| MICHIGAN                                                      |   | 38-2869722                           |
|---------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. Employer Identification No.) |

----

|                                     |   |                                                                                                                                |   | Page   |
|------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                     |   |                                                                                                                                |   | Number |
| Part I Financial Information (unaudited) |   |                                                                                                                                |
| Item 1.                                  |   | Financial Statements:                                                                                                               |   |   |
|                                     |   | Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010                                                               |   | 1      |
|                                     |   | Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010                                     |   | 2      |
|                                     |   | Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the six months ended June 30, 2011 and 2010 |   | 3      |
|                                     |   | Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010                                               |   | 4      |
|                                     |   | Notes to Interim Consolidated Financial Statements                                                                                  |   | 5      |
|                                     |   |                                                                                                                                |   |   |
| Item 2.                                  |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                         |   | 18     |
| Item 3.                                  |   | Quantitative and Qualitative Disclosures about Market Risk                                                                          |   | 32     |
| Item 4.                                  |   | Controls and Procedures                                                                                                             |   | 32     |
|                                     |   |                                                                                                                                |   |   |
| Part II. Other Information               |   |                                                                                                                                |
| Item 1A                                  |   | Risk Factors                                                                                                                        |   | 32     |
| Item 2.                                  |   | Unregistered Sales of Equity Securities and Use of Proceeds                                                                         |   | 32     |
| Item 6.                                  |   | Exhibits                                                                                                                            |   | 33     |
|                                     |   |                                                                                                                                |   |   |
| Signatures                               |   | 34                                                                                                                                  |

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|   | · | our ability to successfully raise new equity capital and/or our ability to implement our capital restoration and recovery plan; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | our ability to continue as a going concern in light of the uncertainty regarding the extent and timing of possible future regulatory enforcement action against the Bank; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the failure of assumptions underlying the establishment of and provisions made to our allowance for loan losses; |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | the timing and pace of an economic recovery in Michigan and the United States in general, including regional and local real estate markets; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the ability of our Bank to attain and maintain certain regulatory capital standards; |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | limitations on our ability to access and rely on wholesale funding sources; |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | the continued services of our management team, particularly as we work through our asset quality issues and the implementation of our capital restoration plan; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | implementation of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act or other new legislation, which may have significant effects on us and the financial services industry |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| FNBH Bancorp, Inc.                      |
|-----------------------------------------|
| Consolidated Balance Sheets (Unaudited) |

|                                                                                                                                                                                                                      |   | June 30, |        |   | December 31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                                                                                                                                                                                                                      |   | 2011          |        |   | 2010              |   |
| Assets                                                                                                                                                                                                                    |   |          |        |   |              |   |
| Cash and due from banks                                                                                                                                                                                                   |   | $             | 27,691,632  |   |              | $      | 40,376,267 |   |
| Short term investments                                                                                                                                                                                                    |   |          | 196,524     |   |              |   | 196,159 |   |
| Total cash and cash equivalents                                                                                                                                                                                           |   |          | 27,888,156  |   |              |   | 40,572,426 |   |
|                                                                                                                                                                                                                      |   |          |        |   |              |   |   |   |
| Investment securities:                                                                                                                                                                                                    |   |          |        |   |              |   |   |   |
| Investment securities available for sale, at fair value                                                                                                                                                                   |   |          | 41,033,144  |   |              |   | 27,269,670 |   |
| FHLBI and FRB stock, at cost                                                                                                                                                                                              |   |          | 779,050     |   |              |   | 901,350 |   |
| Total investment securities                                                                                                                                                                                               |   |          | 41,812,194  |   |              |   | 28,171,020 |   |
|                                                                                                                                                                                                                      |   |          |        |   |              |   |   |   |
| Loans held for investment:                                                                                                                                                                                                |   |          |        |   |              |   |   |   |
| Commercial                                                                                                                                                                                                                |   |          | 193,045,176 |   |              |   | 203,025,518 |   |
| Consumer                                                                                                                                                                                                                  |   |          | 15,482,141  |   |              |   | 16,641,544 |   |
| Real estate mortgage                                                                                                                                                                                                      |   |          | 15,293,950  |   |              |   | 16,271,284 |   |
| Total loans held for investment                                                                                                                                                                                           |   |          | 223,821,267 |   |              |   | 235,938,346 |   |
| Less allowance for loan losses                                                                                                                                                                                            |   |          | (12,650,158 | )      |              |   | (13,970,170 | ) |
| Net loans held for investment                                                                                                                                                                                             |   |          | 211,171,109 |   |              |   | 221,968,176 |   |
| Premises and equipment, net                                                                                                                                                                                               |   |          | 7,675,905   |   |              |   | 7,692,185 |   |
| Other real estate owned, held for sale                                                                                                                                                                                    |   |          | 2,967,340   |   |              |   | 4,294,212 |   |
| Accrued interest and other assets                                                                                                                                                                                         |   |          | 2,014,250   |   |              |   | 2,642,511 |   |
| Total assets                                                                                                                                                                                                              |   | $             | 293,528,954 |   |              | $      | 305,340,530 |   |
|                                                                                                                                                                                                                      |   |          |        |   |              |   |   |   |
| Liabilities and Shareholders' Equity                                                                                                                                                                                      |   |          |        |   |              |   |   |   |
| Liabilities                                                                                                                                                                                                               |   |          |        |   |              |   |   |   |
| Deposits:                                                                                                                                                                                                                 |   |          |        |   |              |   |   |   |
| Demand (non-interest bearing)                                                                                                                                                                                             |   | $             | 77,400,567  |   |              | $      | 62,294,189 |   |
| NOW                                                                                                                                                                                                                       |   |          | 28,571,521  |   |              |   | 52,018,941 |   |
| Savings and money market                                                                                                                                                                                                  |   |          | 76,191,484  |   |              |   | 75,226,475 |   |
| Time deposits                                                                                                                                                                                                             |   |          | 95,597,089  |   |              |   | 100,382,011 |   |
| Brokered certificates of deposit                                                                                                                                                                                          |   |          | 3,367,454   |   |              |   | 3,358,573 |   |
| Total deposits                                                                                                                                                                                                            |   |          | 281,128,115 |   |              |   | 293,280,189 |   |
| Accrued interest, taxes, and other liabilities                                                                                                                                                                            |   |          | 1,998,358   |   |              |   | 1,926,543 |   |
| Total liabilities                                                                                                                                                                                                         |   |          | 283,126,473 |   |              |   | 295,206,732 |   |
|                                                                                                                                                                                                                      |   |          |        |   |              |   |   |   |
| Shareholders' Equity                                                                                                                                                                                                      |   |          |        |   |              |   |   |   |
| Preferred stock, no par value.  Authorized 30,000 shares; no shares issued and outstanding                                                                                                                      |   |          | -           |   |              |   | - |   |
| Common stock, no par value. Authorized 7,000,000 shares at June 30, 2011 and December 31, 2010; 3,171,523 shares issued and outstanding at June 30, 2011 and 3,165,392 shares issued and outstanding at December 31, 2010 |   |          | 7,072,759   |   |              |   | 6,935,140 |   |
| Retained earnings                                                                                                                                                                                                         |   |          | 2,601,778   |   |              |   | 2,747,615 |   |
| Deferred directors' compensation                                                                                                                                                                                          |   |          | 577,111     |   |              |   | 708,372 |   |
| Accumulated other comprehensive income (loss)                                                                                                                                                                             |   |          | 150,833     |   |              |   | (257,329 | ) |
| Total shareholders' equity                                                                                                                                                                                                |   |          | 10,402,481  |   |              |   | 10,133,798 |   |
| Total liabilities and shareholders' equity                                                                                                                                                                                |   | $             | 293,528,954 |   |              | $      | 305,340,530 |   |

----

| FNBH Bancorp, Inc.                                |
|---------------------------------------------------|
| Consolidated Statements of Operations (Unaudited) |

|                                                 |   | Three months ended June 30 |      |   | Six months ended June 30 |   |
|------------------------------------------------------|--------|------------------------------------------------|-----------|--------|----------------------------------------------|--------|
|                                                 |   | 2011                                           |      |   | 2010                                         |   |   | 2011 |   |   | 2010 |   |
| Interest and dividend income:                        |   |                                           |      |   |                                         |   |   |   |   |   |   |   |
| Interest and fees on loans                           |   | $                                              | 2,939,342 |   |                                         | $      | 3,291,285 |   |   | $ | 5,903,588 |   |   | $ | 6,736,293 |   |
| Interest and dividends on investment securities:     |   |                                           |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury, agency securities and CMOs            |   |                                           | 275,452   |   |                                         |   | 195,740 |   |   |   | 468,897 |   |   |   | 406,361 |   |
| Obligations of states and political subdivisions     |   |                                           | 67,544    |   |                                         |   | 69,681 |   |   |   | 131,308 |   |   |   | 142,958 |   |
| Other securities                                     |   |                                           | 6,611     |   |                                         |   | 6,016 |   |   |   | 12,326 |   |   |   | 10,809 |   |
| Interest on short term investments                   |   |                                           | 499       |   |                                         |   | 143 |   |   |   | 822 |   |   |   | 232 |   |
| Total interest and dividend income                   |   |                                           | 3,289,448 |   |                                         |   | 3,562,865 |   |   |   | 6,516,941 |   |   |   | 7,296,653 |   |
| Interest expense:                                    |   |                                           |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                 |   |                                           | 399,554   |   |                                         |   | 658,872 |   |   |   | 850,557 |   |   |   | 1,367,686 |   |
| Interest on other borrowings                         |   |                                           | -         |   |                                         |   | - |   |   |   | - |   |   |   | 1,174 |   |
| Total interest expense                               |   |                                           | 399,554   |   |                                         |   | 658,872 |   |   |   | 850,557 |   |   |   | 1,368,860 |   |
| Net interest income                                  |   |                                           | 2,889,894 |   |                                         |   | 2,903,993 |   |   |   | 5,666,384 |   |   |   | 5,927,793 |   |
| Provision for loan losses                            |   |                                           | 800,002   |   |                                         |   | 1,200,000 |   |   |   | 1,600,000 |   |   |   | 2,400,000 |   |
| Net interest income after provision for loan losses  |   |                                           | 2,089,892 |   |                                         |   | 1,703,993 |   |   |   | 4,066,384 |   |   |   | 3,527,793 |   |
| Noninterest income:                                  |   |                                           |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Service charges and other fee income                 |   |                                           | 672,076   |   |                                         |   | 780,621 |   |   |   | 1,299,082 |   |   |   | 1,554,894 |   |
| Trust income                                         |   |                                           | 49,515    |   |                                         |   | 57,819 |   |   |   | 103,026 |   |   |   | 129,390 |   |
| Other                                                |   |                                           | 559       |   |                                         |   | (1,582 | ) |   |   | 31,961 |   |   |   | (135 | ) |
| Total noninterest income                             |   |                                           | 722,150   |   |                                         |   | 836,858 |   |   |   | 1,434,069 |   |   |   | 1,684,149 |   |
| Noninterest expense:                                 |   |                                           |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                       |   |                                           | 1,170,236 |   |                                         |   | 1,306,658 |   |   |   | 2,382,426 |   |   |   | 2,705,905 |   |
| Net occupancy expense                                |   |                                           | 209,140   |   |                                         |   | 255,547 |   |   |   | 480,113 |   |   |   | 539,921 |   |
| Equipment expense                                    |   |                                           | 101,456   |   |                                         |   | 83,583 |   |   |   | 180,378 |   |   |   | 173,733 |   |
| Professional and service fees                        |   |                                           | 402,485   |   |                                         |   | 437,324 |   |   |   | 753,037 |   |   |   | 827,705 |   |
| Loan collection and foreclosed property expenses     |   |                                           | 111,322   |   |                                         |   | 164,955 |   |   |   | 263,846 |   |   |   | 431,380 |   |
| Computer service fees                                |   |                                           | 109,242   |   |                                         |   | 116,664 |   |   |   | 221,883 |   |   |   | 233,765 |   |
| Computer software amortization expense               |   |                                           | 59,354    |   |                                         |   | 64,284 |   |   |   | 119,306 |   |   |   | 130,328 |   |
| FDIC assessment fees                                 |   |                                           | 258,319   |   |                                         |   | 360,493 |   |   |   | 583,486 |   |   |   | 716,854 |   |
| Insurance                                            |   |                                           | 135,876   |   |                                         |   | 182,744 |   |   |   | 283,316 |   |   |   | 344,022 |   |
| Printing and supplies                                |   |                                           | 50,786    |   |                                         |   | 38,981 |   |   |   | 80,419 |   |   |   | 73,778 |   |
| Director fees                                        |   |                                           | 19,938    |   |                                         |   | 16,125 |   |   |   | 39,125 |   |   |   | 33,075 |   |
| Net loss on sale/writedown of OREO and repossessions |   |                                           | 16,513    |   |                                         |   | 141,513 |   |   |   | 41,668 |   |   |   | 172,763 |   |
| Other                                                |   |                                           | 168,156   |   |                                         |   | 226,783 |   |   |   | 294,989 |   |   |   | 364,976 |   |
| Total noninterest expense                            |   |                                           | 2,812,823 |   |                                         |   | 3,395,654 |   |   |   | 5,723,992 |   |   |   | 6,748,205 |   |
| Loss before federal income taxes                     |   |                                           | (781      | )      |                                         |   | (854,803 | ) |   |   | (223,539 | ) |   |   | (1,536,263 | ) |
| Federal income tax expense (benefit)                 |   |                                           | (77,702   | )      |                                         |   | 60,542 |   |   |   | (77,702 | ) |   |   | (774 | ) |
| Net income (loss)                                    |   | $                                              | 76,921    |   |                                         | $      | (915,345 | ) |   | $ | (145,837 | ) |   | $ | (1,535,489 | ) |
| Per share statistics:                                |   |                                           |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Basic and Diluted EPS                                |   | $                                              | 0.02      |   |                                         | $      | (0.29 | ) |   | $ | (0.05 | ) |   | $ | (0.48 | ) |
| Basic and diluted average shares outstanding         |   |                                           | 3,197,837 |   |                                         |   | 3,191,928 |   |   |   | 3,197,729 |   |   |   | 3,190,668 |   |

