
| Consolidated Statements of Cash Flows                                   |
| Six Months Ended June 30, 2010 and 2009                                 |
|                                                                    |   |   |   |   |
|                                                                    |   | 2010 |   | 2009 |
| Cash Flows from Operating Activities                                    |   |   |   |   |
| Net income (loss)                                                       | $ |  947,620 | $ |  (1,857,066) |
| Adjustments to reconcile net income to net                              |   |   |   |   |
| cash provided by (used in) operating activities:                        |   |   |   |   |
| Depreciation and amortization                                           |   |  641,674 |   |  619,533 |
| Provision for loan losses                                               |   |  1,740,000 |   |  4,200,000 |
| Write-down of other real estate owned                                   |   |  93,000 |   |  - |
| Gain on securities                                                      |   |  (597,375) |   |  (8,061) |
| Gain on loans sold                                                      |   |  (2,838,224) |   |  (2,453,087) |
| Gain on sale of premises and equipment                                  |   |  (242,936) |   |  (37,872) |
| Gain on sale of other real estate owned                                 |   |  (40,384) |   |  - |
| Stock compensation expense                                              |   |  50,182 |   |  87,260 |
| Proceeds from sale of mortgage loans                                    |   |  115,654,593 |   |  114,618,514 |
| Origination of mortgage loans for sale                                  |   |  (128,785,065) |   |  (127,359,964) |
| Amortization of premiums and accrection of discounts on securities, net |   |  290,210 |   |  24,444 |
| Decrease in interest receivable                                         |   |  756,537 |   |  343,678 |
| Increase in bank owned life insurance                                   |   |  (341,769) |   |  (41,759) |
| (Increase) decrease  in other assets                          |   |  842,660 |   |  (1,792,852) |
| Decrease in interest payable                                            |   |  (50,529) |   |  (191,957) |
| Decrease in other liabilities                                           |   |  (301,712) |   |  (257,514) |
| Net cash used in operating activities                                   |   |  (12,181,518) |   |  (14,106,703) |
|                                                                    |   |   |   |   |
| Cash Flows from Investing Activities                                    |   |   |   |   |
| Purchases of available for sale securities                              |   |  (6,859,145) |   |  (6,230,297) |
| Maturities and calls of available for sale securities                   |   |  36,670,662 |   |  9,395,167 |
| Proceeds from the sale and calls of available for sale securities       |   |  1,324,821 |   |  500,775 |
| Proceeds from sale of other real estate owned                           |   |  2,212,801 |   |  - |
| Net increase in loans                                                   |   |  (1,968,543) |   |  (10,072,343) |
| Purchases of premises and equipment                                     |   |  (607,731) |   |  (574,454) |
| Proceeds from sale of premises and equipment                            |   |  377,321 |   |  406,516 |
| Net cash provided by (used in) investing activities                     |   |  31,150,185 |   |  (6,574,636) |
|                                                                    |   |   |   |   |
| Cash Flows from Financing Activities                                    |   |   |   |   |
| Issuance of preferred stock                                             |   |  - |   |  14,738,000 |
| Net increase in deposits                                                |   |  5,251,641 |   |  17,431,308 |
| Net decrease in federal home loan bank advances                         |   |  (250,000) |   |   |
| Net decrease in other borrowings                                        |   |  (894,033) |   |  (7,529,907) |
| Dividends on preferred stock                                            |   |  (365,421) |   |  (123,153) |
| Net cash provided by financing activities                               |   |  3,742,187 |   |  24,516,248 |
|                                                                    |   |   |   |   |
| Net increase in cash and cash equivalents                               |   |  22,710,854 |   |  3,834,909 |
| Cash and cash equivalents, beginning of period                          |   |  20,661,820 |   |  26,600,829 |
|                                                                    |   |   |   |   |
| Cash and cash equivalents, end of period                                | $ |  43,372,674 | $ |  30,435,738 |
|                                                                    |   |   |   |   |
| Supplemental Schedule of Non Cash Activities                            |   |   |   |   |
| Real estate owned assets acquired in settlement of loans                | $ |  2,801,652 | $ |  3,743,473 |
|                                                                    |   |   |   |   |
| See accompanying notes to consolidated financial statements.            |   |   |   |   |

----

----

|                      |   | December 31, 2009 |
|---------------------------|--------|-------------------|
|                      |   | As Reported       |   | Adjustment |   | As Revised |
|                      |   |              |   |   |   |   |
| Other assets              | $      |  15,015,708  | $ |  (969,588) | $ |  14,046,120 |
| Other liabilities         |   |  2,641,410   |   |  124,140 |   |  2,765,550 |
| Retained earnings deficit |   |  (8,647,731) |   |  (1,093,728) |   |  (9,741,459) |

