| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| Tennessee                                                                           |   | 20-0307691                           |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
| (State or other jurisdiction of                                                     |   | (I.R.S. Employer Identification No.) |   |
| incorporation or organization)                                                      |   |                                 |   |
|                                                                                |   |                                 |   |
| 3095 East Andrew Johnson Highway Greeneville, Tennessee                        |   |  37745                          |   |
| (Address of principal executive offices)                                            |   | (Zip Code)                           |   |
|                                                                                |   |                                 |   |
| Registrant’s telephone number, including area code:  (423) 636-1555 |   |
|                                                                                |   |                                 |   |
| Not Applicable                                                                      |
| (Former name, former address and former fiscal year, if changed since last report)  |

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

----

| PART I - FINANCIAL INFORMATION |                                                                                         |
|--------------------------------|----------------------------------------------------------------------------------------------|
|                           |                                                                                         |        |
| Item 1.                        | Financial Statements.                                                                        | 3 |
|                           |                                                                                         |   |
| Item 2.                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 19 |
|                           |                                                                                         |   |
| Item 3.                        | Quantitative and Qualitative Disclosures about Market Risk.                                  | 28 |
|                           |                                                                                         |   |
| Item 4.                        | Controls and Procedures.                                                                     | 28 |
|                           |                                                                                         |   |
| PART II - OTHER INFORMATION    |                                                                                         |
|                           |                                                                                         |   |
| Item 1.                        | Legal Proceedings.                                                                           | 29 |
|                           |                                                                                         |   |
| Item 1A.                       | Risk Factors.                                                                                | 29 |
|                           |                                                                                         |   |
| Item 2.                        | Unregistered Sales of Equity Securities and Use of Proceeds.                                 | 29 |
|                           |                                                                                         |   |
| Item 3.                        | Defaults Upon Senior Securities.                                                             | 29 |
|                           |                                                                                         |   |
| Item 4.                        | (Removed and Reserved).                                                                      | 29 |
|                           |                                                                                         |   |
| Item 5.                        | Other Information.                                                                           | 29 |
|                           |                                                                                         |   |
| Item 6.                        | Exhibits.                                                                                    | 29 |

----

|                                                                                                                                                    |   | As of March 31,2011 (Unaudited) |            |   | As of December31, 2010 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|-----------------|--------|---------------------------------------|--------|
| ASSETS                                                                                                                                                  |   |                                                |            |   |                                  |   |
|                                                                                                                                                    |   |                                                |            |   |                                  |   |
| Cash and due from banks                                                                                                                                 |   | $                                                   | 6,646,359       |   |                                  | $      | 1,499,054 |   |
| Federal funds sold                                                                                                                                      |   |                                                | 2,759,961       |   |                                  |   | 1,609,482 |   |
| Interest-bearing deposits in banks                                                                                                                      |   |                                                |  2,883,175 |   |                                  |   | 8,182,239 |   |
| Cash and cash equivalents                                                                                                                               |   |                                                | 12,289,495      |   |                                  |   | 11,290,775 |   |
| Securities available for sale                                                                                                                           |   |                                                | 2,914,771       |   |                                  |   | 2,916,717 |   |
| Federal Home Loan Bank stock, at cost                                                                                                                   |   |                                                | 296,500         |   |                                  |   | 296,500 |   |
| Loans, net of allowance for loan losses of $2,660,676 in 2011 and $2,956,010 in 2010                                                                    |   |                                                | 68,388,201      |   |                                  |   | 73,759,525 |   |
| Premises and equipment, net                                                                                                                             |   |                                                | 4,750,550       |   |                                  |   | 4,807,200 |   |
| Accrued interest receivable                                                                                                                             |   |                                                | 259,397         |   |                                  |   | 358,298 |   |
| Deferred tax assets, net                                                                                                                                |   |                                                | 28,366          |   |                                  |   | 29,912 |   |
| Foreclosed assets                                                                                                                                       |   |                                                | 6,374,565       |   |                                  |   | 3,885,396 |   |
| Cash surrender value of bank owned life insurance                                                                                                       |   |                                                | 2,596,022       |   |                                  |   | 2,570,228 |   |
| Other assets                                                                                                                                            |   |                                                |  180,662   |   |                                  |   | 174,415 |   |
| Total Assets                                                                                                                                            |   | $                                                   | 98,078,529      |   |                                  | $      | 100,088,966 |   |
|                                                                                                                                                    |   |                                                |            |   |                                  |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                              |   |                                                |            |   |                                  |   |   |   |
|                                                                                                                                                    |   |                                                |            |   |                                  |   |   |   |
| LIABILITIES                                                                                                                                             |   |                                                |            |   |                                  |   |   |   |
| Deposits:                                                                                                                                               |   |                                                |            |   |                                  |   |   |   |
| Noninterest-bearing                                                                                                                                     |   |                                                |            |   |                                  |   |   |   |
| Demand                                                                                                                                                  |   | $                                                   | 4,766,125       |   |                                  | $      | 5,275,302 |   |
| Interest-bearing                                                                                                                                        |   |                                                |            |   |                                  |   |   |   |
| Money market, interest checking and savings                                                                                                             |   |                                                | 22,298,935      |   |                                  |   | 23,056,505 |   |
| Time deposits                                                                                                                                           |   |                                                | 64,822,028      |   |                                  |   | 65,322,512 |   |
| Total Deposits                                                                                                                                          |   |                                                | 91,887,088      |   |                                  |   | 93,654,319 |   |
| Accrued interest payable                                                                                                                                |   |                                                | 372,027         |   |                                  |   | 307,285 |   |
| Other liabilities                                                                                                                                       |   |                                                | 410,057         |   |                                  |   | 438,612 |   |
| Federal Home Loan Bank and other borrowings                                                                                                             |   |                                                |  3,545,906 |   |                                  |   | 3,545,906 |   |
| Total Liabilities                                                                                                                                       |   |                                                | 96,215,078      |   |                                  |   | 97,946,122 |   |
|                                                                                                                                                    |   |                                                |            |   |                                  |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                              |   |                                                |            |   |                                  |   |   |   |
| Stock:                                                                                                                                                  |   |                                                |            |   |                                  |   |   |   |
| Preferred stock, no par value; authorized 1,000,000 shares; issued and outstanding 207 shares at March 31, 2011 and December 31, 2010                   |   |                                                | 177,863         |   |                                  |   | 174,220 |   |
| Common stock, $0.333 par value; authorized 6,000,000 shares; issued and outstanding 2,389,391 shares at March 31, 2011 and  December 31, 2010 |   |                                                | 796,337         |   |                                  |   | 796,337 |   |
| Additional paid-in capital                                                                                                                              |   |                                                | 7,167,260       |   |                                  |   | 7,167,260 |   |
| Retained deficit                                                                                                                                        |   |                                                | (6,232,289      | )      |                                  |   | (5,946,761 | ) |
| Accumulated other comprehensive income                                                                                                                  |   |                                                | (45,720         | )      |                                  |   | (48,212 | ) |
| Total Stockholders’ Equity                                                                                                                        |   |                                                | 1,863,451       |   |                                  |   | 2,142,844 |   |
| Total Liabilities and Stockholders’ Equity                                                                                                        |   | $                                                   | 98,078,529      |   |                                  | $      | 100,088,966 |   |