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| FNBH BANCORP, INC. AND SUBSIDIARIES                                      |
|--------------------------------------------------------------------------|
| Consolidated Statements of Shareholders' Equity and Comprehensive Income |
| For the Six Months Ended June 30, 2011 and 2010 (Unaudited)              |

|                                                                                     |   | Common Stock |      |   | RetainedEarnings |   |       | Deferred Directors'Compensation |   |   | AccumulatedOtherComprehensiveIncome (Loss) |   |   | Total  |     |
|------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|------------|--------------------------------------|--------|--------|-------------------------------------------------|--------|--------|--------|----------|
| Balances at January 1, 2010                                                              |   | $                 | 6,738,128 |   |             | $      | 6,641,060  |                                 |   | $      | 885,919                                         |   |   | $      | 111,157  |   |   | $ | 14,376,264 |   |
| Earned portion of long term incentive plan                                               |   |              | 8,544     |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   | 8,544 |   |
| Issued 3,715 shares for employee stock purchase plan                                     |   |              | 1,620     |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   | 1,620 |   |
| Issued 8,088 shares for deferred directors' fees                                         |   |              | 177,547   |   |             |   |       |                                 |   |   | (177,547                                        | )      |   |   |     |   |   |   | - |   |
| Comprehensive loss:                                                                      |   |              |      |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   |   |   |
| Net loss                                                                                 |   |              |      |   |             |   | (1,535,489 | )                                    |   |   |                                            |   |   |   |     |   |   |   | (1,535,489 | ) |
| Change in unrealized gain on investment securities available for sale, net of tax effect |   |              |      |   |             |   |       |                                 |   |   |                                            |   |   |   | 1,502    |   |   |   | 1,502 |   |
| Total comprehensive loss                                                                 |   |              |      |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   | (1,533,987 | ) |
| Balances at June 30, 2010                                                                |   | $                 | 6,925,839 |   |             | $      | 5,105,571  |                                 |   | $      | 708,372                                         |   |   | $      | 112,659  |   |   | $ | 12,852,441 |   |
|                                                                                     |   |              |      |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   |   |   |
| Balances at January 1, 2011                                                              |   | $                 | 6,935,140 |   |             | $      | 2,747,615  |                                 |   | $      | 708,372                                         |   |   | $      | (257,329 | ) |   | $ | 10,133,798 |   |
| Earned portion of long term incentive plan                                               |   |              | 6,358     |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   | 6,358 |   |
| Issued 6,131 shares for deferred directors' fees                                         |   |              | 131,261   |   |             |   |       |                                 |   |   | (131,261                                        | )      |   |   |     |   |   |   | - |   |
| Comprehensive income:                                                                    |   |              |      |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   |   |   |
| Net loss                                                                                 |   |              |      |   |             |   | (145,837   | )                                    |   |   |                                            |   |   |   |     |   |   |   | (145,837 | ) |
| Change in unrealized gain on investment securities available for sale, net of tax effect |   |              |      |   |             |   |       |                                 |   |   |                                            |   |   |   | 408,162  |   |   |   | 408,162 |   |
| Total comprehensive income                                                               |   |              |      |   |             |   |       |                                 |   |   |                                            |   |   |   |     |   |   |   | 262,325 |   |
| Balances at June 30, 2011                                                                |   | $                 | 7,072,759 |   |             | $      | 2,601,778  |                                 |   | $      | 577,111                                         |   |   | $      | 150,833  |   |   | $ | 10,402,481 |   |

----

| FNBH BANCORP, INC. AND SUBSIDIARIES               |
|---------------------------------------------------|
| Consolidated Statements of Cash Flows (Unaudited) |

|                                                                           |   | Six months ended June 30 |        |
|--------------------------------------------------------------------------------|--------|----------------------------------------------|-------------|
|                                                                           |   | 2011                                         |        |   | 2010 |   |
| Cash flows from operating activities:                                          |   |                                         |        |   |   |   |
| Net loss                                                                       |   | $                                            | (145,837    | ) |   | $ | (1,535,489 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activites: |   |                                         |        |   |   |   |   |   |
| Provision for loan losses                                                      |   |                                         | 1,600,000   |   |   |   | 2,400,000 |   |
| Depreciation and amortization                                                  |   |                                         | 344,849     |   |   |   | 379,587 |   |
| Deferred income tax (benefit) expense                                          |   |                                         | (77,702     | ) |   |   | (774 | ) |
| Net amortization on investment securities                                      |   |                                         | 166,321     |   |   |   | 4,560 |   |
| Earned portion of long term incentive plan                                     |   |                                         | 6,358       |   |   |   | 8,544 |   |
| Loss on the disposal of fixed assets                                           |   |                                         | 1,574       |   |   |   | - |   |
| Loss on the sale of other real estate owned, held for sale                     |   |                                         | 43,218      |   |   |   | 188,737 |   |
| Decrease in accrued interest income and other assets                           |   |                                         | 507,381     |   |   |   | 1,571,903 |   |
| Decrease in accrued interest, taxes, and other liabilities                     |   |                                         | 71,815      |   |   |   | (193,698 | ) |
| Net cash provided by operating activities                                      |   |                                         | 2,517,977   |   |   |   | 2,823,370 |   |
| Cash flows from investing activities:                                          |   |                                         |        |   |   |   |   |   |
| Purchases of available for sale securities                                     |   |                                         | (16,085,664 | ) |   |   | - |   |
| Proceeds from maturities and calls of available for sale securities            |   |                                         | 250,000     |   |   |   | 390,000 |   |
| Proceeds from mortgage-backed securities paydowns-available for sale           |   |                                         | 2,391,733   |   |   |   | 2,116,234 |   |
| Proceeds from repurchse of FHLB stock                                          |   |                                         | 122,300     |   |   |   | - |   |
| Net decrease in loans                                                          |   |                                         | 9,093,367   |   |   |   | 13,394,419 |   |
| Proceeds from sale of other real estate owned, held for sale                   |   |                                         | 1,387,354   |   |   |   | 841,062 |   |
| Capital expenditures                                                           |   |                                         | (209,263    | ) |   |   | (64,348 | ) |
| Net cash provided by (used in) investing activities                            |   |                                         | (3,050,173  | ) |   |   | 16,677,367 |   |
| Cash flows from financing activities:                                          |   |                                         |        |   |   |   |   |   |
| Net decrease in deposits                                                       |   |                                         | (12,152,074 | ) |   |   | (25,684,575 | ) |
| Payments on FHLBI note                                                         |   |                                         | -           |   |   |   | (413,970 | ) |
| Shares issued for employee stock purchase plan                                 |   |                                         | -           |   |   |   | 1,620 |   |
| Net cash used in financing activities                                          |   |                                         | (12,152,074 | ) |   |   | (26,096,925 | ) |
| Net decrease in cash and cash equivalents                                      |   |                                         | (12,684,270 | ) |   |   | (6,596,188 | ) |
| Cash and cash equivalents at beginning of year                                 |   |                                         | 40,572,426  |   |   |   | 37,043,665 |   |
| Cash and cash equivalents at end of period                                     |   | $                                            | 27,888,156  |   |   | $ | 30,447,477 |   |
| Supplemental disclosures:                                                      |   |                                         |        |   |   |   |   |   |
| Interest paid                                                                  |   | $                                            | 892,648     |   |   | $ | 1,440,914 |   |
| Net federal income taxes refunded                                              |   |                                         | -           |   |   |   | 1,693,691 |   |
| Loans transferred to other real estate                                         |   |                                         | 103,700     |   |   |   | 3,788,742 |   |
| Loans charged off                                                              |   |                                         | 3,457,518   |   |   |   | 7,929,340 |   |