|                                                        |          | Three Months Ended June 30, |          | Six Months Ended June 30, |
|-------------------------------------------------------------|---------------|-----------------------------|---------------|---------------------------|
|                                                        |          | 2010                        |          | 2009                      |   | 2010 |   | 2009 |
| Numerator                                                   |          |                        |          |                      |   |   |   |   |
| Net income (loss) - basic and diluted                       |   $      |  459,781               |   $      |  (1,781,928)         |   $ |  947,620 |   $ |  (1,857,065) |
| Preferred stock dividend and amortization of discount       |  219,754 |                        |  123,153 |                      |  437,489 |   |  123,153 |
| Net income (loss) available to common                       |          |                        |          |                      |   |   |   |   |
| shareholders                                                |   $      |  240,027               |   $      |  (1,905,081)         |   $ |  510,131 |   $ |  (1,980,218) |
|                                                        |          |                        |          |                      |   |   |   |   |
| Denominator                                                 |          |                        |          |                      |   |   |   |   |
| Weighted average shares outstanding - basic                 |          |  4,238,370             |          |  4,230,603           |   |  4,237,042 |   |  4,230,293 |
| Dilutive effect of common stock options and                 |          |                        |          |                      |   |   |   |   |
|       restricted stock awards |          |  -                     |          |  -                   |   |  - |   |  - |
|                                                        |          |                        |          |                      |   |   |   |   |
| Weighted average shares outstanding - diluted               |          |  4,238,370             |          |  4,230,603           |   |  4,237,042 |   |  4,230,293 |
|                                                        |          |                        |          |                      |   |   |   |   |
| Earnings (loss) per share - basic and diluted               |          |                        |          |                      |   |   |   |   |
| Earnings (loss) per share - basic                           |   $      |  0.06                  |   $      |  (0.45)              |   $ |  0.12 |   $ |  (0.47) |
| Effect of dilutive common stock options                     |          |  -                     |          |  -                   |   |  - |   |  - |
|                                                        |          |                        |          |                      |   |   |   |   |
| Earnings (loss) per share - diluted                         |   $      |  0.06                  |   $      |  (0.45)              |   $ |  0.12 |   $ |  (0.47) |

----

| Investment Securities Available-for-Sale |
|------------------------------------------|
| (Dollars in thousands)                   |
|                                     |   |   |   |   |   |   |   |   |   |   |
|                                     |   |   |   |   |   | Unrealized |   | Estimated |   |   |
|                                     |   | Par |   | Amortized |   | Gain |   | Fair |   | Average |
|                                     |   | Value |   | Cost |   | (Loss) |   | Value |   | Yield |
| June 30, 2010                            |   |   |   |   |   |   |   |   |   |   |
| US Government Agencies                   |   |   |   |   |   |   |   |   |   |   |
| Within one year                          |  $ |  6,000 |  $ |  $6,035 |   $ |  33 |   $ |  6,068 |   | 2.13% |
| One to five years                        |   |  6,463 |   |  6,735 |   |  98 |   |  6,833 |   | 1.78% |
| Five to ten years                        |   |  - |   |  - |   |  - |   |  - |   |  - |
| More than ten years                      |   |  - |   |  - |   |  - |   |  - |   |  - |
| Total                                    |   |  12,463 |   |  12,770 |   |  131 |   |  12,901 |   | 1.95% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities               |   |   |   |   |   |   |   |   |   |   |
| Within one year                          |   |  1,361 |   |  1,402 |   |  51 |   |  1,453 |   | 2.18% |
| One to five years                        |   |  1,720 |   |  1,779 |   |  50 |   |  1,829 |   | 2.78% |
| Five to ten years                        |   |  3,883 |   |  3,887 |   |  (18) |   |  3,869 |   | 2.71% |
| More than ten years                      |   |  16 |   |  17 |   |  (1) |   |  16 |   | 3.04% |
| Total                                    |   |  6,980 |   |  7,085 |   |  82 |   |  7,167 |   | 2.62% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Municipals                               |   |   |   |   |   |   |   |   |   |   |
| Five to ten years                        |   |  2,000 |   |  2,103 |   |  41 |   |  2,144 |   | 5.19% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Other investments                        |   |   |   |   |   |   |   |   |   |   |
| More than five years                     |   |  2,000 |   |  1,974 |   |  13 |   |  1,987 |   | 5.65% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Total investment securities              |   $ |  23,443 |   $ |  23,932 |   $ |  267 |   $ |  24,199 |   | 2.74% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009                        |   |   |   |   |   |   |   |   |   |   |
| US Government Agencies                   |   |   |   |   |   |   |   |   |   |   |
| One to five years                        |   $ |  9,000 |   $ |  9,315 |   $ |  (66) |   $ |  9,249 |   | 2.32% |
| Five to ten years                        |   |  3,000 |   |  3,029 |   |  32 |   |  3,061 |   | 4.50% |
| More than ten years                      |   |  34,250 |   |  35,284 |   |  75 |   |  35,359 |   | 5.73% |
| Total                                    |   |  46,250 |   |  47,628 |   |  41 |   |  47,669 |   | 5.70% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities               |   |   |   |   |   |   |   |   |   |   |
| One to five years                        |   |  389 |   |  435 |   |  (37) |   $ |  398 |   | 4.40% |
| Five to ten years                        |   |  471 |   |  471 |   |  29 |   |  500 |   | 5.24% |
| More than ten years                      |   |  3,141 |   |  3,227 |   |  53 |   |  3,280 |   | 5.42% |
|                                     |   |  4,001 |   |  4,133 |   |  45 |   |  4,178 |   | 5.39% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Municipals                               |   |   |   |   |   |   |   |   |   |   |
| More than ten years                      |   |  1,000 |   |  1,026 |   |  1 |   |  1,027 |   | 5.28% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Other investments                        |   |   |   |   |   |   |   |   |   |   |
| More than five years                     |   |  2,000 |   |  1,973 |   |  10 |   |  1,983 |   | 5.65% |
|                                     |   |   |   |   |   |   |   |   |   |   |
| Total investment securities              |   $ |  53,251 |   $ |  54,760 |   $ |  97 |   $ |  54,857 |   | 4.72% |