----

|                                                       |   | Three Months Ended |      |
|------------------------------------------------------------|--------|------------------------------|-----------|
|                                                       |   | March 31, 2011     |      |   | March 31, 2010 |   |
|                                                       |   |                         |      |   |   |   |
| Interest and dividend income:                              |   |                         |      |   |   |   |
| Loans, including fees                                      |   | $                            | 954,022   |   |   | $ | 1,354,147 |   |
| Investment securities                                      |   |                         | 14,669    |   |   |   | 11,945 |   |
| Dividends on Federal Home Loan Bank stock                  |   |                         | 3,363     |   |   |   | 3,363 |   |
| Federal funds sold and other                               |   |                         | 17,731    |   |   |   | 6,568 |   |
|                                                       |   |                         |      |   |   |   |   |   |
|   Total interest and dividend income                  |   |                         | 989,785   |   |   |   | 1,376,023 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Interest expense:                                          |   |                         |      |   |   |   |   |   |
| Deposits                                                   |   |                         | 304,507   |   |   |   | 492,183 |   |
| Borrowed funds                                             |   |                         | 39,598    |   |   |   | 63,652 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Total interest expense                                     |   |                         | 344,105   |   |   |   | 555,835 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Net interest income before provision for loan losses       |   |                         | 645,680   |   |   |   | 820,188 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Provision for loan losses                                  |   |                         | 4,260     |   |   |   | 839,167 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Net interest income (loss) after provision for loan losses |   |                         | 641,420   |   |   |   | (18,979 | ) |
|                                                       |   |                         |      |   |   |   |   |   |
| Noninterest income:                                        |   |                         |      |   |   |   |   |   |
| Service charges on deposit accounts                        |   |                         | 74,386    |   |   |   | 91,684 |   |
| Fees from origination of mortgage loans sold               |   |                         | 4,235     |   |   |   | 2,203 |   |
| Other                                                      |   |                         | 27,253    |   |   |   | 26,088 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Total noninterest income                                   |   |                         | 105,874   |   |   |   | 119,975 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Noninterest expense:                                       |   |                         |      |   |   |   |   |   |
| Salaries and employee benefits                             |   |                         | 368,048   |   |   |   | 405,831 |   |
| Occupancy                                                  |   |                         | 151,607   |   |   |   | 141,384 |   |
| Advertising                                                |   |                         | 5,163     |   |   |   | 6,676 |   |
| Data processing                                            |   |                         | 79,372    |   |   |   | 85,495 |   |
| Legal and professional                                     |   |                         | 103,731   |   |   |   | 116,003 |   |
| Depository insurance                                       |   |                         | 105,510   |   |   |   | 123,347 |   |
| Foreclosed real estate, net                                |   |                         | 107,538   |   |   |   | 211,281 |   |
| Other operating                                            |   |                         | 108,210   |   |   |   | 109,783 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Total noninterest expense                                  |   |                         | 1,029,179 |   |   |   | 1,199,800 |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Net loss before income taxes                               |   |                         | (281,885  | ) |   |   | (1,098,804 | ) |
|                                                       |   |                         |      |   |   |   |   |   |
| Income taxes                                               |   |                         | -         |   |   |   | - |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Net loss                                                   |   |                         | (281,885  | ) |   |   | (1,098,804 | ) |
| Preferred stock dividend requirement                       |   |                         | (12,199   | ) |   |   | - |   |
| Accretion on preferred stock discount                      |   |                         | (3,643    | ) |   |   | - |   |
|                                                       |   |                         |      |   |   |   |   |   |
| Net Loss to Common Shareholders                            |   | $                            | (297,727  | ) |   | $ | (1,098,804 | ) |
|                                                       |   |                         |      |   |   |   |   |   |
| Basic net loss per common share                            |   | $                            | (.12      | ) |   | $ | (.46 | ) |
| Diluted net loss per common share                          |   | $                            | (.12      | ) |   | $ | (.46 | ) |

----

|                                                                                       |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   | Accumulated   |       |       |   |   |
|-------------------------------------------------------------------------------------------------|--------|---------------|----------|--------|-----------|---------|---------|--------|--------|---------|------------|--------|--------|-----------|-----------|--------|---------------|------------|------------|--------|--------|
|                                                                                            |   |          |     |   |      |    |    |   |   |    | Additional |   |   |      |      |   | Other         |       |       |   |   |
|                                                                                            |   | Comprehensive |     |   | Preferred |    |    | Common |   |    | Paid-In    |   |   | Retained  |      |   | Comprehensive |       |       |   |   |
|                                                                                            |   | Loss          |     |   | Stock     |    |    | Stock  |   |    | Capital    |   |   | Deficit   |      |   | Income        |       |       | Total  |   |
|                                                                                            |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |
| Balance, December 31, 2010                                                                      |   |          |     |   | $         | 174,220 |    |   | $      | 796,337 |       |   | $      | 7,167,260 |      |   | $             | (5,946,761 | )          |   | $      | (48,212 | ) |   | $ | 2,142,844 |   |
|                                                                                            |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |
| Comprehensive loss:                                                                             |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |
| Net loss                                                                                        |   | $             | (281,885 | )      |      |    | -       |   |   |    | -          |   |   |      | -         |   |          |       | (281,885   | )      |   |   | - |   |   |   | (281,885 | ) |
| Other comprehensive income:                                                                     |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains (losses) on securities available for sale, net of tax effect of $1,546 |   |          | 2,492    |   |      |    | -       |   |   |    | -          |   |   |      | -         |   |          |       | -          |   |   |   | 2,492 |   |   |   | 2,492 |   |
|                                                                                            |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |   |
| Total comprehensive loss                                                                        |   | $             | (279,393 | )      |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |   |
| Accretion of discount on preferred stock -                                                      |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |   |
| Series A                                                                                        |   |          |     |   |      |    | 3,643   |   |   |    | -          |   |   |      | -         |   |          |       | (3,643     | )      |   |   | - |   |   |   | - |   |
|                                                                                            |   |          |     |   |      |    |    |   |   |    |       |   |   |      |      |   |          |       |       |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2011                                                                         |   |          |     |   |      | $       | 177,863 |   |   | $       | 796,337    |   |   | $         | 7,167,260 |   |          | $          | (6,232,289 | )      |   | $ | (45,720 | ) |   | $ | 1,863,451 |   |