----

|                                            |   | June 30, 2011 |       |
|-------------------------------------------------|--------|-------------------------|------------|
|                                            |   |                    |       |   | Unrealized |   |   |   |   |
|                                            |   | Amortized Cost     |       |   | Gains |   |   | Losses |   |   | Fair Value |   |
| Obligations of state and political subdivisions |   | $                       | 6,060,573  |   |   | $ | 128,498 |   |   | $ | (30,349 | ) |   | $ | 6,158,722 |   |
| U.S. agency securities                          |   |                    | 5,990,000  |   |   |   | 63,344 |   |   |   | - |   |   |   | 6,053,344 |   |
| Mortgage-backed/CMO securities                  |   |                    | 28,705,236 |   |   |   | 428,324 |   |   |   | (498,882 | ) |   |   | 28,634,678 |   |
| Preferred stock securities (1)                  |   |                    | 48,800     |   |   |   | 137,600 |   |   |   | - |   |   |   | 186,400 |   |
| Total securities                                |   | $                       | 40,804,609 |   |   | $ | 757,766 |   |   | $ | (529,231 | ) |   | $ | 41,033,144 |   |

|                                            |   | December 31, 2010 |       |
|-------------------------------------------------|--------|-----------------------------|------------|
|                                            |   |                        |       |   | Unrealized |   |   |   |   |
|                                            |   | Amortized Cost         |       |   | Gains |   |   | Losses |   |   | Fair Value |   |
| Obligations of state and political subdivisions |   | $                           | 6,309,076  |   |   | $ | 94,982 |   |   | $ | (117,722 | ) |   | $ | 6,286,336 |   |
| Mortgage-backed/CMO securities                  |   |                        | 21,169,123 |   |   |   | 206,063 |   |   |   | (439,412 | ) |   |   | 20,935,774 |   |
| Preferred stock securities (1)                  |   |                        | 48,800     |   |   |   | 9,560 |   |   |   | (10,800 | ) |   |   | 47,560 |   |
| Total securities                                |   | $                           | 27,526,999 |   |   | $ | 310,605 |   |   | $ | (567,934 | ) |   | $ | 27,269,670 |   |

----

|                                            |   | June 30, 2011                      |    |
|-------------------------------------------------|--------|------------------------------------|---------|
|                                            |   | Less than 12 months |    |   | 12 months or more |   |   | Total |   |
|                                            |   | Unrealizedlosses                   |    |   | Fairvalue |   |   | Unrealizedlosses |   |   | Fairvalue |   |   | Unrealizedlosses |   |   | Fairvalue |   |
| Obligations of state and political subdivisions |   | $                                  | (30,349 | ) |   | $ | 1,323,666 |   |   | $ | - |   |   | $ | - |   |   | $ | (30,349 | ) |   | $ | 1,323,666 |   |
| Mortgage-backed/CMO securities                  |   | $                                  | (19,409 | ) |   | $ | 2,952,742 |   |   | $ | (479,473 | ) |   | $ | 2,308,138 |   |   | $ | (498,882 | ) |   | $ | 5,260,880 |   |
| Total available for sale                        |   | $                                  | (49,758 | ) |   | $ | 4,276,408 |   |   | $ | (479,473 | ) |   | $ | 2,308,138 |   |   | $ | (529,231 | ) |   | $ | 6,584,546 |   |

|                                            |   | December 31, 2010        |     |
|-------------------------------------------------|--------|------------------------------------|----------|
|                                            |   | Less than 12 months |     |   | 12 months or more |   |   | Total |   |
|                                            |   | Unrealizedlosses                   |     |   | Fairvalue |   |   | Unrealizedlosses |   |   | Fairvalue |   |   | Unrealizedlosses |   |   | Fairvalue |   |
| Obligations of state and political subdivisions |   | $                                  | (117,722 | ) |   | $ | 2,692,003 |   |   | $ | - |   |   | $ | - |   |   | $ | (117,722 | ) |   | $ | 2,692,003 |   |
| Mortgage-backed/CMO  securities       |   |                               | (59,401  | ) |   |   | 6,955,344 |   |   |   | (380,011 | ) |   |   | 2,591,514 |   |   |   | (439,412 | ) |   |   | 9,546,858 |   |
| Preferred stock securities                      |   |                               | (10,800  | ) |   |   | 22,400 |   |   |   | - |   |   |   | - |   |   |   | (10,800 | ) |   |   | 22,400 |   |
| Total available for sale                        |   | $                                  | (187,923 | ) |   | $ | 9,669,747 |   |   | $ | (380,011 | ) |   | $ | 2,591,514 |   |   | $ | (567,934 | ) |   | $ | 12,261,261 |   |

|                                   |   | June 30, 2011 |       |   | December 31, 2010 |   |
|----------------------------------------|--------|-------------------------|------------|--------|-----------------------------|--------|
|                                   |   | Amortized Cost     |       |   | Approximate FairValue  |   |   | Amortized Cost |   |   | Approximate FairValue |   |
| Due in one year or less                |   | $                       | -          |   |                        | $      | - |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years  |   |                    | 5,453,496  |   |                        |   | 5,537,571 |   |   |   | 715,954 |   |   |   | 735,290 |   |
| Due after five years through ten years |   |                    | 3,653,765  |   |                        |   | 3,741,769 |   |   |   | 2,646,610 |   |   |   | 2,701,070 |   |
| Due after ten years                    |   |                    | 2,992,111  |   |                        |   | 3,119,126 |   |   |   | 2,995,312 |   |   |   | 2,897,536 |   |
|                                   |   |                    | 12,099,372 |   |                        |   | 12,398,466 |   |   |   | 6,357,876 |   |   |   | 6,333,896 |   |
| Mortgage-backed/CMO securities         |   |                    | 28,705,237 |   |                        |   | 28,634,678 |   |   |   | 21,169,123 |   |   |   | 20,935,774 |   |
| Totals                                 |   | $                       | 40,804,609 |   |                        | $      | 41,033,144 |   |   | $ | 27,526,999 |   |   | $ | 27,269,670 |   |

----

|                                           |   | June 30, 2011 |        |   | December 31, 2010 |   |
|------------------------------------------------|--------|-------------------------|-------------|--------|-----------------------------|--------|
| Commerical                                     |   | $                       | 13,916,202  |   |                        | $      | 16,195,595 |   |
| Commercial real estate:                        |   |                    |        |   |                        |   |   |   |
| Construction, land development, and other land |   |                    | 18,584,557  |   |                        |   | 19,641,905 |   |
| Owner occupied                                 |   |                    | 60,907,798  |   |                        |   | 63,315,056 |   |
| Nonowner occupied                              |   |                    | 88,684,743  |   |                        |   | 91,690,983 |   |
| Consumer real estate:                          |   |                    |        |   |                        |   |   |   |
| Commercial purpose                             |   |                    | 10,356,320  |   |                        |   | 11,343,509 |   |
| Mortgage - Residential                         |   |                    | 15,661,160  |   |                        |   | 16,772,150 |   |
| Home equity and home equity lines of credit    |   |                    | 10,579,819  |   |                        |   | 11,397,448 |   |
| Consumer and Other                             |   |                    | 5,325,963   |   |                        |   | 5,783,631 |   |
| Subtotal                                       |   |                    | 224,016,562 |   |                        |   | 236,140,277 |   |
| Unearned income                                |   |                    | (195,295    | )      |                        |   | (201,931 | ) |
| Total Loans                                    |   | $                       | 223,821,267 |   |                        | $      | 235,938,346 |   |

|                       |   | For the Six Months Ended June 30, 2011 |      |
|----------------------------|--------|---------------------------------------------------------------------------|-----------|
|                       |   |                                                                      |      |   | Commercial |   |   | Consumer |   |   | Consumer |   |   |   |   |
|                       |   | Commercial                                                                |      |   | Real Estate |   |   | Real Estate |   |   | and Other |   |   | Total |   |
| Allowance for loan losses: |   |                                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance          |   | $                                                                         | 1,049,233 |   |   | $ | 10,555,428 |   |   | $ | 2,212,618 |   |   | $ | 152,891 |   |   | $ | 13,970,170 |   |
| Charge offs                |   |                                                                      | (224,929  | ) |   |   | (2,096,599 | ) |   |   | (1,035,864 | ) |   |   | (100,126 | ) |   |   | (3,457,518 | ) |
| Recoveries                 |   |                                                                      | 122,558   |   |   |   | 226,684 |   |   |   | 118,133 |   |   |   | 70,131 |   |   |   | 537,506 |   |
| Provision                  |   |                                                                      | (131,499  | ) |   |   | 488,868 |   |   |   | 1,221,413 |   |   |   | 21,218 |   |   |   | 1,600,000 |   |
| Ending balance             |   | $                                                                         | 815,363   |   |   | $ | 9,174,381 |   |   | $ | 2,516,300 |   |   | $ | 144,114 |   |   | $ | 12,650,158 |   |

----

|                       |   | For the Six Months Ended June 30, 2010 |      |
|----------------------------|--------|---------------------------------------------------------------------------|-----------|
|                       |   |                                                                      |      |   | Commercial |   |   | Consumer |   |   | Consumer |   |   |   |   |
|                       |   | Commercial                                                                |      |   | Real Estate |   |   | Real Estate |   |   | and Other |   |   | Total |   |
| Allowance for loan losses: |   |                                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance          |   | $                                                                         | 965,255   |   |   | $ | 15,554,706 |   |   | $ | 1,915,944 |   |   | $ | 229,268 |   |   | $ | 18,665,173 |   |
| Charge offs                |   |                                                                      | (413,161  | ) |   |   | (6,675,681 | ) |   |   | (685,531 | ) |   |   | (154,967 | ) |   |   | (7,929,340 | ) |
| Recoveries                 |   |                                                                      | 40,956    |   |   |   | 560,666 |   |   |   | 13,474 |   |   |   | 106,402 |   |   |   | 721,498 |   |
| Provision                  |   |                                                                      | 658,529   |   |   |   | 1,088,645 |   |   |   | 625,342 |   |   |   | 27,484 |   |   |   | 2,400,000 |   |
| Ending balance             |   | $                                                                         | 1,251,579 |   |   | $ | 10,528,336 |   |   | $ | 1,869,229 |   |   | $ | 208,187 |   |   | $ | 13,857,331 |   |

|                                  |   | June 30, 2011 |       |
|---------------------------------------|--------|-------------------------|------------|
|                                  |   |                    |       |   | Commercial |   |   | Consumer |   |   | Consumer |   |   |   |   |
|                                  |   | Commercial              |       |   | Real Estate |   |   | Real Estate |   |   | and Other |   |   | Total |   |
| Allowance for loan losses:            |   |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                       | 436,000    |   |   | $ | 4,678,000 |   |   | $ | 879,000 |   |   | $ | - |   |   | $ | 5,993,000 |   |
| Collectively evaluated for impairment |   |                    | 379,363    |   |   |   | 4,496,381 |   |   |   | 1,637,300 |   |   |   | 144,114 |   |   |   | 6,657,158 |   |
| Total allowance for loan losses       |   | $                       | 815,363    |   |   | $ | 9,174,381 |   |   | $ | 2,516,300 |   |   | $ | 144,114 |   |   | $ | 12,650,158 |   |
|                                  |   |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan balances:                        |   |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                       | 1,028,067  |   |   | $ | 25,618,141 |   |   | $ | 2,838,370 |   |   | $ | - |   |   | $ | 29,484,578 |   |
| Collectively evaluated for impairment |   |                    | 12,888,135 |   |   |   | 142,558,957 |   |   |   | 33,758,929 |   |   |   | 5,325,963 |   |   |   | 194,531,984 |   |
| Total loans                           |   | $                       | 13,916,202 |   |   | $ | 168,177,098 |   |   | $ | 36,597,299 |   |   | $ | 5,325,963 |   |   | $ | 224,016,562 |   |