----

|   |   | Securities in a Loss   |   | Securities in a Loss   |   |   |   |       |
|--------|--------|------------------------|--------|------------------------|--------|--------|--------|------------|
|   |   | Position for Less Than |   | Position for More Than |   |   |   |       |
|   |   | 12 Months              |   | 12 Months              |   | Total  |
|   |   | Fair                   |   | Unrealized             |   | Fair   |   | Unrealized |   | Fair |   | Unrealized |
|   |   | Value                  |   | Losses                 |   | Value  |   | Losses     |   | Value |   | Losses |

| June 30, 2010              |     |         |     |        |     |    |     |    |     |         |     |        |
|----------------------------|----------|--------------|----------|-------------|----------|---------|----------|---------|----------|--------------|----------|-------------|
| Investment securities      |     |         |     |        |     |    |     |    |     |         |     |        |
| available for sale         |     |         |     |        |     |    |     |    |     |         |     |        |
| US Government Agencies     |   $ |  1,459  |   $ |  (4)   |   $ |  - |   $ |  - |   $ |  1,459  |   $ |  (4)   |
| Mortgage-backed securities |     |  4,404  |     |  (43)  |     |  - |     |  - |     |  4,404  |     |  (43)  |
|                       |     |         |     |        |     |    |     |    |     |         |     |        |
| Total                      |   $ |  5,863  |   $ |  (47)  |   $ |  - |   $ |  - |   $ |  5,863  |   $ |  (47)  |
|                       |     |         |     |        |     |    |     |    |     |         |     |        |
| December 31, 2009          |     |         |     |        |     |    |     |    |     |         |     |        |
| Investment securities      |     |         |     |        |     |    |     |    |     |         |     |        |
| available for sale         |     |         |     |        |     |    |     |    |     |         |     |        |
| US Government Agencies     |   $ |  19,542 |   $ |  (264) |   $ |  - |   $ |  - |   $ |  19,542 |   $ |  (264) |
|                       |     |         |     |        |     |    |     |    |     |         |     |        |
| Total                      |   $ |  19,542 |   $ |  (264) |   $ |  - |  $  |  - |   $ |  19,542 |   $ |  (264) |

|                               |     | June 30, 2010     |   | December 31, 2009 |
|------------------------------------|----------|-------------------|--------|-------------------|
|                               |     |   Amount     |   | %                 |   | Amount |   | % |
|                               |     |              |   |              |   |   |   |   |
| Noninterest bearing demand         |   $ |  44,150,453  |   | 8.77%             |   $ |  38,520,878 |   | 7.73% |
| Now                                |     |  35,242,967  |   | 7.00%             |   |  36,441,259 |   | 7.31% |
| Money market                       |     |  102,389,471 |   | 20.33%            |   |  115,166,477 |   | 23.11% |
| Savings                            |     |  10,320,106  |   | 2.05%             |   |  8,901,299 |   | 1.79% |
| Time deposits of $100,000 and over |     |  125,134,684 |   | 24.85%            |   |  119,352,471 |   | 23.95% |
| Other time deposits                |     |  186,299,084 |   | 37.00%            |   |  179,902,740 |   | 36.11% |
|                               |     |              |   |              |   |   |   |   |
| Total                              |   $ |  503,536,765 |   | 100.00%           |   $ |  498,285,124 |   | 100.00% |

----

|                 |   | Six Months Ended June 30, |
|----------------------|--------|---------------------------|
|                 |   | 2010                      |   | 2009 |
|                 |   |                      |   | 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  |   |  336,005             |   $ |  9.58 |   $ |  4.75 |   |   |   |  333,955 |   $ |  9.63 |   $ |  4.77 |   |   |
| Granted              |   |  -                   |   |  - |   |  - |   |   |   |  - |   |  - |   |  - |   |   |
| Forfeited            |   |  (25,800)            |   |  10.77 |   |  5.02 |   |   |   |  - |   |  - |   |  - |   |   |
| Exercised            |   |  -                   |   |  - |   |  - |   |   |   |  - |   |  - |   |  - |   |   |
| Options outstanding, |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| end of period        |   |  310,205             |   $ |  9.48 |   $ |  4.73 |   $ |  - |   |  333,955 |   $ |  9.63 |   $ |  4.77 |   $ |  - |
| Options exercisable, |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| end of period        |   |  291,350             |   |   |   |   |   |   |   |  298,600 |   |   |   |   |   |   |

----

----

|                            |     | Fair Value Measurement at June 30, 2010 Using |
|---------------------------------|----------|-----------------------------------------------|
|                            |     |                                          |   | Quoted Prices |   |   |   |   |
|                            |     |                                          |   | in Active |   |   |   |   |
|                            |     |                                          |   | Markets for |   | Other |   | Significant |
|                            |     |                                          |   | Identical |   | Observable |   | Unobservable |
|                            |     | Carrying                                      |   | Assets |   | Inputs |   | Inputs |
|                            |     | Value                                         |   | (Level 1) |   | (Level 2) |   | (Level 3) |
|                            |     | (in thousands)                                |
| Financial Assets-Recurring      |     |                                          |   |   |   |   |   |   |
| US Government Agencies          |   $ |  12,901                                  |   $ |  - |   $ |  12,901 |   $ |  - |
| MBS                             |     |  7,167                                   |   |  - |   |  7,167 |   |  - |
| Municipals                      |     |  2,144                                   |   |  - |   |  2,144 |   |  - |
| Other available for sale (1)    |     |  1,987                                   |   |  - |   |  1,987 |   |  - |
|                            |     |                                          |   |   |   |   |   |   |
| Financial Assets-Non-Recurring  |     |                                          |   |   |   |   |   |   |
| Impaired loans                  |   $ |  31,106                                  |   $ |  - |   $ |  - |   $ |  31,106 |
| Real estate owned               |     |  11,816                                  |   |  - |   |  - |   |  11,816 |
| Residential loans held for sale |     |  23,474                                  |   |  - |   |  23,474 |   |  - |
|                            |     |                                          |   |   |   |   |   |   |
| (1) Excludes restricted stock.  |     |                                          |   |   |   |   |   |   |