----

|                                                                        |   | Three Months Ended |       |
|-----------------------------------------------------------------------------|--------|------------------------------|------------|
|                                                                        |   | March 31, 2011     |       |   | March 31, 2010 |   |
|                                                                        |   |                         |       |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                       |   |                         |       |   |   |   |
| Net loss                                                                    |   | $                            | (281,885   | ) |   | $ | (1,098,804 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |   |                         |       |   |   |   |   |   |
| Provision for loan losses                                                   |   |                         | 4,260      |   |   |   | 839,167 |   |
| Depreciation                                                                |   |                         | 63,922     |   |   |   | 69,191 |   |
| Write-down of foreclosed assets                                             |   |                         | 37,084     |   |   |   | 73,478 |   |
| Realized loss on sales of foreclosed assets                                 |   |                         | 11,511     |   |   |   | 116,212 |   |
| Increase in cash surrender value of bank owned life insurance               |   |                         | (25,794    | ) |   |   | (26,173 | ) |
| Net change in:                                                              |   |                         |       |   |   |   |   |   |
| Accrued interest receivable                                                 |   |                         | 98,901     |   |   |   | (13,552 | ) |
| Other assets                                                                |   |                         | 11,793     |   |   |   | 35,811 |   |
| Other liabilities                                                           |   |                         | (46,598    | ) |   |   | (11,049 | ) |
| Accrued interest payable                                                    |   |                         | 64,742     |   |   |   | (63,781 | ) |
|                                                                        |   |                         |       |   |   |   |   |   |
| Net cash used in operating activities                                       |   |                         | (62,064    | ) |   |   | (79,500 | ) |
|                                                                        |   |                         |       |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                       |   |                         |       |   |   |   |   |   |
| Securities available for sale:                                              |   |                         |       |   |   |   |   |   |
| Maturities, prepayments and calls                                           |   |                         | 5,987      |   |   |   | 1,499 |   |
| Proceeds from sale of foreclosed assets                                     |   |                         | 70,301     |   |   |   | 258,216 |   |
| Loan originations and principal collections, net                            |   |                         | 2,758,999  |   |   |   | 3,235,694 |   |
| Additions to premises and equipment                                         |   |                         | (7,272     | ) |   |   | (8,735 | ) |
|                                                                        |   |                         |       |   |   |   |   |   |
| Net cash provided by investing activities                                   |   |                         | 2,828,015  |   |   |   | 3,486,674 |   |
|                                                                        |   |                         |       |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                       |   |                         |       |   |   |   |   |   |
| Net change in deposits (non-time deposits)                                  |   |                         | (1,266,747 | ) |   |   | (1,299,437 | ) |
| Net change in time deposits                                                 |   |                         | (500,484   | ) |   |   | (1,109,770 | ) |
| Issuance of stock                                                           |   |                         | -          |   |   |   | 18,294 |   |
| Repayments of other borrowings                                              |   |                         | -          |   |   |   | (7,000 | ) |
| Federal Home Loan Bank repayments                                           |   |                         | -          |   |   |   | (143,914 | ) |
|                                                                        |   |                         |       |   |   |   |   |   |
| Net cash used in financing activities                                       |   |                         | (1,767,231 | ) |   |   | (2,541,827 | ) |
|                                                                        |   |                         |       |   |   |   |   |   |
| Net change in cash and cash equivalents                                     |   |                         | 998,720    |   |   |   | 865,347 |   |
|                                                                        |   |                         |       |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                            |   |                         | 11,290,775 |   |   |   | 10,214,016 |   |
|                                                                        |   |                         |       |   |   |   |   |   |
| Cash and cash equivalents at end of period                                  |   | $                            | 12,289,495 |   |   | $ | 11,079,363 |   |
|                                                                        |   |                         |       |   |   |   |   |   |
| SUPPLEMENTARY CASH FLOW INFORMATION:                                        |   |                         |       |   |   |   |   |   |
| Interest paid on deposits and borrowed funds                                |   | $                            | 279,363    |   |   | $ | 619,616 |   |
|                                                                        |   |                         |       |   |   |   |   |   |
| SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:                               |   |                         |       |   |   |   |   |   |
| Loans moved to foreclosed/repossessed assets                                |   | $                            | 2,608,065  |   |   | $ | 1,100,943 |   |

----

----

| Note 2. | Stock Options and Awards |
|---------|--------------------------|

|   | No options were granted during the three months ended March 31, 2011, and no compensation cost related to options is recognized in the consolidated statements of income for the three months ended March 31, 2011 or 2010.  No intrinsic value exists at March 31, 2011, as the market price of the Company's common stock of $1.50 per common share is below the exercise price of the outstanding options. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note 3.  | Earnings (Loss) Per Share of Common Stock |
|---------------|-------------------------------------------|

|   | Basic earnings (loss) per share (EPS) of common stock is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share of common stock is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares and potential dilutive common shares outstanding during the period.  Stock options are regarded as potential common shares.  Potential common shares are computed using the treasury stock method.  For the three months ended March 31, 2011, 31,550 options are excluded from the effect of dilutive securities because they are anti-dilutive; 71,050 options are similarly excluded from the effect of dilutive securities for the three months ended March 31, 2010. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The following is a reconciliation of the numerators and denominators used in the basic and diluted earnings (loss) per share computations for the three months ended March 31, 2011 and 2010. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                    |   | Three Months Ended March 31, |     |
|-------------------------------------------------------------------------|--------|--------------------------------------------------|----------|
|                                                                    |   | 2011                                             |     |   | 2010 |   |
|                                                                    |   | Income (Loss)                               |     |   | Shares |   |   | Income (Loss) |   |   | Shares |   |
|                                                                    |   | (Numerator)                                      |     |   | (Denominator) |   |   | (Numerator) |   |   | (Denominator) |   |
|                                                                    |   |                                             |     |   |   |   |   |   |   |   |   |   |
| Basic EPS                                                               |   |                                             |     |   |   |   |   |   |   |   |   |   |
| Income (loss) available to common stockholders                          |   | $                                                | (297,727 | ) |   |   | 2,389,391 |   |   | $ | (1,098,804 | ) |   |   | 2,389,391 |   |
|                                                                    |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of dilutive securities                                           |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock options outstanding                                               |   |                                             | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                    |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted EPS                                                             |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) available to common shareholders plus assumed conversions |   | $                                                | (297,727 | ) |   |   | 2,389,391 |   |   | $ | (1,098,804 | ) |   |   | 2,389,391 |   |

| Note 4. | Fair Value Disclosures |
|---------|------------------------|

|   | The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  In accordance with the Fair Value Measurements and Disclosures ASC Topic 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Fair value is best determined based upon quoted market prices.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction between market participants at the measurement date under current market conditions.  If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate.  In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment.  The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ASC Topic 820 also establishes a three-tier fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value, as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

----

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

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

|   | A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments.  There have been no changes in the methodologies used at March 31, 2011 and December 31, 2010. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash and cash equivalents: |
|--------|----------------------------|

|   | The carrying amounts of cash and due from banks, interest-bearing deposits in banks, and federal funds sold approximate fair values based on the short-term nature of the assets. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Securities: |
|--------|-------------|

|   | Loans: |
|--------|--------|

|   | For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.  Fair values for fixed-rate loans are estimated usingdiscounted cash flow analyses, using market interest rates for comparable loans.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310, Accounting by Creditors for Impairment of a Loan.  The fair value of impaired loans is estimated using several methods including collateral value, liquidation value and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  At March 31, 2011, substantially all of the total impaired loans were evaluated based on the fair value of collateral.  In accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Accrued interest: |
|--------|-------------------|

|   | The carrying amounts of accrued interest approximate fair value. |
|--------|------------------------------------------------------------------|