|                                  |   | December 31, 2010 |       |
|---------------------------------------|--------|-----------------------------|------------|
|                                  |   |                        |       |   | Commercial |   |   | Consumer |   |   | Consumer |   |   |   |   |
|                                  |   | Commercial                  |       |   | Real Estate |   |   | Real Estate |   |   | and other |   |   | Total |   |
| Allowance for loan losses:            |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                           | 462,000    |   |   | $ | 5,776,000 |   |   | $ | 297,000 |   |   | $ | - |   |   | $ | 6,535,000 |   |
| Collectively evaluated for impairment |   |                        | 587,233    |   |   |   | 4,779,428 |   |   |   | 1,915,618 |   |   |   | 152,891 |   |   |   | 7,435,170 |   |
| Total allowance for loan losses       |   | $                           | 1,049,233  |   |   | $ | 10,555,428 |   |   | $ | 2,212,618 |   |   | $ | 152,891 |   |   | $ | 13,970,170 |   |
|                                  |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan balances:                        |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                           | 1,379,512  |   |   | $ | 27,427,229 |   |   | $ | 1,396,122 |   |   | $ | 403,632 |   |   | $ | 30,606,495 |   |
| Collectively evaluated for impairment |   |                        | 14,816,083 |   |   |   | 147,220,715 |   |   |   | 38,116,985 |   |   |   | 5,379,999 |   |   |   | 205,533,782 |   |
| Total Loans                           |   | $                           | 16,195,595 |   |   | $ | 174,647,944 |   |   | $ | 39,513,107 |   |   | $ | 5,783,631 |   |   | $ | 236,140,277 |   |

|   | A description of the general characteristics of each risk grade follows: |
|--------|--------------------------------------------------------------------------|

|   | · | RATING 1 (Minimal) - Loans in this category are generally to persons or entities of unquestioned financial strength, a highly liquid financial position, with collateral that is liquid and well margined.  These borrowers have performed without question on past obligations, and the Bank expects their performance to continue.  Internally generated cash flow covers current maturities on long-term debt by a substantial margin. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | RATING 2 (Modest) – These loans generally to persons or entities with strong financial condition and above-average liquidity who have previously satisfactorily handled their obligations with the Bank.  Collateral securing the Bank’s debt is margined in accordance with policy guidelines.  Internally-generated cash flow covers current maturities on long-term debt more than adequately. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | RATING 3 (Average) – These are loans generally with average cash flow and ratios compared to peers.  Usually RMA comparisons show where companies fall in the performance spectrum.  Companies have consistent performance for 3 or more years. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | RATING 4 (Acceptable) – These are loans generally to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly of fixed assets are included in this category.  These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future.  Overall, these loans are basically sound. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | RATING 5 (Acceptable – Monitor) - These loans are characterized by borrowers who have marginal cash flow, marginal profitability, or have experienced an unprofitable year and a declining financial condition. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition.  Other characteristics of borrowers in this class include inadequate credit information or weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure. This classification includes loans to established borrowers that are reasonably margined by collateral, but where near term potential for improvement in financial capacity appears limited. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | RATING 6 (Special Mention - OAEM) - Loans in this class generally have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. These potential weaknesses may result in a deterioration of the repayment of the loan and increase the credit risk. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Special mention credits may include a borrower that pays the Bank on a timely basis (occasional 30 day delinquent) and may be experiencing temporary cash flow deficiencies. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | RATING 7 (Substandard) - These loans are generally inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans. Substandard credits may include a borrower that pays consistently past due, has significant cash flow shortages and may have a collateral shortfall that requires a specific reserve. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | RATING 8 (Doubtful) - This risk rating class has all of the weaknesses inherent in the substandard rating but with the added characteristic that the weaknesses make collection in full or liquidation, on the basis of currently known existing facts, condition, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full within a reasonable period of time; in fact, there is permanent impairment in the collateral securing the Bank’s loan. These loans are in a work-out status, must be non-accrual status and have a defined work-out strategy. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | RATING 9 (Loss) - Loans in this risk rating have a portion of the loan that is deemed to be uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification means the asset has absolutely no recovery or salvage value. The Bank will take the loss in the period in which the related loan becomes uncollectible. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|       |   |       |       |   | Commerical Real Estate |   |       | Consumer Real Estate |   |   |           |   |
|-----------------|--------|------------|------------|--------|----------------------------------|--------|------------|--------------------------------|--------|--------|----------------|--------|
|            |   |       |       |   | Construction,                    |   |       |                           |   |   |           |   |   |   |   |   |   |   |   | Home equity |   |   |   |   |
|            |   |       |       |   | Land                             |   |       |                           |   |   |           |   |   |   |   |   |   |   |   | and Home |   |   |   |   |
|            |   |       |       |   | Development,                     |   |       | Owner                          |   |   | Non Owner |   |   | Commercial |   |   | Mortgage - |   |   | equity Lines of |   |   | Consumer |   |
| Risk Grade |   | Commercial |       |   | Other Land                  |   |       | Occupied                       |   |   | Occupied       |   |   | Purpose |   |   | Residential |   |   | Credit |   |   | and Other |   |
| Not Rated       |   | $          | -          |   |                             | $      | 90,464     |                           |   | $      | 53,384         |   |   | $ | - |   |   | $ | - |   |   | $ | 13,207,483 |   |   | $ | 10,257,321 |   |   | $ | 4,272,981 |   |
| 1               |   |       | 716,945    |   |                             |   | -          |                           |   |   | -              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 2               |   |       | 252,877    |   |                             |   | -          |                           |   |   | 536,286        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 3               |   |       | 2,021,238  |   |                             |   | 1,195,010  |                           |   |   | 3,597,918      |   |   |   | 1,027,508 |   |   |   | 443,968 |   |   |   | - |   |   |   | - |   |   |   | 510,084 |   |
| 4               |   |       | 3,976,514  |   |                             |   | 1,248,688  |                           |   |   | 13,712,865     |   |   |   | 24,499,757 |   |   |   | 1,886,754 |   |   |   | - |   |   |   | - |   |   |   | 148,789 |   |
| 5               |   |       | 3,302,330  |   |                             |   | 5,530,884  |                           |   |   | 27,596,190     |   |   |   | 41,085,507 |   |   |   | 3,759,055 |   |   |   | - |   |   |   | - |   |   |   | 151,332 |   |
| 6               |   |       | 1,305,292  |   |                             |   | 1,976,762  |                           |   |   | 5,257,256      |   |   |   | 10,246,558 |   |   |   | 1,611,067 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 7               |   |       | 2,341,006  |   |                             |   | 8,542,749  |                           |   |   | 10,153,899     |   |   |   | 11,825,413 |   |   |   | 2,655,476 |   |   |   | 2,453,677 |   |   |   | 322,498 |   |   |   | 242,777 |   |
| Total           |   | $          | 13,916,202 |   |                             | $      | 18,584,557 |                           |   | $      | 60,907,798     |   |   | $ | 88,684,743 |   |   | $ | 10,356,320 |   |   | $ | 15,661,160 |   |   | $ | 10,579,819 |   |   | $ | 5,325,963 |   |
|            |   |       |       |   |                             |   |       |                           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performing      |   | $          | 12,446,075 |   |                             | $      | 8,811,787  |                           |   | $      | 54,058,690     |   |   | $ | 79,001,454 |   |   | $ | 6,899,817 |   |   | $ | 14,351,653 |   |   | $ | 10,353,505 |   |   | $ | 5,279,718 |   |
| Nonperforming   |   |       | 1,470,127  |   |                             |   | 9,772,770  |                           |   |   | 6,849,108      |   |   |   | 9,683,289 |   |   |   | 3,456,503 |   |   |   | 1,309,507 |   |   |   | 226,314 |   |   |   | 46,245 |   |
| Total           |   | $          | 13,916,202 |   |                             | $      | 18,584,557 |                           |   | $      | 60,907,798     |   |   | $ | 88,684,743 |   |   | $ | 10,356,320 |   |   | $ | 15,661,160 |   |   | $ | 10,579,819 |   |   | $ | 5,325,963 |   |

|       |   |       |       |   | Commerical Real Estate |   |       | Consumer Real Estate |   |   |           |   |
|-----------------|--------|------------|------------|--------|----------------------------------|--------|------------|--------------------------------|--------|--------|----------------|--------|
|            |   |       |       |   | Construction,                    |   |       |                           |   |   |           |   |   |   |   |   |   |   |   | Home equity |   |   |   |   |
|            |   |       |       |   | Land                             |   |       |                           |   |   |           |   |   |   |   |   |   |   |   | and Home |   |   |   |   |
|            |   |       |       |   | Development,                     |   |       | Owner                          |   |   | Non Owner |   |   | Commercial |   |   | Mortgage - |   |   | equity Lines of |   |   | Consumer |   |
| Risk Grade |   | Commercial |       |   | Other Land                  |   |       | Occupied                       |   |   | Occupied       |   |   | Purpose |   |   | Residential |   |   | Credit |   |   | and Other |   |
| Not Rated       |   | $          | -          |   |                             | $      | 90,962     |                           |   | $      | 59,510         |   |   | $ | - |   |   | $ | - |   |   | $ | 13,922,193 |   |   | $ | 11,100,433 |   |   | $ | 4,429,637 |   |
| 1               |   |       | 915,371    |   |                             |   | -          |                           |   |   | -              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 2               |   |       | 508,717    |   |                             |   | -          |                           |   |   | -              |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 3               |   |       | 2,515,293  |   |                             |   | 1,470,334  |                           |   |   | 2,135,613      |   |   |   | 843,228 |   |   |   | 353,935 |   |   |   | - |   |   |   | - |   |   |   | 662,640 |   |
| 4               |   |       | 3,098,230  |   |                             |   | 1,173,686  |                           |   |   | 14,786,199     |   |   |   | 22,255,054 |   |   |   | 1,999,213 |   |   |   | - |   |   |   | - |   |   |   | 282,613 |   |
| 5               |   |       | 4,627,881  |   |                             |   | 5,317,013  |                           |   |   | 30,193,755     |   |   |   | 41,308,900 |   |   |   | 3,511,445 |   |   |   | - |   |   |   | - |   |   |   | 161,696 |   |
| 6               |   |       | 1,837,269  |   |                             |   | 1,865,608  |                           |   |   | 6,790,306      |   |   |   | 14,083,914 |   |   |   | 2,284,589 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| 7               |   |       | 2,692,834  |   |                             |   | 9,724,302  |                           |   |   | 9,349,673      |   |   |   | 13,199,887 |   |   |   | 3,194,327 |   |   |   | 2,849,957 |   |   |   | 297,015 |   |   |   | 247,045 |   |
| Total           |   | $          | 16,195,595 |   |                             | $      | 19,641,905 |                           |   | $      | 63,315,056     |   |   | $ | 91,690,983 |   |   | $ | 11,343,509 |   |   | $ | 16,772,150 |   |   | $ | 11,397,448 |   |   | $ | 5,783,631 |   |
|            |   |       |       |   |                             |   |       |                           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performing      |   | $          | 13,897,127 |   |                             | $      | 10,994,656 |                           |   | $      | 57,069,363     |   |   | $ | 82,662,548 |   |   | $ | 8,743,005 |   |   | $ | 14,965,365 |   |   | $ | 11,209,677 |   |   | $ | 5,740,341 |   |
| Nonperforming   |   |       | 2,298,468  |   |                             |   | 8,647,249  |                           |   |   | 6,245,693      |   |   |   | 9,028,435 |   |   |   | 2,600,504 |   |   |   | 1,806,785 |   |   |   | 187,771 |   |   |   | 43,290 |   |
| Total           |   | $          | 16,195,595 |   |                             | $      | 19,641,905 |                           |   | $      | 63,315,056     |   |   | $ | 91,690,983 |   |   | $ | 11,343,509 |   |   | $ | 16,772,150 |   |   | $ | 11,397,448 |   |   | $ | 5,783,631 |   |