----

|                            |     | Fair Value Measurement at December 31, 2009 Using |
|---------------------------------|----------|---------------------------------------------------|
|                            |     |                                              |   | Quoted Prices |   |   |   |   |
|                            |     |                                              |   | in Active |   |   |   |   |
|                            |     |                                              |   | Markets for |   | Other |   | Significant |
|                            |     |                                              |   | Identical |   | Observable |   | Unobservable |
|                            |     | Carrying                                          |   | Assets |   | Inputs |   | Inputs |
|                            |     | Value                                             |   | (Level 1) |   | (Level 2) |   | (Level 3) |
|                            |     | (in thousands)                                    |
| Financial Assets-Recurring      |     |                                              |   |   |   |   |   |   |
| US Government Agencies          |   $ |  47,669                                      |   $ |  - |   $ |  47,669 |   $ |  - |
| MBS                             |     |  4,178                                       |   |  - |   |  4,178 |   |  - |
| Municipals                      |     |  1,027                                       |   |  - |   |  1,027 |   |  - |
| Other available for sale (1)    |     |  1,983                                       |   |  - |   |  1,983 |   |  - |
|                            |     |                                              |   |   |   |   |   |   |
| Financial Assets-Non-Recurring  |     |                                              |   |   |   |   |   |   |
| Impaired loans                  |  $  |  25,913                                      |   $ |  - |   $ |  - |   $ |  25,913 |
| Real estate owned               |     |  11,279                                      |   |  - |   |  - |   |  11,279 |
| Residential loans held for sale |     |  7,506                                       |   |  - |   |  7,506 |   |  - |
|                            |     |                                              |   |   |   |   |   |   |
| (1) Excludes restricted stock.  |     |                                              |   |   |   |   |   |   |

----

|                                     |             | June 30,          |             | December 31,      |
|------------------------------------------|------------------|-------------------|------------------|-------------------|
|                                     |             | 2010              |             | 2009              |
|                                     |             | Carrying          |             | Estimated         |   | Carrying |   | Estimated |
|                                     |             | Value             |             | Fair Value        |   | Value |   | Fair Value |
|                                     |             |              |             |              |   |   |   |   |
| Financial assets                         |             |              |             |              |   |   |   |   |
| Cash and cash equivalents                |   $         |  43,372,674  |   $         |  43,372,674  |   $ |  20,661,820 |   $ |  20,661,820 |
| Investment securities available for sale |  24,199,460 |              |  24,199,460 |              |  54,857,211 |   |  54,857,211 |
| Loans held for sale                      |             |  23,473,948  |             |  23,473,948  |   |  7,506,252 |   |  7,506,252 |
| Loans                                    |             |  454,473,507 |             |  453,698,255 |   |  457,046,616 |   |  466,271,730 |
| Accrued interest receivable              |             |  2,610,181   |             |  2,610,181   |   |  3,366,718 |   |  3,366,718 |
|                                     |             |              |             |              |   |   |   |   |
| Financial liabilities                    |             |              |             |              |   |   |   |   |
| Deposits                                 |             |  503,536,765 |             |  513,901,281 |   |  498,285,124 |   |  500,979,984 |
| FHLB borrowings                          |             |  28,750,000  |             |  28,537,963  |   |  29,000,000 |   |  29,011,904 |
| Trust preferred securities               |             |  8,764,000   |             |  8,724,602   |   |  8,764,000 |   |  8,764,000 |
| Other borrowings                         |             |  13,935,488  |             |  13,903,001  |   |  14,829,521 |   |  14,783,055 |
| Accrued interest payable                 |             |  450,540     |             |  450,540     |   |  501,069 |   |  501,069 |
|                                     |             |              |             |              |   |   |   |   |
| Off-balance-sheet instruments            |             |              |             |              |   |   |   |   |
| Undisbursed credit lines                 |             |              |             |  52,973,258  |   |   |   |  49,621,000 |
| Commitments to extend or originate       |             |              |             |              |   |   |   |   |
| credit                                   |             |              |             |  19,908,750  |   |   |   |  19,078,000 |
| Standby letters of credit                |             |              |             |  3,500,194   |   |   |   |  4,177,000 |

----

----

----

----

----

|                                        |     |            |     | Six Months      |
|---------------------------------------------|----------|-----------------|----------|-----------------|
|                                        |     |            |     | Ended June 30,  |
|                                        |     | Second Quarter  |     | 2010            |
|                                        |     | 2010            |     | Compared to     |
|                                        |     | Compared to     |     | Six Months      |
|                                        |     | Second Quarter  |     | Ended June 30,  |
|                                        |     | 2009            |     | 2009            |
|                                        |     |            |     |            |
| Increase in net interest income             |   $ |  534,000   |   $ |  1,043,000 |
| Decrease in provision for loan losses       |     |  1,860,000 |     |  2,460,000 |
| Increase in gain on sale of loans           |     |  124,000   |     |  385,000   |
| Gain on sale of securities                  |     |  489,000   |     |  489,000   |
| Gain on sale of land                        |     |  -         |     |  243,000   |
| Decrease (increase) in noninterest expenses |     |  52,000    |     |  (903,000) |