----

|   | Foreclosed assets: |
|--------|--------------------|

|   | Foreclosed assets, consisting of properties obtained through foreclosure or in satisfaction of loans, is initially recorded at fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs.  At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses.  Gains or losses on sale and any subsequent adjustment to the fair value are recorded as a component of foreclosed real estate expense.  Foreclosed assets are included in Level 2 of the valuation hierarchy when the fair value is based on an observable market price or a current appraised value.  When an appraised value is not available or management determines the foreclosed asset is impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash surrender value of bank owned life insurance: |
|--------|----------------------------------------------------|

|   | The carrying amounts of cash surrender value of bank owned life insurance approximate their fair value.  The carrying amount is based on information received from the insurance carriers indicating the financial performance of the policies and the amount the Company would receive should the policies be surrendered.  The Company reflects these assets within Level 2 of the valuation hierarchy. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Deposits: |
|--------|-----------|

|   | The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits and NOW, money market, and savings accounts, is equal to the amount payable on demand at the reporting date.  The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date.  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Federal Home Loan Bank and other borrowings: |
|--------|----------------------------------------------|

|   | Fair values of Federal Home Loan Bank and other borrowings are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis. |
|--------|---------------------------------------------------------------------------------------------------------------------|

|                                                    |   |            |      |   | Quoted Prices in |   |   | Significant    |   |   | Significant    |   |
|---------------------------------------------------------|--------|-----------------|-----------|--------|----------------------------|--------|--------|----------------|--------|--------|----------------|--------|
|                                                    |   | Balance as |      |   | Active Markets        |   |   | Other          |   |   | Other          |   |
|                                                    |   | of              |      |   | for Identical         |   |   | Observable     |   |   | Unobservable   |   |
|                                                    |   | March 31,  |      |   | Assets                     |   |   | Inputs         |   |   | Inputs         |   |
|                                                    |   | 2011            |      |   | (Level 1)             |   |   | (Level 2) |   |   | (Level 3) |   |
|                                                    |   |            |      |   |                       |   |   |           |   |   |           |   |
| Securities available for sale:                          |   |            |      |   |                       |   |   |           |   |   |           |   |
| Securities of U.S. Government agencies and corporations |   | $               | 2,441,600 |   |                       | $      | -      |           |   | $      | 2,441,600      |   |   | $ | - |   |
| Mortgage-backed securities                              |   |            | 473,171   |   |                       |   | -      |           |   |   | 473,171        |   |   |   | - |   |
|                                                    |   |            |      |   |                       |   |   |           |   |   |           |   |   |   |   |   |
|                                                    |   | $               | 2,914,771 |   |                       | $      | -      |           |   | $      | 2,914,771      |   |   | $ | - |   |
|                                                    |   |            |      |   |                       |   |   |           |   |   |           |   |   |   |   |   |
| Cash surrender value of life insurance                  |   | $               | 2,596,022 |   |                       | $      | -      |           |   | $      | 2,596,022      |   |   | $ | - |   |

|                                                    |   |              |      |   | Quoted Prices in |   |   | Significant    |   |   | Significant    |   |
|---------------------------------------------------------|--------|-------------------|-----------|--------|----------------------------|--------|--------|----------------|--------|--------|----------------|--------|
|                                                    |   | Balance as   |      |   | Active Markets        |   |   | Other          |   |   | Other          |   |
|                                                    |   | of                |      |   | for Identical         |   |   | Observable     |   |   | Unobservable   |   |
|                                                    |   | December 31, |      |   | Assets                     |   |   | Inputs         |   |   | Inputs         |   |
|                                                    |   | 2010              |      |   | (Level 1)             |   |   | (Level 2) |   |   | (Level 3) |   |
|                                                    |   |              |      |   |                       |   |   |           |   |   |           |   |
| Securities available for sale:                          |   |              |      |   |                       |   |   |           |   |   |           |   |
| Securities of U.S. Government agencies and corporations |   | $                 | 2,445,450 |   |                       | $      | -      |           |   | $      | 2,445,450      |   |   | $ | - |   |
| Mortgage-backed securities                              |   |              | 471,267   |   |                       |   | -      |           |   |   | 471,267        |   |   |   | - |   |
|                                                    |   |              |      |   |                       |   |   |           |   |   |           |   |   |   |   |   |
|                                                    |   | $                 | 2,916,717 |   |                       | $      | -      |           |   | $      | 2,916,717      |   |   | $ | - |   |
|                                                    |   |              |      |   |                       |   |   |           |   |   |           |   |   |   |   |   |
| Cash surrender value of life insurance                  |   | $                 | 2,570,228 |   |                       | $      | -      |           |   | $      | 2,570,228      |   |   | $ | - |   |

|   | The Company has no assets or liabilities whose fair values are measured on a recurring basis using Level 3 inputs. |
|--------|--------------------------------------------------------------------------------------------------------------------|

|   | Certain assets and liabilities are measured at fair value on a nonrecurring basis, which means the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  The tables below present information about assets and liabilities for which a nonrecurring change in fair value was recorded. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                   |   |            |      |   | Quoted Prices in |   |   | Significant    |   |   | Significant    |   |
|------------------------|--------|-----------------|-----------|--------|----------------------------|--------|--------|----------------|--------|--------|----------------|--------|
|                   |   | Balance as |      |   | Active Markets        |   |   | Other          |   |   | Other          |   |
|                   |   | of              |      |   | for Identical         |   |   | Observable     |   |   | Unobservable   |   |
|                   |   | March 31,  |      |   | Assets                     |   |   | Inputs         |   |   | Inputs         |   |
|                   |   | 2011            |      |   | (Level 1)             |   |   | (Level 2) |   |   | (Level 3) |   |
|                   |   |            |      |   |                       |   |   |           |   |   |           |   |
| Impaired loans         |   | $               | 2,919,930 |   |                       | $      | -      |           |   | $      | 2,919,930      |   |   | $ | - |   |
| Foreclosed real estate |   |            | 6,374,565 |   |                       |   | -      |           |   |   | 6,233,336      |   |   |   | 141,229 |   |