----

|                                      |   |                     |      |   |            |   |      |          |   |   | Loans 90+          |   |
|------------------------------------------------|--------|--------------------------|-----------|--------|-----------------|--------|-----------|---------------|--------|--------|-------------------------|--------|
|                                           |   | Loans Past Due |      |   | Loans not  |   |      | Total         |   |   | days Past Due |   |
|                                           |   | 30-59 days          |      |   | 60-89 days |   |      | 90+ days |   |   | Total                   |   |   | Past Due |   |   | Loans |   |   | and Accruing |   |
| Commercial                                     |   | $                        | 27,310    |   |            | $      | 278,187   |          |   | $      | 6,066                   |   |   | $ | 311,563 |   |   | $ | 13,604,639 |   |   | $ | 13,916,202 |   |   | $ | - |   |
| Commercial real estate:                        |   |                     |      |   |            |   |      |          |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction, land development, and other land |   |                     | 142,902   |   |            |   | -         |          |   |   | 5,161,185               |   |   |   | 5,304,087 |   |   |   | 13,280,470 |   |   |   | 18,584,557 |   |   |   | - |   |
| Owner occupied                                 |   |                     | 186,240   |   |            |   | 408,628   |          |   |   | 1,843,746               |   |   |   | 2,438,614 |   |   |   | 58,469,184 |   |   |   | 60,907,798 |   |   |   | - |   |
| Nonowner occupied                              |   |                     | 265,108   |   |            |   | 128,333   |          |   |   | 2,122,356               |   |   |   | 2,515,797 |   |   |   | 86,168,946 |   |   |   | 88,684,743 |   |   |   | - |   |
| Consumer real estate:                          |   |                     |      |   |            |   |      |          |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial purpose                             |   |                     | 180,182   |   |            |   | -         |          |   |   | 394,960                 |   |   |   | 575,142 |   |   |   | 9,781,178 |   |   |   | 10,356,320 |   |   |   | - |   |
| Mortgage - Residential                         |   |                     | -         |   |            |   | 738,126   |          |   |   | 72,793                  |   |   |   | 810,919 |   |   |   | 14,850,241 |   |   |   | 15,661,160 |   |   |   | - |   |
| Home equity and home equity lines of credit    |   |                     | 218,766   |   |            |   | 35,210    |          |   |   | -                       |   |   |   | 253,976 |   |   |   | 10,325,843 |   |   |   | 10,579,819 |   |   |   | - |   |
| Consumer and Other                             |   |                     | 48,138    |   |            |   | 8,173     |          |   |   | 1,241                   |   |   |   | 57,552 |   |   |   | 5,268,411 |   |   |   | 5,325,963 |   |   |   | - |   |
| Total                                          |   | $                        | 1,068,646 |   |            | $      | 1,596,657 |          |   | $      | 9,602,347               |   |   | $ | 12,267,650 |   |   | $ | 211,748,912 |   |   | $ | 224,016,562 |   |   | $ | - |   |

|                                      |   |                     |      |   |            |   |    |          |   |   | Loans 90+          |   |
|------------------------------------------------|--------|--------------------------|-----------|--------|-----------------|--------|---------|---------------|--------|--------|-------------------------|--------|
|                                           |   | Loans Past Due |      |   | Loans not  |   |    | Total         |   |   | days Past Due |   |
|                                           |   | 30-59 days          |      |   | 60-89 days |   |    | 90+ days |   |   | Total                   |   |   | Past Due |   |   | Loans |   |   | and Accruing |   |
| Commercial                                     |   | $                        | 572,949   |   |            | $      | -       |          |   | $      | 530,616                 |   |   | $ | 1,103,565 |   |   | $ | 15,092,030 |   |   | $ | 16,195,595 |   |   | $ | - |   |
| Commercial real estate:                        |   |                     |      |   |            |   |    |          |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction, land development, and other land |   |                     | -         |   |            |   | -       |          |   |   | 6,091,118               |   |   |   | 6,091,118 |   |   |   | 13,550,787 |   |   |   | 19,641,905 |   |   |   | - |   |
| Owner occupied                                 |   |                     | 181,565   |   |            |   | -       |          |   |   | 2,672,341               |   |   |   | 2,853,906 |   |   |   | 60,461,150 |   |   |   | 63,315,056 |   |   |   | - |   |
| Nonowner occupied                              |   |                     | -         |   |            |   | -       |          |   |   | 2,032,497               |   |   |   | 2,032,497 |   |   |   | 89,658,486 |   |   |   | 91,690,983 |   |   |   | - |   |
| Consumer real estate:                          |   |                     |      |   |            |   |    |          |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial purpose                             |   |                     | -         |   |            |   | -       |          |   |   | 1,244,601               |   |   |   | 1,244,601 |   |   |   | 10,098,908 |   |   |   | 11,343,509 |   |   |   |   |   |
| Mortgage - Residential                         |   |                     | -         |   |            |   | 179,271 |          |   |   | 533,216                 |   |   |   | 712,487 |   |   |   | 16,059,663 |   |   |   | 16,772,150 |   |   |   |   |   |
| Home equity and home equity lines of credit    |   |                     | 256,360   |   |            |   | 104,330 |          |   |   | -                       |   |   |   | 360,690 |   |   |   | 11,036,758 |   |   |   | 11,397,448 |   |   |   | - |   |
| Consumer and Other                             |   |                     | 41,014    |   |            |   | 13,117  |          |   |   | 1,631                   |   |   |   | 55,762 |   |   |   | 5,727,869 |   |   |   | 5,783,631 |   |   |   | - |   |
| Total                                          |   | $                        | 1,051,888 |   |            | $      | 296,718 |          |   | $      | 13,106,020              |   |   | $ | 14,454,626 |   |   | $ | 221,685,651 |   |   | $ | 236,140,277 |   |   | $ | - |   |

----

|                                           |   | June 30, |       |   | December 31, |   |
|------------------------------------------------|--------|---------------|------------|--------|-------------------|--------|
|                                           |   | 2011          |       |   | 2010              |   |
| Commercial                                     |   | $             | 1,470,127  |   |              | $      | 2,298,468 |   |
| Commercial real estate:                        |   |          |       |   |              |   |   |   |
| Construction, land development, and other land |   |          | 9,772,770  |   |              |   | 8,647,249 |   |
| Owner occupied                                 |   |          | 6,849,108  |   |              |   | 6,245,693 |   |
| Nonowner occupied                              |   |          | 9,683,289  |   |              |   | 9,028,435 |   |
| Consumer real estate:                          |   |          |       |   |              |   |   |   |
| Commercial purpose                             |   |          | 3,456,503  |   |              |   | 2,600,504 |   |
| Mortgage - Residential                         |   |          | 1,309,507  |   |              |   | 1,806,785 |   |
| Home equity and home equity lines of credit    |   |          | 226,314    |   |              |   | 187,771 |   |
| Consumer and Other                             |   |          | 46,245     |   |              |   | 43,290 |   |
| Total                                          |   | $             | 32,813,863 |   |              | $      | 30,858,195 |   |

----

|                                           |   | Recorded   |       |   | Unpaid Principal |   |       | Related   |   |   | Average   |   |
|------------------------------------------------|--------|------------|------------|--------|-----------------------|--------|------------|-----------|--------|--------|-----------|--------|
|                                           |   | Investment |       |   | Balance               |   |       | Allowance |   |   | Balance   |   |
| With no related allowance recorded:            |   |       |       |   |                  |   |       |      |   |   |      |   |
| Commercial                                     |   | $          | 256,267    |   |                  | $      | 286,059    |      |   | $      | -         |   |   | $ | 259,611 |   |
| Commercial real estate:                        |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Construction, land development, and other land |   |       | 1,583,732  |   |                  |   | 1,750,578  |      |   |   | -         |   |   |   | 1,597,740 |   |
| Owner occupied                                 |   |       | 1,474,524  |   |                  |   | 1,854,865  |      |   |   | -         |   |   |   | 1,607,881 |   |
| Non owner occupied                             |   |       | 901,980    |   |                  |   | 963,987    |      |   |   | -         |   |   |   | 912,402 |   |
| Consumer real estate:                          |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial purpose                             |   |       | 541,698    |   |                  |   | 637,070    |      |   |   | -         |   |   |   | 610,851 |   |
| Mortgage - Residential                         |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Home equity and home equity lines of credit    |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Consumer and Other                             |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
|                                           |   |       | 4,758,201  |   |                  |   | 5,492,559  |      |   |   | -         |   |   |   | 4,988,485 |   |
| With an allowance recorded:                    |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial                                     |   |       | 771,800    |   |                  |   | 822,499    |      |   |   | 436,000   |   |   |   | 784,161 |   |
| Commercial real estate:                        |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Construction, land development, and other land |   |       | 7,463,795  |   |                  |   | 11,343,228 |      |   |   | 1,392,000 |   |   |   | 7,513,569 |   |
| Owner occupied                                 |   |       | 4,296,620  |   |                  |   | 5,235,722  |      |   |   | 831,000   |   |   |   | 4,810,096 |   |
| Non owner occupied                             |   |       | 9,897,490  |   |                  |   | 11,439,771 |      |   |   | 2,455,000 |   |   |   | 10,389,258 |   |
| Consumer real estate:                          |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial purpose                             |   |       | 2,296,672  |   |                  |   | 2,470,215  |      |   |   | 879,000   |   |   |   | 2,310,422 |   |
| Mortgage - Residential                         |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Home equity and home equity lines of credit    |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Consumer and Other                             |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
|                                           |   |       | 24,726,377 |   |                  |   | 31,311,435 |      |   |   | 5,993,000 |   |   |   | 25,807,506 |   |
| Total:                                         |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial                                     |   |       | 1,028,067  |   |                  |   | 1,108,558  |      |   |   | 436,000   |   |   |   | 1,043,772 |   |
| Commercial real estate:                        |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Construction, land development, and other land |   |       | 9,047,527  |   |                  |   | 13,093,806 |      |   |   | 1,392,000 |   |   |   | 9,111,309 |   |
| Owner occupied                                 |   |       | 5,771,144  |   |                  |   | 7,090,587  |      |   |   | 831,000   |   |   |   | 6,417,977 |   |
| Non owner occupied                             |   |       | 10,799,470 |   |                  |   | 12,403,758 |      |   |   | 2,455,000 |   |   |   | 11,301,660 |   |
| Consumer real estate:                          |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial purpose                             |   |       | 2,838,370  |   |                  |   | 3,107,285  |      |   |   | 879,000   |   |   |   | 2,921,273 |   |
| Mortgage - Residential                         |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Home equity and home equity lines of credit    |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Consumer and Other                             |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Total                                          |   | $          | 29,484,578 |   |                  | $      | 36,803,994 |      |   | $      | 5,993,000 |   |   | $ | 30,795,991 |   |