----

|               |   |   |   | Adjusted      |
|--------------------|--------|--------|--------|---------------|
|               |   |   |   | for Interest  |
|               |   |   |   | On Non-       |
| Quarter Ended      |   | Actual |   | Accrual Loans |
|               |   |   |   |          |
| June 30, 2009      |   | 3.17%  |   | 3.27%         |
| September 30, 2009 |   | 3.17%  |   | 3.32%         |
| December 31, 2009  |   | 3.22%  |   | 3.27%         |
| March 31, 2010     |   | 3.26%  |   | 3.52%         |
| June 30, 2010      |   | 3.46%  |   | 3.52%         |

----

----

| Average Balance Sheets                      |
|---------------------------------------------|
| (in thousands)                              |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   | Three Months Ended June 30, 2010 |   | Three Months Ended June 30, 2009 |
|                                        |   |   |   | Interest |   | Annualized |   |   |   | Interest |   | Annualized |
|                                        |   | Average |   | Income/ |   | Yield |   | Average |   | Income/ |   | Yield |
|                                        |   | Balance |   | Expense |   | Rate |   | Balance |   | Expense |   | Rate |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans net of deferred fees                  |   $ |  464,233 |   $ |  7,034 |   | 6.08% |   $ |  477,692 |   $ |  7,977 |   | 6.70% |
| Investment securities                       |   |  38,833 |   |  286 |   | 2.95% |   |  23,231 |   |  286 |   | 4.94% |
| Loans held for sale                         |   |  14,412 |   |  180 |   | 5.01% |   |  13,112 |   |  160 |   | 4.89% |
| Federal funds and other                     |   |  27,142 |   |  16 |   | 0.24% |   |  13,528 |   |  5 |   | 0.15% |
| Total interest earning assets               |   |  544,620 |   |  7,516 |   | 5.54% |   |  527,563 |   |  8,428 |   | 6.41% |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses and deferred fees |   |  (9,042) |   |   |   |   |   |  (7,080) |   |   |   |   |
| Cash and due from banks                     |   |  13,405 |   |   |   |   |   |  13,124 |   |   |   |   |
| Premises and equipment, net                 |   |  27,716 |   |   |   |   |   |  27,858 |   |   |   |   |
| Other assets                                |   |  32,712 |   |   |   |   |   |  25,790 |   |   |   |   |
| Total assets                                |   $ |  609,411 |   |   |   |   |   $ |  587,255 |   |   |   |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking                           |   $ |  36,456 |   $ |  81 |   | 0.89% |  $ |  21,982 |   $ |  79 |   | 1.44% |
| Money market                                |   |  103,928 |   |  257 |   | 0.99% |   |  35,708 |   |  159 |   | 1.79% |
| Savings                                     |   |  10,328 |   |  18 |   | 0.70% |   |  7,219 |   |  21 |   | 1.17% |
| Certificates                                |   |  314,768 |   |  1,922 |   | 2.45% |   |  373,657 |   |  3,565 |   | 3.83% |
| Total deposits                              |   |  465,480 |   |  2,278 |   | 1.96% |   |  438,566 |   |  3,824 |   | 3.50% |
| Borrowings                                  |   |  50,139 |   |  536 |   | 4.29% |   |  49,161 |   |  436 |   | 3.56% |
| Total interest bearing liabilities          |   |  515,619 |   |  2,814 |   | 2.19% |   |  487,727 |   |  4,260 |   | 3.50% |
| Noninterest bearing deposits                |   |  41,741 |   |   |   |   |   |  40,729 |   |   |   |   |
| Other liabilities                           |   |  2,623 |   |   |   |   |   |  2,678 |   |   |   |   |
| Total liabilities                           |   |  559,983 |   |   |   |   |   |  531,134 |   |   |   |   |
| Equity capital                              |   |  49,428 |   |   |   |   |   |  56,122 |   |   |   |   |
| Total liabilities and capital               |   $ |  609,411 |   |   |   |   |   $ |  587,256 |   |   |   |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income before                  |   |   |   |   |   |   |   |   |   |   |   |   |
|   provision for loan losses       |   |   |   $ |  4,702 |   |   |   |   |   $ |  4,168 |   |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest spread - average yield on interest |   |   |   |   |   |   |   |   |   |   |   |   |
| earning assets, less average rate on        |   |   |   |   |   |   |   |   |   |   |   |   |
| interest bearing liabilities                |   |   |   |   |   | 3.35% |   |   |   |   |   | 2.90% |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Annualized net interest margin (net         |   |   |   |   |   |   |   |   |   |   |   |   |
| interest income expressed as                |   |   |   |   |   |   |   |   |   |   |   |   |
| percentage of average earning assets)       |   |   |   |   |   | 3.46% |   |   |   |   |   | 3.17% |