----

|                   |   |              |      |   | Quoted Prices in |   |   | Significant    |   |   | Significant    |   |
|------------------------|--------|-------------------|-----------|--------|----------------------------|--------|--------|----------------|--------|--------|----------------|--------|
|                   |   | Balance as   |      |   | Active Markets        |   |   | Other          |   |   | Other          |   |
|                   |   | of                |      |   | for Identical         |   |   | Observable     |   |   | Unobservable   |   |
|                   |   | December 31, |      |   | Assets                     |   |   | Inputs         |   |   | Inputs         |   |
|                   |   | 2010              |      |   | (Level 1)             |   |   | (Level 2) |   |   | (Level 3) |   |
|                   |   |              |      |   |                       |   |   |           |   |   |           |   |
| Impaired loans         |   | $                 | 4,434,890 |   |                       | $      | -      |           |   | $      | 4,434,890      |   |   | $ | - |   |
| Foreclosed real estate |   |              | 3,885,396 |   |                       |   | -      |           |   |   | 3,498,552      |   |   |   | 386,844 |   |

|   | Impaired loans include impaired loans held for investment for which an allowance for loan losses has been calculated based upon the fair value of the loans at March 31, 2011 and December 31, 2010. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The carrying amount and estimated fair value of the Company's financial instruments are as follows: |
|--------|-----------------------------------------------------------------------------------------------------|

|                                   |   | March 31, 2011 |       |   | December 31, 2010 |   |
|---------------------------------------------|--------|--------------------------|------------|--------|-----------------------------|--------|
|                                        |   | Carrying                 |       |   | Fair                        |   |   | Carrying |   |   | Fair |   |
|                                        |   | Amount                   |       |   | Value                       |   |   | Amount |   |   | Value |   |
| Financial Assets:                           |   |                     |       |   |                        |   |   |   |   |   |   |   |
| Cash and cash equivalents                   |   | $                        | 12,289,495 |   |                        | $      | 12,289,495 |   |   | $ | 11,290,775 |   |   | $ | 11,290,775 |   |
| Securities available for sale               |   |                     | 2,914,771  |   |                        |   | 2,914,771 |   |   |   | 2,916,717 |   |   |   | 2,916,717 |   |
| Federal Home Loan Bank stock                |   |                     | 296,500    |   |                        |   | 296,500 |   |   |   | 296,500 |   |   |   | 296,500 |   |
| Loans, net                                  |   |                     | 68,388,201 |   |                        |   | 68,504,582 |   |   |   | 73,759,525 |   |   |   | 73,740,093 |   |
| Accrued interest receivable                 |   |                     | 259,397    |   |                        |   | 259,397 |   |   |   | 358,298 |   |   |   | 358,298 |   |
| Cash surrender value of life insurance      |   |                     | 2,596,022  |   |                        |   | 2,596,022 |   |   |   | 2,570,228 |   |   |   | 2,570,228 |   |
|                                        |   |                     |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:                      |   |                     |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                    |   |                     | 91,887,088 |   |                        |   | 92,160,497 |   |   |   | 93,654,319 |   |   |   | 93,842,636 |   |
| Accrued interest payable                    |   |                     | 372,027    |   |                        |   | 372,027 |   |   |   | 307,285 |   |   |   | 307,285 |   |
| Federal Home Loan Bank and other borrowings |   |                     | 3,545,906  |   |                        |   | 3,561,166 |   |   |   | 3,545,906 |   |   |   | 3,582,568 |   |

| Note 5. | Securities Available for Sale |
|---------|-------------------------------|

|   | The amortized cost and estimated fair value of securities classified as available for sale and held to maturity at March 31, 2011 and December 31, 2010 are as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   |      |      |   | March 31, 2011 |   |
|---------------------------------------------------------|--------|-----------|-----------|--------|--------------------------|--------|
|                                                    |   |      |      |   | Gross                    |   |   | Gross |   |   |   |   |
|                                                    |   | Amortized |      |   | Unrealized               |   |   | Unrealized |   |   | Fair |   |
|                                                    |   | Cost      |      |   | Gains                    |   |   | Losses |   |   | Value |   |
|                                                    |   |      |      |   |                     |   |   |   |   |   |   |   |
| Securities Available for Sale:                          |   |      |      |   |                     |   |   |   |   |   |   |   |
|                                                    |   |      |      |   |                     |   |   |   |   |   |   |   |
| Securities of U.S. Government agencies and corporations |   | $         | 2,500,000 |   |                     | $      | - |   |   | $ | (58,400 | ) |   | $ | 2,441,600 |   |
|                                                    |   |      |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed and related securities (1)              |   |      | 488,857   |   |                     |   | - |   |   |   | (15,686 | ) |   |   | 473,171 |   |
|                                                    |   |      |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   | $         | 2,988,857 |   |                     | $      | - |   |   | $ | (74,086 | ) |   | $ | 2,914,771 |   |

----

|                                                    |   |      |      |   | December 31, 2010 |   |
|---------------------------------------------------------|--------|-----------|-----------|--------|-----------------------------|--------|
|                                                    |   |      |      |   | Gross                       |   |   | Gross |   |   |   |   |
|                                                    |   | Amortized |      |   | Unrealized                  |   |   | Unrealized |   |   | Fair |   |
|                                                    |   | Cost      |      |   | Gains                       |   |   | Losses |   |   | Value |   |
|                                                    |   |      |      |   |                        |   |   |   |   |   |   |   |
| Securities Available for Sale:                          |   |      |      |   |                        |   |   |   |   |   |   |   |
|                                                    |   |      |      |   |                        |   |   |   |   |   |   |   |
| Securities of U.S. Government agencies and corporations |   | $         | 2,500,000 |   |                        | $      | - |   |   | $ | (54,550 | ) |   | $ | 2,445,450 |   |
|                                                    |   |      |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed and related securities (1)              |   |      | 494,841   |   |                        |   | - |   |   |   | (23,574 | ) |   |   | 471,267 |   |
|                                                    |   |      |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   | $         | 2,994,841 |   |                        | $      | - |   |   | $ | (78,124 | ) |   | $ | 2,916,717 |   |

----

| Note 6. | Loans and Allowance for Loan Losses |
|---------|-------------------------------------|

|                                |   | March 31, |       |   | December 31, |   |
|-------------------------------------|--------|----------------|------------|--------|-------------------|--------|
|                                |   | 2011           |       |   | 2010              |   |
|                                |   |           |       |   |              |   |
| Mortgage loans on real estate:      |   |           |       |   |              |   |
| Residential 1-4 family              |   | $              | 37,484,240 |   |              | $      | 37,907,120 |   |
| Nonresidential & multifamily    |   |           | 18,211,340 |   |              |   | 21,222,784 |   |
| Construction and development        |   |           | 5,136,191  |   |              |   | 5,415,167 |   |
|                                |   |           | 60,831,771 |   |              |   | 64,545,071 |   |
|                                |   |           |       |   |              |   |   |   |
| Commercial loans                    |   |           | 8,969,723  |   |              |   | 10,805,289 |   |
|                                |   |           |       |   |              |   |   |   |
| Consumer loans                      |   |           | 1,247,383  |   |              |   | 1,365,175 |   |
|                                |   |           |       |   |              |   |   |   |
| Total loans                         |   |           | 71,048,877 |   |              |   | 76,715,535 |   |
|                                |   |           |       |   |              |   |   |   |
| Less:                               |   |           |       |   |              |   |   |   |
| Estimated allowance for loan losses |   |           | (2,660,676 | )      |              |   | (2,956,010 | ) |
|                                |   |           |       |   |              |   |   |   |
| Loans, net                          |   | $              | 68,388,201 |   |              | $      | 73,759,525 |   |

|   | An analysis of the allowance for loan losses follows: |
|--------|-------------------------------------------------------|