----

|                                           |   | Recorded   |       |   | Unpaid Principal |   |       | Related   |   |   | Average   |   |
|------------------------------------------------|--------|------------|------------|--------|-----------------------|--------|------------|-----------|--------|--------|-----------|--------|
|                                           |   | Investment |       |   | Balance               |   |       | Allowance |   |   | Balance   |   |
| With no related allowance recorded:            |   |       |       |   |                  |   |       |      |   |   |      |   |
| Commercial                                     |   | $          | 551,143    |   |                  | $      | 580,023    |      |   | $      | -         |   |   | $ | 693,352 |   |
| Commercial real estate:                        |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Construction, land development, and other land |   |       | 1,487,350  |   |                  |   | 4,417,929  |      |   |   | -         |   |   |   | 2,376,456 |   |
| Owner occupied                                 |   |       | 3,217,843  |   |                  |   | 3,438,668  |      |   |   | -         |   |   |   | 1,740,262 |   |
| Non owner occupied                             |   |       | 1,671,186  |   |                  |   | 1,698,476  |      |   |   | -         |   |   |   | 2,377,437 |   |
| Consumer real estate:                          |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial purpose                             |   |       | 704,837    |   |                  |   | 794,233    |      |   |   | -         |   |   |   | 140,967 |   |
| Mortgage - Residential                         |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Home equity and home equity lines of credit    |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Consumer and Other                             |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
|                                           |   |       | 7,632,359  |   |                  |   | 10,929,329 |      |   |   | -         |   |   |   | 7,328,474 |   |
| With an allowance recorded:                    |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial                                     |   |       | 828,369    |   |                  |   | 861,986    |      |   |   | 462,000   |   |   |   | 1,065,747 |   |
| Commercial real estate:                        |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Construction, land development, and other land |   |       | 6,706,756  |   |                  |   | 8,262,532  |      |   |   | 1,085,000 |   |   |   | 9,269,626 |   |
| Owner occupied                                 |   |       | 4,606,999  |   |                  |   | 5,070,441  |      |   |   | 1,394,000 |   |   |   | 4,954,620 |   |
| Non owner occupied                             |   |       | 9,737,095  |   |                  |   | 10,473,268 |      |   |   | 3,297,000 |   |   |   | 7,838,019 |   |
| Consumer real estate:                          |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial purpose                             |   |       | 1,094,917  |   |                  |   | 1,100,483  |      |   |   | 297,000   |   |   |   | 218,983 |   |
| Mortgage - Residential                         |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Home equity and home equity lines of credit    |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Consumer and Other                             |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
|                                           |   |       | 22,974,136 |   |                  |   | 25,768,710 |      |   |   | 6,535,000 |   |   |   | 23,346,995 |   |
| Total:                                         |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial                                     |   |       | 1,379,512  |   |                  |   | 1,442,009  |      |   |   | 462,000   |   |   |   | 1,759,099 |   |
| Commercial real estate:                        |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Construction, land development, and other land |   |       | 8,194,106  |   |                  |   | 12,680,461 |      |   |   | 1,085,000 |   |   |   | 11,646,082 |   |
| Owner occupied                                 |   |       | 7,824,842  |   |                  |   | 8,509,109  |      |   |   | 1,394,000 |   |   |   | 6,694,882 |   |
| Non owner occupied                             |   |       | 11,408,281 |   |                  |   | 12,171,744 |      |   |   | 3,297,000 |   |   |   | 10,215,456 |   |
| Consumer real estate:                          |   |       |       |   |                  |   |       |      |   |   |      |   |   |   |   |   |
| Commercial purpose                             |   |       | 1,799,754  |   |                  |   | 1,894,716  |      |   |   | 297,000   |   |   |   | 359,950 |   |
| Mortgage - Residential                         |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Home equity and home equity lines of credit    |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Consumer and Other                             |   |       | -          |   |                  |   | -          |      |   |   | -         |   |   |   | - |   |
| Total                                          |   | $          | 30,606,495 |   |                  | $      | 36,698,039 |      |   | $      | 6,535,000 |   |   | $ | 30,675,469 |   |

----

|                                            |   | Fair Value Measurements at June 30, 2011 |       |
|-------------------------------------------------|--------|------------------------------------------------------------------------|------------|
|                                            |   |                                                                   |       |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservable Inputs |   |   | SignificantUnobservableInputs |   |
|                                            |   | Total                                                                  |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Obligations of state and political subdivisions |   | $                                                                      | 6,158,722  |   |   | $ | - |   |   | $ | 6,158,722 |   |   | $ | - |   |
| U.S. agency securities                          |   |                                                                   | 6,053,344  |   |   |   | - |   |   |   | 6,053,344 |   |   |   | - |   |
| Mortgage-backed/CMO securities                  |   |                                                                   | 28,634,678 |   |   |   | - |   |   |   | 26,326,540 |   |   |   | 2,308,138 |   |
| Preferred stock securities                      |   |                                                                   | 186,400    |   |   |   | - |   |   |   | 186,400 |   |   |   | - |   |
| Total investment securities available for sale  |   | $                                                                      | 41,033,144 |   |   | $ | - |   |   | $ | 38,725,006 |   |   | $ | 2,308,138 |   |

|                                            |   | Fair Value Measurements at December 31, 2010 |       |
|-------------------------------------------------|--------|----------------------------------------------------------------------------|------------|
|                                            |   |                                                                       |       |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservable Inputs |   |   | SignificantUnobservableInputs |   |
|                                            |   | Total                                                                      |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Obligations of state and political subdivisions |   | $                                                                          | 6,286,336  |   |   | $ | - |   |   | $ | 6,286,336 |   |   | $ | - |   |
| Mortgage-backed/CMO securities                  |   |                                                                       | 20,935,774 |   |   |   | - |   |   |   | 18,344,260 |   |   |   | 2,591,514 |   |
| Preferred stock securities                      |   |                                                                       | 47,560     |   |   |   | - |   |   |   | 47,560 |   |   |   | - |   |
| Total investment securities available for sale  |   | $                                                                          | 27,269,670 |   |   | $ | - |   |   | $ | 24,678,156 |   |   | $ | 2,591,514 |   |

|                                                                                                                                                           |   | Fair Value MeasurementsUsing SignificantUnobservable Inputs |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|-----------|
|                                                                                                                                                           |   | (Level 3)                                                                  |      |
| Fair value of CMO, beginning of period(1)                                                                                                                      |   | $                                                                               | 2,591,514 |   |
| Total gains (losses) realized/unrealized:                                                                                                                      |   |                                                                            |      |   |
| Included in earnings(2)                                                                                                                                        |   |                                                                            | -         |   |
| Included in other comprehensive income(2)                                                                                                                      |   |                                                                            | (99,462   | ) |
| Purchases, issuances, and other settlements                                                                                                                    |   |                                                                            | (183,914  | ) |
| Transfers into Level 3(3)                                                                                                                                      |   |                                                                            | -         |   |
| Fair value of CMO, June 30, 2011                                                                                                                               |   | $                                                                               | 2,308,138 |   |
|                                                                                                                                                           |   |                                                                            |      |   |
| Total amount of losses for the period included in earnings attributable to the change in unrealized losses relating to assets still held at June 30, 2011 |   | $                                                                               | -         |   |

|   | (1) | Non-agency CMO classified as available for sale is valued using internal valuation models and pricing information from third parties. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Realized gain (losses), including unrealized losses deemed other-than-temporary, are reported in noninterest income.  Unrealized gains (losses) are reported in accumulated other comprehensive income (loss). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Transfers in or out are based on the carrying amount of the security at the beginning of the period. |
|--------|-----|------------------------------------------------------------------------------------------------------|

----

|                    |   | Fair Value Measurements at June 30, 2011 |       |
|-------------------------|--------|------------------------------------------------------------------------|------------|
|                    |   |                                                                   |       |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservable Inputs |   |   | SignificantUnobservableInputs |   |
|                    |   | Total                                                                  |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Impaired loans (1)      |   | $                                                                      | 23,491,578 |   |   | $ | - |   |   | $ | - |   |   | $ | 23,491,578 |   |
| Other real estate owned |   |                                                                   | 2,967,339  |   |   |   | - |   |   |   | - |   |   |   | 2,967,339 |   |

|                    |   | Fair Value Measurements at December 31, 2010 |       |
|-------------------------|--------|----------------------------------------------------------------------------|------------|
|                    |   |                                                                       |       |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservableInputs |   |   | SignificantUnobservableInputs |   |
|                    |   | Total                                                                      |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Impaired loans (1)      |   | $                                                                          | 24,071,495 |   |   | $ | - |   |   | $ | - |   |   | $ | 24,071,495 |   |
| Other real estate owned |   |                                                                       | 4,294,212  |   |   |   | - |   |   |   | - |   |   |   | 4,294,212 |   |

| (1) | Represents carrying value and related write-downs and specific reserves pertaining to collateral dependent loans for which adjustments are based on the appraised value of the collateral or by other unobservable inputs. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                       |   | June 30, 2011 |        |   | December 31, 2010 |   |
|--------------------------------------------|--------|-------------------------|-------------|--------|-----------------------------|--------|
|                                       |   | CarryingValue           |        |   | FairValue                   |   |   | CarryingValue |   |   | FairValue |   |
| Financial assets:                          |   |                    |        |   |                        |   |   |   |   |   |   |   |
| Cash and cash equivalents                  |   | $                       | 27,888,000  |   |                        | $      | 27,888,000 |   |   | $ | 40,572,000 |   |   | $ | 40,572,000 |   |
| Investments and mortgage-backed securities |   |                    | 41,033,000  |   |                        |   | 41,033,000 |   |   |   | 27,270,000 |   |   |   | 27,270,000 |   |
| FHLBI and FRB stock                        |   |                    | 779,000     |   |                        | NA     |   |   |   | 901,000 |   |   | NA |   |
| Loans, net                                 |   |                    | 223,821,000 |   |                        |   | 224,458,000 |   |   |   | 221,968,000 |   |   |   | 222,025,000 |   |
| Accrued interest income                    |   |                    | 803,000     |   |                        |   | 803,000 |   |   |   | 834,000 |   |   |   | 834,000 |   |
| Financial liabilities:                     |   |                    |        |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                   |   |                    |        |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Demand                                     |   | $                       | 77,401,000  |   |                        | $      | 77,401,000 |   |   | $ | 62,294,000 |   |   | $ | 62,294,000 |   |
| NOW                                        |   |                    | 28,572,000  |   |                        |   | 28,176,000 |   |   |   | 52,019,000 |   |   |   | 52,089,000 |   |
| Savings and money market accounts          |   |                    | 76,191,000  |   |                        |   | 75,547,000 |   |   |   | 75,226,000 |   |   |   | 75,276,000 |   |
| Time deposits                              |   |                    | 95,597,000  |   |                        |   | 96,559,000 |   |   |   | 100,382,000 |   |   |   | 100,647,000 |   |
| Brokered certificates                      |   |                    | 3,367,000   |   |                        |   | 3,482,000 |   |   |   | 3,359,000 |   |   |   | 3,463,000 |   |
| Accrued interest expense                   |   |                    | 162,000     |   |                        |   | 162,000 |   |   |   | 204,000 |   |   |   | 204,000 |   |

|                                                         |   | Second Quarter |      |   | Year-to-Date |   |
|--------------------------------------------------------------|--------|---------------------|-----------|--------|--------------|--------|
|                                                         |   | 2011                |      |   | 2010         |   |   | 2011 |   |   | 2010 |   |
| Weighted average common shares outstanding                   |   |                | 3,197,837 |   |         |   | 3,191,928 |   |   |   | 3,197,729 |   |   |   | 3,190,668 |   |
| Weighted average unvested restricted stock outstanding       |   |                | -         |   |         |   | - |   |   |   | - |   |   |   | - |   |
| Weighted average basic and diluted common shares outstanding |   |                | 3,197,837 |   |         |   | 3,191,928 |   |   |   | 3,197,729 |   |   |   | 3,190,668 |   |
|                                                         |   |                |      |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) available to common shareholders           |   | $                   | 76,921    |   |         | $      | (915,345 | ) |   | $ | (145,837 | ) |   | $ | (1,535,489 | ) |
| Basic and diluted net income (loss) per share                |   | $                   | 0.02      |   |         | $      | (0.29 | ) |   | $ | (0.05 | ) |   | $ | (0.48 | ) |