----

| Average Balance Sheets                      |
|---------------------------------------------|
| (in thousands)                              |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   | Six Months Ended June 30, 2010 |   | Six Months Ended June 30, 2009 |
|                                        |   |   |   | Interest |   | Annualized |   |   |   | Interest |   | Annualized |
|                                        |   | Average |   | Income/ |   | Yield |   | Average |   | Income/ |   | Yield |
|                                        |   | Balance |   | Expense |   | Rate |   | Balance |   | Expense |   | Rate |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans net of deferred fees                  |   $ |  466,939 |  $ |  14,035 |   | 6.06% |   $ |  476,062 |  $ |  15,905 |   | 6.74% |
| Investment securities                       |   |  43,802 |   |  643 |   | 2.96% |   |  24,479 |   |  623 |   | 5.13% |
| Loans held for sale                         |   |  10,818 |   |  269 |   | 5.01% |   |  9,647 |   |  241 |   | 5.04% |
| Federal funds and other                     |   |  26,687 |   |  30 |   | 0.23% |   |  14,415 |   |  12 |   | 0.17% |
| Total interest earning assets               |   |  548,246 |   |  14,977 |   | 5.51% |   |  524,603 |   |  16,781 |   | 6.45% |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses and deferred fees |   |  (9,808) |   |   |   |   |   |  (6,653) |   |   |   |   |
| Cash and due from banks                     |   |  11,454 |   |   |   |   |   |  12,917 |   |   |   |   |
| Premises and equipment, net                 |   |  27,745 |   |   |   |   |   |  27,988 |   |   |   |   |
| Other assets                                |   |  32,929 |   |   |   |   |   |  25,282 |   |   |   |   |
| Total assets                                |   $ |  610,566 |   |   |   |   |   $ |  584,137 |   |   |   |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking                           |   $ |  36,177 |   $ |  217 |   | 1.21% |   $ |  20,562 |  $ |  146 |   | 1.43% |
| Money market                                |   |  108,177 |   |  627 |   | 1.17% |   |  33,052 |   |  291 |   | 1.78% |
| Savings                                     |   |  9,862 |   |  44 |   | 0.90% |   |  6,635 |   |  39 |   | 1.19% |
| Certificates                                |   |  312,008 |   |  3,902 |   | 2.52% |   |  381,254 |   |  7,352 |   | 3.89% |
| Total deposits                              |   |  466,224 |   |  4,790 |   | 2.07% |   |  441,503 |   |  7,828 |   | 3.58% |
| Borrowings                                  |   |  52,672 |   |  1,070 |   | 4.10% |   |  50,378 |   |  879 |   | 3.52% |
| Total interest bearing liabilities          |   |  518,896 |   |  5,860 |   | 2.28% |   |  491,881 |   |  8,707 |   | 3.57% |
| Noninterest bearing deposits                |   |  39,879 |   |   |   |   |   |  38,368 |   |   |   |   |
| Other liabilities                           |   |  2,899 |   |   |   |   |   |  2,403 |   |   |   |   |
| Total liabilities                           |   |  561,674 |   |   |   |   |   |  532,652 |   |   |   |   |
| Equity capital                              |   |  48,892 |   |   |   |   |   |  51,484 |   |   |   |   |
| Total liabilities and capital               |   $ |  610,566 |   |   |   |   |   $ |  584,136 |   |   |   |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income before                  |   |   |   |   |   |   |   |   |   |   |   |   |
|   provision for loan losses       |   |   |   $ |  9,117 |   |   |   |   |   $ |  8,074 |   |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest spread - average yield on interest |   |   |   |   |   |   |   |   |   |   |   |   |
| earning assets, less average rate on        |   |   |   |   |   |   |   |   |   |   |   |   |
| interest bearing liabilities                |   |   |   |   |   | 3.23% |   |   |   |   |   | 2.88% |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Annualized net interest margin (net         |   |   |   |   |   |   |   |   |   |   |   |   |
| interest income expressed as                |   |   |   |   |   |   |   |   |   |   |   |   |
| percentage of average earning assets)       |   |   |   |   |   | 3.35% |   |   |   |   |   | 3.10% |

----

|                       |     | June 30,     |     | March 31,    |     | Dec. 31,     |     | Sept. 30,    |     | June 30,     |
|----------------------------|----------|--------------|----------|--------------|----------|--------------|----------|--------------|----------|--------------|
|                       |     | 2010         |     | 2010         |     | 2009         |     | 2009         |     | 2009         |
|                       |     |         |     |         |     |         |     |         |     |         |
| Nonaccrual loans           |     |         |     |         |     |         |     |         |     |         |
| Number                     |     |  132    |     |  130    |     |  123    |     |  117    |     |  96     |
| Amount                     |   $ |  31,106 |   $ |  33,255 |   $ |  25,913 |   $ |  21,916 |   $ |  18,795 |
| Other real estate owned    |     |  11,816 |     |  10,715 |     |  11,279 |     |  11,249 |     |  4,626  |
|                       |     |         |     |         |     |         |     |         |     |         |
| Nonperforming assets       |   $ |  42,922 |   $ |  43,970 |   $ |  37,192 |   $ |  33,165 |   $ |  23,421 |
|                       |     |         |     |         |     |         |     |         |     |         |
| Percentage of total assets |     | 7.08%        |     | 7.14%        |     | 6.18%        |     | 5.35%        |     | 3.94%        |