|                                       |   | Three Months         |      |   | Year Ended   |   |
|--------------------------------------------|--------|---------------------------|-----------|--------|-------------------|--------|
|                                       |   | Ended March 31, |      |   | December 31, |   |
|                                       |   | 2011                      |      |   | 2010              |   |
|                                       |   |                      |      |   |              |   |
| Balance, beginning                         |   | $                         | 2,956,010 |   |              | $      | 3,082,659 |   |
| Provision for loan losses                  |   |                      | 4,260     |   |              |   | 1,382,685 |   |
| Recoveries of loans previously charged-off |   |                      | 21,111    |   |              |   | 133,795 |   |
|                                       |   |                      |      |   |              |   |   |   |
|                                       |   |                      | 2,981,381 |   |              |   | 4,599,139 |   |
| Loans charged-off                          |   |                      | 320,705   |   |              |   | 1,643,129 |   |
|                                       |   |                      |      |   |              |   |   |   |
| Balance, ending                            |   | $                         | 2,660,676 |   |              | $      | 2,956,010 |   |

|                       |   |            |     |   | Nonresidential |   |     | Construction |   |   |       |   |   |     |    |   |        |   |
|---------------------------------|--------|-----------------|----------|--------|----------------|--------|----------|--------------|--------|--------|------------|--------|--------|----------|---------|--------|-------------|--------|
|                            |   | Residential     |     |   | and            |   |     | and          |   |   |       |   |   |     |    |   |        |   |   |   |   |
|                            |   | 1-4 Family |     |   | Multifamily    |   |     | Development  |   |   | Commercial |   |   | Consumer |    |   | Unallocated |   |   | Total |   |
|                            |   |            |     |   |           |   |     |         |   |   |       |   |   |     |    |   |        |   |   |   |   |
| Balance, beginning of period    |   | $               | 948,868  |   |           | $      | 460,801  |         |   | $      | 853,849    |   |   | $        | 651,319 |   |        | $      | 41,173 |   |   | $ | - |   |   | $ | 2,956,010 |   |
| Charge-offs                     |   |            | (10,512  | )      |           |   | (264,563 | )            |   |   | -          |   |   |     | (31,511 | )      |        |   | (14,119 | ) |   |   | - |   |   |   | (320,705 | ) |
| Recoveries                      |   |            | 10,941   |   |           |   | 937      |         |   |   | 320        |   |   |     | 1,969   |   |        |   | 6,944 |   |   |   | - |   |   |   | 21,111 |   |
| Provision charged to operations |   |            | (100,663 | )      |           |   | (6,971   | )            |   |   | 42,783     |   |   |     | 29,918  |   |        |   | (11,383 | ) |   |   | 50,576 |   |   |   | 4,260 |   |
|                            |   |            |     |   |           |   |     |         |   |   |       |   |   |     |    |   |        |   |   |   |   |   |   |   |   |   |   |   |
| Balance, net of period          |   | $               | 848,634  |   |           | $      | 190,204  |         |   | $      | 896,952    |   |   | $        | 651,695 |   |        | $      | 22,615 |   |   | $ | 50,576 |   |   | $ | 2,660,676 |   |

----

|                                         |   | March 31, 2011 |       |
|---------------------------------------------------|--------|--------------------------|------------|
|                                              |   |                     |       |   | Nonresidential |   |   | Construction |   |   |   |   |   |   |   |   |   |   |
|                                              |   | Residential              |       |   | and |   |   | and |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   | 1-4 Family          |       |   | Multifamily |   |   | Development |   |   | Commercial |   |   | Consumer |   |   | Unallocated |   |   | Total |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Specified reserves impaired loans                 |   | $                        | 202,835    |   |   | $ | - |   |   | $ | 369,275 |   |   | $ | 560,687 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,132,797 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General reserves                                  |   |                     | 645,799    |   |   |   | 190,204 |   |   |   | 527,677 |   |   |   | 91,008 |   |   |   | 22,615 |   |   |   | 50,576 |   |   |   | 1,527,879 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |   | $                        | 848,634    |   |   | $ | 190,204 |   |   | $ | 896,952 |   |   | $ | 651,695 |   |   | $ | 22,615 |   |   | $ | 50,576 |   |   | $ | 2,660,676 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment:      |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With a valuation allowance                        |   | $                        | 2,426,254  |   |   | $ | - |   |   | $ | 824,890 |   |   | $ | 801,583 |   |   | $ | - |   |   | $ | - |   |   | $ | 4,052,727 |   |
| Without a valuation allowance                     |   |                     | 3,675,070  |   |   |   | 2,889,934 |   |   |   | 383,695 |   |   |   | 540,972 |   |   |   | 165,799 |   |   |   | - |   |   |   | 7,655,470 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans individually evaluated for impairment |   |                     | 6,101,324  |   |   |   | 2,889,934 |   |   |   | 1,208,585 |   |   |   | 1,342,555 |   |   |   | 165,799 |   |   |   | - |   |   |   | 11,708,197 |   |
| Loans collectively evaluated for impairment       |   |                     | 31,382,916 |   |   |   | 15,321,406 |   |   |   | 3,927,606 |   |   |   | 7,627,168 |   |   |   | 1,081,584 |   |   |   | - |   |   |   | 59,340,680 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |   | $                        | 37,484,240 |   |   | $ | 18,211,340 |   |   | $ | 5,136,191 |   |   | $ | 8,969,723 |   |   | $ | 1,247,383 |   |   | $ | - |   |   | $ | 71,048,877 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valuation allowance related to impaired loans     |   | $                        | 202,835    |   |   | $ | - |   |   | $ | 369,275 |   |   | $ | 560,687 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,132,797 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average investment in impaired loans              |   | $                        | 6,098,794  |   |   | $ | 2,886,747 |   |   | $ | 1,210,301 |   |   | $ | 1,169,830 |   |   | $ | 7,294 |   |   | $ | - |   |   | $ | 11,372,966 |   |
|                                              |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income recognized on impaired loans      |   | $                        | 17,482     |   |   | $ | 6,312 |   |   | $ | 2,933 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 26,727 |   |

|                                         |   | December 31, 2010 |       |
|---------------------------------------------------|--------|-----------------------------|------------|
|                                              |   |                        |       |   | Nonresidential |   |   | Construction |   |   |   |   |   |   |   |   |   |   |
|                                              |   | Residential                 |       |   | and |   |   | and |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   | 1-4 Family             |       |   | Multifamily |   |   | Development |   |   | Commercial |   |   | Consumer |   |   | Unallocated |   |   | Total |   |
|                                              |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Specified reserves impaired loans                 |   | $                           | 198,774    |   |   | $ | 271,500 |   |   | $ | 422,771 |   |   | $ | 487,294 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,380,339 |   |
|                                              |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General reserves                                  |   |                        | 750,094    |   |   |   | 189,301 |   |   |   | 431,078 |   |   |   | 164,025 |   |   |   | 41,173 |   |   |   | - |   |   |   | 1,575,671 |   |
|                                              |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |   | $                           | 948,868    |   |   | $ | 460,801 |   |   | $ | 853,849 |   |   | $ | 651,319 |   |   | $ | 41,173 |   |   | $ | - |   |   | $ | 2,956,010 |   |
|                                              |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment:      |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With a valuation allowance                        |   | $                           | 1,941,917  |   |   | $ | 2,063,412 |   |   | $ | 1,008,317 |   |   | $ | 801,583 |   |   | $ | - |   |   | $ | - |   |   | $ | 5,815,229 |   |
| Without a valuation allowance                     |   |                        | 3,031,169  |   |   |   | 2,753,053 |   |   |   | 241,842 |   |   |   | 835,902 |   |   |   | 144,336 |   |   |   | - |   |   |   | 7,006,302 |   |
|                                              |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans individually evaluated for impairment |   |                        | 4,973,086  |   |   |   | 4,816,465 |   |   |   | 1,250,159 |   |   |   | 1,637,485 |   |   |   | 144,336 |   |   |   | - |   |   |   | 12,821,531 |   |
| Loans collectively evaluated for impairment       |   |                        | 32,934,034 |   |   |   | 16,406,319 |   |   |   | 4,165,008 |   |   |   | 9,167,804 |   |   |   | 1,220,839 |   |   |   | - |   |   |   | 63,894,004 |   |
|                                              |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |   | $                           | 37,907,120 |   |   | $ | 21,222,784 |   |   | $ | 5,415,167 |   |   | $ | 10,805,289 |   |   | $ | 1,365,175 |   |   | $ | - |   |   | $ | 76,715,535 |   |
|                                              |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valuation allowance related to impaired loans     |   | $                           | 198,774    |   |   | $ | 271,500 |   |   | $ | 422,771 |   |   | $ | 487,294 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,380,339 |   |