----

|                              |   | 2011   |   |   | 2010            |   |
|-----------------------------------|--------|--------|--------|--------|-----------------|--------|
|                              |   |   |   |   | Weighted-       |   |   |   |   |   | Weighted- |   |
|                              |   |   |   |   | Average         |   |   |   |   |   | Average |   |
|                              |   |   |   |   | Grant Date |   |   |   |   |   | Grant Date |   |
| Restricted Stock Awards |   | Shares |   |   | Fair Value |   |   | Shares |   |   | Fair Value |   |
| Outstanding at January 1,         |   |   | 1,210  |   |            | $      | 16.03 |   |   |   | 2,033 |   |   | $ | 17.47 |   |
| Granted                           |   |   | -      |   |            |   | - |   |   |   | - |   |   |   | - |   |
| Vested                            |   |   | (348   | )      |            |   | 18.26 |   |   |   | (428 | ) |   |   | 19.99 |   |
| Forfeited                         |   |   | -      |   |            |   | - |   |   |   | - |   |   |   | - |   |
| Outstanding at June 30,           |   |   | 862    |   |            | $      | 15.14 |   |   |   | 1,605 |   |   | $ | 16.80 |   |

----

|                                          |   | (in thousands except per share data) |   |
|-----------------------------------------------|--------|---------------------------------------------------------------|--------|
| Earnings                                      |   | Second Quarter                                           |   |   | Year-to-Date |   |
|                                          |   | 2011                                                          |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Net income (loss)                             |   | $                                                             | 77     |   |   | $ | (915 | ) |   | $ | (146 | ) |   | $ | (1,535 | ) |
| Basic and diluted net income (loss) per share |   | $                                                             | 0.02   |   |   | $ | (0.29 | ) |   | $ | (0.05 | ) |   | $ | (0.48 | ) |

|                          |   | (in thousands) |   |
|-------------------------------|--------|---------------------|--------|
| Net Interest Income |   | Second Quarter |   |   | Year-to-Date |   |
|                          |   | 2011                |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Interest and dividend income  |   | $                   | 3,290  |   |   | $ | 3,563 |   |   | $ | 6,517 |   |   | $ | 7,297 |   |
| Interest expense              |   |                | 400    |   |   |   | 659 |   |   |   | 851 |   |   |   | 1,369 |   |
| Net Interest Income           |   | $                   | 2,890  |   |   | $ | 2,904 |   |   | $ | 5,666 |   |   | $ | 5,928 |   |

----

|                                                          |   | For the three months ended June 30, |    |
|---------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|
|                                                          |   | 2011                                                              |    |   | 2010 |   |
|                                                          |   | Average                                                           |    |   |   |   |   |   |   |   | Average |   |   |   |   |   |   |   |
|                                                          |   | Balance                                                           |    |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| Assets:                                                       |   |                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest earning assets:                                      |   |                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short term investments                                        |   | $                                                                 | 196     |   |   | $ | 0.1 |   |   |   | 0.27 | % |   | $ | 97 |   |   | $ | - |   |   |   | 0.12 | % |
| Securities: Taxable                                           |   |                                                              | 36,335  |   |   |   | 282.1 |   |   |   | 3.11 | % |   |   | 14,923 |   |   |   | 201.8 |   |   |   | 5.41 | % |
| Tax-exempt (1)                                                |   |                                                              | 6,060   |   |   |   | 97.3 |   |   |   | 6.42 | % |   |   | 6,822 |   |   |   | 102.3 |   |   |   | 6.00 | % |
| Commercial loans (2)(3)                                       |   |                                                              | 197,764 |   |   |   | 2,573.1 |   |   |   | 5.15 | % |   |   | 220,682 |   |   |   | 2,835.3 |   |   |   | 5.08 | % |
| Consumer loans (2)(3)                                         |   |                                                              | 15,657  |   |   |   | 207.3 |   |   |   | 5.31 | % |   |   | 17,624 |   |   |   | 251.2 |   |   |   | 5.72 | % |
| Mortgage loans (2)(3)                                         |   |                                                              | 15,514  |   |   |   | 168.4 |   |   |   | 4.34 | % |   |   | 18,376 |   |   |   | 217.8 |   |   |   | 4.74 | % |
| Total earning assets and total interest income                |   |                                                              | 271,526 |   |   |   | 3,328.3 |   |   |   | 4.86 | % |   |   | 278,524 |   |   |   | 3,608.4 |   |   |   | 5.14 | % |
| Cash and due from banks                                       |   |                                                              | 21,753  |   |   |   |   |   |   |   |   |   |   |   | 29,240 |   |   |   |   |   |   |   |   |   |
| All other assets                                              |   |                                                              | 13,192  |   |   |   |   |   |   |   |   |   |   |   | 18,045 |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                     |   |                                                              | (13,601 | ) |   |   |   |   |   |   |   |   |   |   | (15,723 | ) |   |   |   |   |   |   |   |   |
| Total Assets                                                  |   | $                                                                 | 292,870 |   |   |   |   |   |   |   |   |   |   | $ | 310,086 |   |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders' Equity:                         |   |                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                 |   |                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                                           |   | $                                                                 | 28,617  |   |   | $ | 1.7 |   |   |   | 0.02 | % |   | $ | 47,625 |   |   | $ | 23.1 |   |   |   | 0.19 | % |
| Savings                                                       |   |                                                              | 42,090  |   |   |   | 9.9 |   |   |   | 0.09 | % |   |   | 39,438 |   |   |   | 18.6 |   |   |   | 0.19 | % |
| MMDA                                                          |   |                                                              | 33,542  |   |   |   | 50.6 |   |   |   | 0.60 | % |   |   | 30,197 |   |   |   | 46.9 |   |   |   | 0.62 | % |
| Time                                                          |   |                                                              | 99,822  |   |   |   | 337.4 |   |   |   | 0.01 |   |   |   | 120,299 |   |   |   | 570.3 |   |   |   | 1.90 | % |
| Total interest bearing liabilities and total interest expense |   |                                                              | 204,071 |   |   |   | 399.6 |   |   |   | 0.79 | % |   |   | 237,559 |   |   |   | 658.9 |   |   |   | 1.11 | % |
| Non-interest bearing deposits                                 |   |                                                              | 76,368  |   |   |   |   |   |   |   |   |   |   |   | 56,338 |   |   |   |   |   |   |   |   |   |
| All other liabilities                                         |   |                                                              | 2,093   |   |   |   |   |   |   |   |   |   |   |   | 2,368 |   |   |   |   |   |   |   |   |   |
| Shareholders' Equity                                          |   |                                                              | 10,338  |   |   |   |   |   |   |   |   |   |   |   | 13,821 |   |   |   |   |   |   |   |   |   |
| Total Liabilities and Shareholders' Equity                    |   | $                                                                 | 292,870 |   |   |   |   |   |   |   |   |   |   | $ | 310,086 |   |   |   |   |   |   |   |   |   |
| Interest spread                                               |   |                                                              |    |   |   |   |   |   |   |   | 4.07 | % |   |   |   |   |   |   |   |   |   |   | 4.03 | % |
| Net interest income-FTE                                       |   |                                                              |    |   |   | $ | 2,928.7 |   |   |   |   |   |   |   |   |   |   | $ | 2,949.5 |   |   |   |   |   |
| Net interest margin                                           |   |                                                              |    |   |   |   |   |   |   |   | 4.27 | % |   |   |   |   |   |   |   |   |   |   | 4.19 | % |

|   | (1) | Average yields in the above table have been adjusted to a tax-equivalent basis using a 34% tax rate. |
|--------|-----|------------------------------------------------------------------------------------------------------|

|   | (2) | For purposes of the computation above, average non-accruing loans of $30,260,000 in 2011 and $36,153,000 in 2010 are included in the average daily loan balance. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Interest on loans includes origination fees totaling $19,000 in 2011 and $27,000 in 2010. |
|--------|-----|-------------------------------------------------------------------------------------------|