----

|                                 |     | June 30,     |     | Mar 31,       |     | Dec 31,       |     | Sept 30,      |     | Jun 30,      |
|--------------------------------------|----------|--------------|----------|---------------|----------|---------------|----------|---------------|----------|--------------|
|                                 |     | 2010         |     | 2010          |     | 2009          |     | 2009          |     | 2009         |
|                                 |     |         |     |          |     |          |     |          |     |         |
| Loans 90 days past due and           |     |         |     |          |     |          |     |          |     |         |
| still accruing                       |   $ |  959    |   $ |  2,535   |   $ | 4,787         |   $ |  $1,661  |   $ |  1,670  |
|                                 |     |         |     |          |     |          |     |          |     |         |
| Nonaccrual loans                     |     |  31,106 |     |  33,255  |     |  25,913  |     |  21,916  |     |  18,795 |
|                                 |     |         |     |          |     |          |     |          |     |         |
| Other real estate owned              |     |  11,816 |     |  10,715  |     |  11,279  |     |  11,249  |     |  4,626  |
|                                 |     |         |     |          |     |          |     |          |     |         |
| Allowance for loan losses            |     |         |     |          |     |          |     |          |     |         |
| Beginning balance                    |   $ |  9,091  |   $ |  10,522  |   $ |  9,527   |   $ |  9,618   |   $ |  6,849  |
| Provision for loan losses            |     |  1,240  |     |  500     |     |  3,020   |     |  6,000   |     |  3,100  |
| Charge-offs                          |     |  (954)  |     |  (2,114) |     |  (2,026) |     |  (6,091) |     |  (336)  |
| Recoveries                           |     |  123    |     |  183     |     |  1       |     |  -       |     |  5      |
| Ending balance                       |   $ |  9,500  |   $ |  9,091   |   $ |  10,522  |   $ |  9,527   |   $ |  9,618  |
|                                 |     |         |     |          |     |          |     |          |     |         |
| Ratios                               |     |         |     |          |     |          |     |          |     |         |
| Allowance for loan losses to         |     |         |     |          |     |          |     |          |     |         |
| Loans, net of unearned income        |     | 2.05%        |     | 1.96%         |     | 2.25%         |     | 2.02%         |     | 2.01%        |
| Nonaccrual loans                     |     | 30.54%       |     | 27.34%        |     | 40.61%        |     | 43.47%        |     | 51.17%       |
| Nonperforming assets to total assets |     | 7.08%        |     | 7.14%         |     | 6.18%         |     | 5.35%         |     | 3.94%        |

----

| Loan Portfolio, Net                        |
|--------------------------------------------|
| (In thousands)                             |
|                                       |   |   |   |   |   |   |   |   |
|                                       |   | June 30, 2010 |   | December 31, 2009 |
|                                       |   | Amount |   | % |   | Amount |   | % |
|                                       |   |   |   |   |   |   |   |   |
| Commercial                                 |   $ |  33,178 |   | 7.2% |   $ |  39,576 |   | 8.5% |
| Real estate - residential                  |   |  98,479 |   | 21.2% |   |  93,657 |   | 20.0% |
| Real estate - commercial                   |   |  252,957 |   | 54.6% |   |  240,830 |   | 51.5% |
| Real estate - construction                 |   |  68,168 |   | 14.7% |   |  81,688 |   | 17.5% |
| Consumer                                   |   |  10,717 |   | 2.3% |   |  11,609 |   | 2.5% |
|                                       |   |   |   |   |   |   |   |   |
| Total loans                                |   |  463,499 |   | 100.0% |   |  467,360 |   | 100.0% |
| Less:  unearned income, net      |   |  474 |   |   |   |  209 |   |   |
| Less:  Allowance for loan losses |   |  (9,500) |   |   |   |  (10,522) |   |   |
|                                       |   |   |   |   |   |   |   |   |
| Total loans, net                           |   $ |  454,473 |   |   |   $ |  457,047 |   |   |

----

| Analysis of Allowance for Loan Losses            |
|--------------------------------------------------|
| (In thousands)                                   |
|                                             |   |   |   |   |
|                                             |   | Six Months Ended |
|                                             |   | June 30, |
|                                             |   | 2010 |   | 2009 |
|                                             |   |   |   |   |
| Beginning balance                                |   $ |  10,522 |   $ |  6,059 |
| Provision for loan losses                        |   |  1,740 |   |  4,200 |
| Charge-offs                                      |   |   |   |   |
| Commercial and industrial                        |  $ |  (107) |   $ |  - |
| Real estate - residential                        |   |  (790) |   |  - |
| Real estate - commercial                         |   |  (1,034) |   |  (100) |
| Real estate - construction                       |   |  (1,017) |   |  (411) |
| Consumer                                         |   |  (120) |   |  (140) |
|                                             |   |  (3,068) |   |  (651) |
| Recoveries                                       |   |   |   |   |
| Commercial and industrial                        |   |  - |   |  - |
| Real estate - residential                        |   |  - |   |  - |
| Real estate - commercial                         |   |  121 |   |  - |
| Real estate - construction                       |   |  101 |   |  3 |
| Consumer                                         |   |  84 |   |  7 |
|                                             |   |  306 |   |  10 |
| Net charge-offs                                  |   |  (2,762) |   |  (641) |
|                                             |   |   |   |   |
| Ending balance                                   |   $ |  9,500 |   $ |  9,618 |
|                                             |   |   |   |   |
| Loans outstanding at end of period (1)           |   $ |  463,499 |   $ |  480,153 |
| Ratio of allowance for loan losses as            |   |   |   |   |
| a percent of loans outstanding at                |   |   |   |   |
| end of period                                    |   | 2.05% |   | 2.01% |
|                                             |   |   |   |   |
| Average loans outstanding for the period (1)     |   $ |  466,939 |   $ |  476,062 |
| Ratio of net charge-offs to average loans        |   |   |   |   |
| outstanding for the period                       |   | 0.59% |   | 0.13% |
|                                             |   |   |   |   |
| (1)  Loans are net of unearned income. |   |   |   |   |