----

| Average investment in impaired loans         |   | $ | 12,882,436 |   |
|----------------------------------------------|--------|---|------------|--------|
| Interest income recognized on impaired loans |   | $ | 291,023    |   |

|                              |   | March 31,2011 |      |   | December 31,2010 |   |
|-----------------------------------|--------|--------------------|-----------|--------|-----------------------|--------|
|                              |   |               |      |   |                  |   |
| Non Accrual Loans:                |   |               |      |   |                  |   |
| Residential 1-4 family            |   | $                  | 5,034,025 |   |                  | $      | 3,464,994 |   |
| Nonresidential and multifamily    |   |               | 2,624,437 |   |                  |   | 4,528,590 |   |
| Construction and land development |   |               | 1,041,680 |   |                  |   | 1,080,586 |   |
| Commercial                        |   |               | 1,198,605 |   |                  |   | 1,182,141 |   |
| Consumer                          |   |               | 17,055    |   |                  |   | 13,383 |   |
|                              |   |               |      |   |                  |   |   |   |
| Total                             |   | $                  | 9,915,802 |   |                  | $      | 10,269,694 |   |

|                         |   | March 31, 2011 |      |
|-----------------------------------|--------|--------------------------|-----------|
|                              |   |                     |      |   | Past Due |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | 30-89 Days          |      |   | 90 Days |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | Past Due and   |      |   | Or More |   |   |   |   |   | Total |   |   | Current |   |   | Total |   |
|                              |   | Accruing                 |      |   | and Accruing |   |   | Non-Accrual |   |   | Past Due |   |   | Loans |   |   | Loans |   |
|                              |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential 1-4 family            |   | $                        | 1,997,062 |   |   | $ | 47,076 |   |   | $ | 5,034,025 |   |   | $ | 7,078,163 |   |   | $ | 30,406,077 |   |   | $ | 37,484,240 |   |
| Nonresidential and multifamily    |   |                     | 274,591   |   |   |   | - |   |   |   | 2,624,437 |   |   |   | 2,899,028 |   |   |   | 15,312,312 |   |   |   | 18,211,340 |   |
| Construction and land development |   |                     | -         |   |   |   | 14,892 |   |   |   | 1,041,680 |   |   |   | 1,056,572 |   |   |   | 4,079,619 |   |   |   | 5,136,191 |   |
| Commercial                        |   |                     | 23,492    |   |   |   | 8,840 |   |   |   | 1,198,605 |   |   |   | 1,230,937 |   |   |   | 7,738,786 |   |   |   | 8,969,723 |   |
| Consumer                          |   |                     | 22,333    |   |   |   | 3,078 |   |   |   | 17,055 |   |   |   | 42,466 |   |   |   | 1,204,917 |   |   |   | 1,247,383 |   |
|                              |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                             |   | $                        | 2,317,478 |   |   | $ | 73,886 |   |   | $ | 9,915,802 |   |   | $ | 12,307,166 |   |   | $ | 58,741,711 |   |   | $ | 71,048,877 |   |

----

|                         |   | December 31, 2010 |      |
|-----------------------------------|--------|-----------------------------|-----------|
|                              |   |                        |      |   | Past Due |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | 30-89 Days             |      |   | 90 Days |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | Past Due and      |      |   | Or More |   |   |   |   |   | Total |   |   | Current |   |   | Total |   |
|                              |   | Accruing                    |      |   | and Accruing |   |   | Non-Accrual |   |   | Past Due |   |   | Loans |   |   | Loans |   |
|                              |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential 1-4 family            |   | $                           | 1,757,199 |   |   | $ | 679,036 |   |   | $ | 3,464,994 |   |   | $ | 5,901,229 |   |   | $ | 32,005,891 |   |   | $ | 37,907,120 |   |
| Nonresidential and multifamily    |   |                        | 99,091    |   |   |   | 346,479 |   |   |   | 4,528,590 |   |   |   | 4,974,160 |   |   |   | 16,248,624 |   |   |   | 21,222,784 |   |
| Construction and land development |   |                        | 207,985   |   |   |   | 362,251 |   |   |   | 1,080,586 |   |   |   | 1,650,822 |   |   |   | 3,764,345 |   |   |   | 5,415,167 |   |
| Commercial                        |   |                        | 172,853   |   |   |   | 493,778 |   |   |   | 1,182,141 |   |   |   | 1,848,772 |   |   |   | 8,956,517 |   |   |   | 10,805,289 |   |
| Consumer                          |   |                        | 31,403    |   |   |   | 14,077 |   |   |   | 13,383 |   |   |   | 58,863 |   |   |   | 1,306,312 |   |   |   | 1,365,175 |   |
|                              |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                             |   | $                           | 2,268,531 |   |   | $ | 1,895,621 |   |   | $ | 10,269,694 |   |   | $ | 14,433,846 |   |   | $ | 62,281,689 |   |   | $ | 76,715,535 |   |

|                      |   | March 31, 2011 |       |
|--------------------------------|--------|--------------------------|------------|
|                           |   |                     |       |   | Special |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   | Pass                     |       |   | Mention |   |   | Substandard |   |   | Doubtful |   |   | Loss |   |   | Total |   |
|                           |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential 1-4 family         |   | $                        | 30,003,111 |   |   | $ | 1,282,593 |   |   | $ | 6,198,536 |   |   | $ | - |   |   | $ | - |   |   | $ | 37,484,240 |   |
| Nonresidential and multifamily |   |                     | 15,321,402 |   |   |   | - |   |   |   | 2,889,938 |   |   |   | - |   |   |   | - |   |   |   | 18,211,340 |   |
| Construction and development   |   |                     | 3,927,605  |   |   |   | - |   |   |   | 1,208,586 |   |   |   | - |   |   |   | - |   |   |   | 5,136,191 |   |
| Commercial                     |   |                     | 7,755,224  |   |   |   | 15,963 |   |   |   | 1,198,536 |   |   |   | - |   |   |   | - |   |   |   | 8,969,723 |   |
| Consumer                       |   |                     | 1,231,914  |   |   |   | 1,678 |   |   |   | 13,791 |   |   |   | - |   |   |   | - |   |   |   | 1,247,383 |   |
|                           |   |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                          |   | $                        | 58,239,256 |   |   | $ | 1,300,234 |   |   | $ | 11,509,387 |   |   | $ | - |   |   | $ | - |   |   | $ | 71,048,877 |   |