----

----

| Analysis of Capital                                                                           |
|-----------------------------------------------------------------------------------------------|
| (In thousands)                                                                                |
|                                                                                          |   |   |   |   |
|                                                                                          |   | June 30, |   | December 31, |
|                                                                                          |   | 2010 |   | 2009* |
|                                                                                          |   |   |   |   |
| Tier 1 capital                                                                                |   |   |   |   |
|   Preferred stock                                                                        | $ |                 59 | $ |                 59 |
|   Common stock                                                                           |   |            16,953 |   |            16,922 |
|   Additional paid-in capital                                                             |   |            40,588 |   |            40,569 |
|   Retained earnings (deficit)                                                            |   |             (9,231) |   |             (9,741) |
|   Warrant Surplus                                                                        |   |                 732 |   |                 732 |
|   Discount on preferred stock                                                            |   |                (565) |   |                (636) |
|   Qualifying trust preferred securities                                                  |   |              8,764 |   |              8,764 |
|     Total equity                                                               |   |            57,300 |   |            56,669 |
|     Total Tier 1 capital                                                       |   |            57,300 |   |            56,669 |
|                                                                                          |   |   |   |   |
| Tier 2 capital                                                                                |   |   |   |   |
|   Allowance for loan losses (1)                                                          |   |              6,187 |   |              6,310 |
|     Total Tier 2 capital                                                       |   |              6,187 |   |              6,310 |
|                                                                                          |   |   |   |   |
| Total risk-based capital                                                                      |   |            63,487 |   |            62,979 |
|                                                                                          |   |   |   |   |
| Risk-weighted assets                                                                          | $ |         490,711 | $ |         500,602 |
|                                                                                          |   |   |   |   |
| Capital ratios                                                                                |   |   |   |   |
|   Tier 1 capital to risk-weighted assets                                                 |   | 11.7% |   | 11.3% |
|   Total capital to risk-weighted assets                                                  |   | 12.9% |   | 12.6% |
|   Leverage ratio (Tier 1 capital to                                                      |   |   |   |   |
|     average assets)                                                            |   | 9.4% |   | 9.4% |
|   Equity to total assets                                                                 |   | 9.4% |   | 8.1% |
|                                                                                          |   |   |   |   |
| (1) Amount is limited to 1.25 percent of the Company's gross risk weighted assets.            |
|                                                                                          |   |   |   |   |
| * Certain December 31, 2009 amounts have been revised.  See Note 2 to the condensed |
| consolidated financial statements.                                                            |   |   |   |   |

----

----

| Village Bank and Trust Financial Corp.                                                                                 |
|------------------------------------------------------------------------------------------------------------------------|
| Interest Rate Sensitivity GAP Analysis                                                                                 |
| June 30, 2010                                                                                                          |
| (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                                                                                                             |   $ |  27,731 |   $ |  15,771 |   $ |  20,214 |   $ |  40,002 |   $ |  145,061 |   $ |  248,779 |
| Variable rate                                                                                                          |   |  130,109 |   |  4,014 |   |  9,145 |   |  15,220 |   |  56,232 |   |  214,720 |
| Investment securities                                                                                                  |   |  - |   |  - |   |  - |   |  2,345 |   |  21,854 |   |  24,199 |
| Loans held for sale                                                                                                    |   |  23,474 |   |  - |   |  - |   |  - |   |  - |   |  23,474 |
| Federal funds sold                                                                                                     |   |  12,037 |   |  - |   |  - |   |  - |   |  - |   |  12,037 |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total rate sensitive assets                                                                                            |   |  193,351 |   |  19,785 |   |  29,359 |   |  57,567 |   |  223,147 |   |  523,209 |
| Cumulative rate sensitive assets                                                                                       |   |  193,351 |   |  213,136 |   |  242,495 |   |  300,062 |   |  523,209 |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Rate Sensitive Liabilities                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking (2)                                                                                                  |   |  - |   |  - |   |  - |   |  35,243 |   |  - |   |  35,243 |
| Money market accounts                                                                                                  |   |  102,389 |   |  - |   |  - |   |  - |   |  - |   |  102,389 |
| Savings (2)                                                                                                            |   |  - |   |  - |   |  - |   |  10,320 |   |  - |   |  10,320 |
| Certificates of deposit                                                                                                |   |  53,829 |   |  34,845 |   |  129,426 |   |  77,153 |   |  16,181 |   |  311,434 |
| FHLB advances                                                                                                          |   |  - |   |   |   |  5,000 |   |  11,750 |   |  12,000 |   |  28,750 |
| Trust Preferred Securities                                                                                             |   |  - |   |  - |   |  - |   |   |   |  8,764 |   |  8,764 |
| Federal funds purchased                                                                                                |   |  - |   |  - |   |  - |   |  - |   |  - |   |  - |
| Other borrowings                                                                                                       |   |  1,791 |   |  43 |   |  88 |   |  608 |   |  11,405 |   |  13,935 |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total rate sensitive liabilities                                                                                       |   |  158,009 |   |  34,888 |   |  134,514 |   |  135,074 |   |  48,350 |   |  510,835 |
| Cumulative rate sensitive liabilities                                                                                  |   |  158,009 |   |  192,897 |   |  327,411 |   |  462,485 |   |  510,835 |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rate sensitivity gap for period                                                                                        |   $ |  35,342 |   $ |  (15,103) |   $ |  (105,155) |   $ |  (77,507) |   $ |  174,797 |   $ |  12,374 |
| Cumulative rate sensitivity gap                                                                                        |   $ |  35,342 |   $ |  20,239 |   $ |  (84,916) |   $ |  (162,423) |   $ |  12,374 |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of cumulative gap to total assets                                                                                |   | 5.8% |   | 3.3% |   | (14.0)% |   | (26.7)% |   | 2.0% |   |   |
| Ratio of cumulative rate sensitive                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| assets to cumulative rate sensitive                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| liabilities                                                                                                            |   | 122.4% |   | 110.5% |   | 74.1% |   | 64.9% |   | 102.4% |   |   |
| Ratio of cumulative gap to cumulative                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| rate sensitive assets                                                                                                  |   | 18.3% |   | 9.5% |   | (35.0)% |   | (54.1)% |   | 2.4% |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Includes nonaccrual loans of approximately $31,106,000, 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 |
|--------|------|-----------------------------------------------------------------------------------------------------|

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

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

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

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

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