|                      |   | December 31, 2010 |       |
|--------------------------------|--------|-----------------------------|------------|
|                           |   |                        |       |   | Special |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   | Pass                        |       |   | Mention |   |   | Substandard |   |   | Doubtful |   |   | Loss |   |   | Total |   |
|                           |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential 1-4 family         |   | $                           | 31,712,951 |   |   | $ | 723,775 |   |   | $ | 5,470,394 |   |   | $ | - |   |   | $ | - |   |   | $ | 37,907,120 |   |
| Nonresidential and multifamily |   |                        | 16,230,470 |   |   |   | - |   |   |   | 4,992,314 |   |   |   | - |   |   |   | - |   |   |   | 21,222,784 |   |
| Construction and development   |   |                        | 4,007,095  |   |   |   | 157,913 |   |   |   | 1,250,159 |   |   |   | - |   |   |   | - |   |   |   | 5,415,167 |   |
| Commercial                     |   |                        | 9,006,658  |   |   |   | 117,831 |   |   |   | 1,680,800 |   |   |   | - |   |   |   | - |   |   |   | 10,805,289 |   |
| Consumer                       |   |                        | 1,340,535  |   |   |   | 8,620 |   |   |   | 16,020 |   |   |   | - |   |   |   | - |   |   |   | 1,365,175 |   |
|                           |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                          |   | $                           | 62,297,709 |   |   | $ | 1,008,139 |   |   | $ | 13,409,687 |   |   | $ | - |   |   | $ | - |   |   | $ | 76,715,535 |   |

----

----

----

----

----

|                                                   |   | March 31, |       |   | December 31, |   |
|--------------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|
|                                                   |   | 2011           |       |   | 2010              |   |
|                                                   |   |           |       |   |              |   |
| Impaired loans without a specific valuation allowance  |   | $              | 7,655,470  |   |              | $      | 7,006,302 |   |
| Impaired loans with a specific valuation allowance     |   |           | 4,052,727  |   |              |   | 5,815,229 |   |
| Total specifically evaluated impaired loans            |   | $              | 11,708,197 |   |              | $      | 12,821,531 |   |
| Specific valuation allowance related to impaired loans |   | $              | 1,132,797  |   |              | $      | 1,380,339 |   |

----

----

|                                                    |   |          |      |   | March 31, 2011 |   |
|---------------------------------------------------------|--------|---------------|-----------|--------|--------------------------|--------|
|                                                    |   | AmortizedCost |      |   | GrossUnrealizedGains     |   |   | GrossUnrealizedLosses |   |   | Fair Value |   |
|                                                    |   |          |      |   |                     |   |   |   |   |   |   |   |
| Securities Available for Sale:                          |   |          |      |   |                     |   |   |   |   |   |   |   |
|                                                    |   |          |      |   |                     |   |   |   |   |   |   |   |
| Securities of U.S. Government agencies and corporations |   | $             | 2,500,000 |   |                     | $      | - |   |   | $ | (58,400 | ) |   | $ | 2,441,600 |   |
|                                                    |   |          |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed and related securities                  |   |          | 488,857   |   |                     |   | - |   |   |   | (15,686 | ) |   |   | 473,171 |   |
|                                                    |   |          |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   | $             | 2,988,857 |   |                     | $      | - |   |   | $ | (74,086 | ) |   | $ | 2,914,771 |   |

----

----

|                            |   | RequiredMinimumRatio |   |   | To beWellCapitalized |   |   | RequirementsUnder theOrder |   |   | Bank   |   |
|---------------------------------|--------|----------------------|--------|--------|---------------------------|--------|--------|---------------------------------|--------|--------|--------|--------|
|                            |   |                 |   |   |                      |   |   |                            |   |   |   |   |
| Tier 1 leverage ratio           |   |                 | 4.00   | %      |                      |   | 5.00   | %                               |   |   | 8.00   | %      |   |   | 2.92 | % |
| Tier 1 risk-based capital ratio |   |                 | 4.00   | %      |                      |   | 6.00   | %                               |   |   | 10.00  | %      |   |   | 3.81 | % |
| Total risk-based capital ratio  |   |                 | 8.00   | %      |                      |   | 10.00  | %                               |   |   | 11.00  | %      |   |   | 5.09 | % |

----

----

| Item 1.  | LEGAL PROCEEDINGS |
|---------------|-------------------|

| Item 1A.  | RISK FACTORS |
|----------------|--------------|

| Item 2.  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|---------------|-------------------------------------------------------------|

|   | (a) | None. |
|--------|-----|-------|

|   | (b) | Not applicable. |
|--------|-----|-----------------|

|   | (c) | No repurchases of Company securities were made during the quarter ended March 31, 2011. |
|--------|-----|-----------------------------------------------------------------------------------------|

| Item 3.  | DEFAULTS UPON SENIOR SECURITIES |
|---------------|---------------------------------|

|   | (a) | None. |
|--------|-----|-------|

|   | (b) | None. |
|--------|-----|-------|

| Item 4.  | (REMOVED AND RESERVED) |
|---------------|------------------------|

| Item 5.  | OTHER INFORMATION |
|---------------|-------------------|

|   | (a) | None. |
|--------|-----|-------|

|   | (b) | None. |
|--------|-----|-------|

| Item 6.  | EXHIBITS. |
|---------------|-----------|

----

| Exhibit No. |     | Description                                                                                                                 |
|------------------|--------------------|-----------------------------------------------------------------------------------------------------------------------------|
|   3.1* |               | Charter of American Patriot Financial Group, Inc.                                                                           |
|   3.2* |               | Bylaws of American Patriot Financial Group, Inc.                                                                            |
| 31.1             |               | Certification pursuant to Rule 13a-14a/15d-14(a)                                                                            |
| 31.2             |               | Certification pursuant to Rule 13a-14a/15d-14(a)                                                                            |
| 32.1             |               | Certification pursuant to Rule 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2             |               | Certification pursuant to Rule 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

|   | * | Previously filed as an exhibit to a Current Report on Form 8-K filed by American Patriot Financial Group, Inc. (f/k/a BG Financial Group, Inc.) with the Commission on May 21, 2004. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| DATE:  | May 16, 2011 |                     | /s/ John D. Belew       |
|--------|--------------|--------------------------|-------------------------|
|   |         |      | John D. Belew           |
|   |         |                     | Chief Executive Officer |
|   |         |                     |                    |
| DATE:  | May 16, 2011 |                     | /s/ T. Don Waddell      |
|   |         |                     | T. Don Waddell          |
|   |         |                     | Chief Financial Officer |

----