----

|                                                          |   | For the six months ended June 30, |    |
|---------------------------------------------------------------|--------|-----------------------------------------------------------------|---------|
|                                                          |   | 2011                                                            |    |   | 2010 |   |
|                                                          |   | Average                                                         |    |   |   |   |   |   |   |   | Average |   |   |   |   |   |   |   |
|                                                          |   | Balance                                                         |    |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| Assets:                                                       |   |                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest earning assets:                                      |   |                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short term investments                                        |   | $                                                               | 196     |   |   | $ | 0.3 |   |   |   | 0.36 | % |   | $ | 99 |   |   | $ | - |   |   |   | 0.08 | % |
| Securities: Taxable                                           |   |                                                            | 30,844  |   |   |   | 481.2 |   |   |   | 3.12 | % |   |   | 15,462 |   |   |   | 417.2 |   |   |   | 5.40 | % |
| Tax-exempt (1)                                                |   |                                                            | 6,181   |   |   |   | 191.7 |   |   |   | 6.20 | % |   |   | 6,954 |   |   |   | 210.2 |   |   |   | 6.03 | % |
| Commercial loans (2)(3)                                       |   |                                                            | 199,735 |   |   |   | 5,152.8 |   |   |   | 5.13 | % |   |   | 225,883 |   |   |   | 5,792.1 |   |   |   | 5.10 | % |
| Consumer loans (2)(3)                                         |   |                                                            | 15,908  |   |   |   | 426.6 |   |   |   | 5.41 | % |   |   | 17,980 |   |   |   | 512.3 |   |   |   | 5.75 | % |
| Mortgage loans (2)(3)                                         |   |                                                            | 15,780  |   |   |   | 342.8 |   |   |   | 4.34 | % |   |   | 18,689 |   |   |   | 456.5 |   |   |   | 4.89 | % |
| Total earning assets and total interest income                |   |                                                            | 268,644 |   |   |   | 6,595.4 |   |   |   | 4.89 | % |   |   | 285,067 |   |   |   | 7,388.3 |   |   |   | 5.16 | % |
| Cash and due from banks                                       |   |                                                            | 28,733  |   |   |   |   |   |   |   |   |   |   |   | 28,151 |   |   |   |   |   |   |   |   |   |
| All other assets                                              |   |                                                            | 13,504  |   |   |   |   |   |   |   |   |   |   |   | 17,916 |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                     |   |                                                            | (13,849 | ) |   |   |   |   |   |   |   |   |   |   | (16,889 | ) |   |   |   |   |   |   |   |   |
| Total Assets                                                  |   | $                                                               | 297,032 |   |   |   |   |   |   |   |   |   |   | $ | 314,245 |   |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders' Equity:                         |   |                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                 |   |                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                                           |   | $                                                               | 29,021  |   |   | $ | 4.2 |   |   |   | 0.03 | % |   | $ | 48,440 |   |   | $ | 49.0 |   |   |   | 0.20 | % |
| Savings                                                       |   |                                                            | 41,129  |   |   |   | 22.8 |   |   |   | 0.11 | % |   |   | 39,130 |   |   |   | 37.5 |   |   |   | 0.19 | % |
| MMDA                                                          |   |                                                            | 35,196  |   |   |   | 109.1 |   |   |   | 0.63 | % |   |   | 32,276 |   |   |   | 106.3 |   |   |   | 0.66 | % |
| Time                                                          |   |                                                            | 101,676 |   |   |   | 714.5 |   |   |   | 1.42 | % |   |   | 121,525 |   |   |   | 1,174.9 |   |   |   | 1.95 | % |
| FHLBI advances                                                |   |                                                            | -       |   |   |   | - |   |   |   | - |   |   |   | 32 |   |   |   | 1.2 |   |   |   | 7.29 | % |
| Total interest bearing liabilities and total interest expense |   |                                                            | 207,022 |   |   |   | 850.6 |   |   |   | 0.83 | % |   |   | 241,403 |   |   |   | 1,368.9 |   |   |   | 1.14 | % |
| Non-interest bearing deposits                                 |   |                                                            | 77,638  |   |   |   |   |   |   |   |   |   |   |   | 56,395 |   |   |   |   |   |   |   |   |   |
| All other liabilities                                         |   |                                                            | 2,110   |   |   |   |   |   |   |   |   |   |   |   | 2,356 |   |   |   |   |   |   |   |   |   |
| Shareholders' Equity                                          |   |                                                            | 10,262  |   |   |   |   |   |   |   |   |   |   |   | 14,091 |   |   |   |   |   |   |   |   |   |
| Total Liabilities and Shareholders' Equity                    |   | $                                                               | 297,032 |   |   |   |   |   |   |   |   |   |   | $ | 314,245 |   |   |   |   |   |   |   |   |   |
| Interest spread                                               |   |                                                            |    |   |   |   |   |   |   |   | 4.06 | % |   |   |   |   |   |   |   |   |   |   | 4.02 | % |
| Net interest income-FTE                                       |   |                                                            |    |   |   | $ | 5,744.8 |   |   |   |   |   |   |   |   |   |   | $ | 6,019.4 |   |   |   |   |   |
| Net interest margin                                           |   |                                                            |    |   |   |   |   |   |   |   | 4.25 | % |   |   |   |   |   |   |   |   |   |   | 4.20 | % |

|   | (1) | Average yields in the above table have been adjusted to a tax-equivalent basis using a 34% tax rate. |
|--------|-----|------------------------------------------------------------------------------------------------------|

|   | (2) | For purposes of the computation above, average non-accruing loans of $30,539,000 in 2011 and $38,348,000 in 2010 are included in the average daily loan balance. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Interest on loans includes origination fees totaling $46,000 in 2011 and $42,000 in 2010. |
|--------|-----|-------------------------------------------------------------------------------------------|

----

----

|                                   |   | (in thousands) |   |
|----------------------------------------|--------|---------------------|--------|
|                                   |   | 0-3                 |   |   | 4-12 |   |   | 1-5 |   |   | 5+ |   |   |   |   |
| Interest Rate Sensitivity    |   | Months              |   |   | Months |   |   | Years |   |   | Years |   |   | Total |   |
| Assets:                                |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                  |   | $                   | 93,672 |   |   | $ | 50,818 |   |   | $ | 78,224 |   |   | $ | 1,107 |   |   | $ | 223,821 |   |
| Securities                             |   |                | 4,940  |   |   |   | 11,070 |   |   |   | 20,377 |   |   |   | 5,425 |   |   |   | 41,812 |   |
| Short term investments                 |   |                | 197    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 197 |   |
| Total rate sensitive assets            |   | $                   | 98,809 |   |   | $ | 61,888 |   |   | $ | 98,601 |   |   | $ | 6,532 |   |   | $ | 265,830 |   |
| Liabilities:                           |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW, Savings & MMDA                |   | $                   | 33,802 |   |   | $ | - |   |   | $ | - |   |   | $ | 70,961 |   |   | $ | 104,763 |   |
| Time deposits                          |   |                | 22,320 |   |   |   | 45,388 |   |   |   | 31,230 |   |   |   | 26 |   |   |   | 98,964 |   |
| Total rate sensitive liabilities       |   | $                   | 56,122 |   |   | $ | 45,388 |   |   | $ | 31,230 |   |   | $ | 70,987 |   |   | $ | 203,727 |   |
| Rate sensitivity GAP and ratios:       |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GAP for period                         |   | $                   | 42,687 |   |   | $ | 16,500 |   |   | $ | 67,371 |   |   | $ | (64,455 | ) |   |   |   |   |
| Cumulative gap                         |   |                | 42,687 |   |   |   | 59,187 |   |   |   | 126,558 |   |   |   | 62,103 |   |   |   |   |   |
|                                   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative rate sensitive ratio        |   |                | 1.76   |   |   |   | 1.58 |   |   |   | 1.95 |   |   |   | 1.30 |   |   |   |   |   |
| December 31, 2010 rate sensitive ratio |   |                | 1.55   |   |   |   | 1.50 |   |   |   | 1.83 |   |   |   | 1.14 |   |   |   |   |   |

|                                     |   | Second Quarter |   |   | Year-to-Date |   |
|------------------------------------------|--------|---------------------|--------|--------|--------------|--------|
| Provision for Loan Losses |   | 2011                |   |   | 2010         |   |   | 2011 |   |   | 2010 |   |
| Total                                    |   | $                   | 800    |   |         | $      | 1,200 |   |   | $ | 1,600 |   |   | $ | 2,400 |   |

----

|                                                |   | (in thousands)     |    |
|-----------------------------------------------------|--------|-------------------------|---------|
|                                                |   | June 30, 2011 |    |   | December 31, 2010 |   |
| Secured by real estate:              |   | Balances                |    |   | Percent |   |   | Balances |   |   | Percent |   |
| Residential first mortgage                          |   | $                       | 23,496  |   |   |   | 10.5 | % |   | $ | 24,546 |   |   |   | 10.4 | % |
| Residential home equity/other junior liens          |   |                    | 13,101  |   |   |   | 5.8 | % |   |   | 14,967 |   |   |   | 6.4 | % |
| Construction, land development and other land loans |   |                    | 18,585  |   |   |   | 8.3 | % |   |   | 19,641 |   |   |   | 8.3 | % |
| Multifamily residential properties                  |   |                    | 2,328   |   |   |   | 1.0 | % |   |   | 2,364 |   |   |   | 1.0 | % |
| Owner-occupied nonfarm, nonresidential properties   |   |                    | 60,908  |   |   |   | 27.2 | % |   |   | 63,315 |   |   |   | 26.8 | % |
| Other nonfarm, nonresidential properties            |   |                    | 86,356  |   |   |   | 38.6 | % |   |   | 89,327 |   |   |   | 37.8 | % |
| Commercial                                          |   |                    | 13,916  |   |   |   | 6.2 | % |   |   | 16,196 |   |   |   | 6.9 | % |
| Consumer                                            |   |                    | 4,283   |   |   |   | 1.9 | % |   |   | 4,499 |   |   |   | 1.9 | % |
| Other                                               |   |                    | 1,043   |   |   |   | 0.5 | % |   |   | 1,285 |   |   |   | 0.5 | % |
| Total gross loans                                   |   |                    | 224,016 |   |   |   | 100.0 | % |   |   | 236,140 |   |   |   | 100.0 | % |
| Net unearned fees                                   |   |                    | (195    | ) |   |   |   |   |   |   | (202 | ) |   |   |   |   |
| Total loans                                         |   | $                       | 223,821 |   |   |   |   |   |   | $ | 235,938 |   |   |   |   |   |

----

|                                                                   |   | (in thousands) |   |
|------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                   |   | June 30,       |   |   | December 31, |   |   | June 30, |   |
|                                                                   |   | 2011                |   |   | 2010 |   |   | 2010 |   |
| Nonaccrual loans                                                       |   | $                   | 32,814 |   |   | $ | 30,858 |   |   | $ | 33,125 |   |
| 90 days or more past due and still accruing                            |   |                | -      |   |   |   | - |   |   |   | 202 |   |
| Total nonperforming loans                                              |   |                | 32,814 |   |   |   | 30,858 |   |   |   | 33,327 |   |
| Other real estate owned                                                |   |                | 2,967  |   |   |   | 4,294 |   |   |   | 6,536 |   |
| Total nonperforming assets                                             |   | $                   | 35,781 |   |   | $ | 35,152 |   |   | $ | 39,863 |   |
|                                                                   |   |                |   |   |   |   |   |   |   |   |   |   |
| Nonperforming loans as a percent of total loans                        |   |                | 14.66  | % |   |   | 13.08 | % |   |   | 13.35 | % |
| Allowance for loan losses as a percent of nonperforming loans          |   |                | 38.55  | % |   |   | 45.27 | % |   |   | 41.58 | % |
| Nonperforming assets as a percent of total loans and other real estate |   |                | 15.78  | % |   |   | 14.63 | % |   |   | 15.56 | % |

----

|                    |   | (in thousands) |   |
|-------------------------|--------|---------------------|--------|
|                    |   | Second Quarter |   |   | Year-to-Date |   |
| Noninterest Income |   | 2011                |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Total                   |   | $                   | 722    |   |   | $ | 837 |   |   | $ | 1,434 |   |   | $ | 1,684 |   |

----

|                     |   | (in thousands) |   |
|--------------------------|--------|---------------------|--------|
|                     |   | Second Quarter |   |   | Year-to-Date |   |
| Noninterest Expense |   | 2011                |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Total                    |   | $                   | 2,813  |   |   | $ | 3,396 |   |   | $ | 5,724 |   |   | $ | 6,748 |   |

----

|                                        |   | (in thousands)                         |   |
|---------------------------------------------|--------|---------------------------------------------|--------|
|                                        |   |     Second Quarter |   |   | Year-to-Date |   |
| Income Tax Expense (Benefit) |   | 2011                                        |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Total                                       |   | $                                           | (78    | ) |   | $ | 61 |   |   | $ | (78 | ) |   | $ | (1 | ) |

----

|                           |   | Total              |   | Tier 1        |   |                          |
|--------------------------------|--------|--------------------|--------|--------------------|--------|-------------------------------|
|                           |   | Risk-Based         |   | Risk-Based         |   |                          |
|                           |   | Capital Ratio |   | Capital Ratio |   | Leverage Ratio           |
| Well capitalized               |   | 10% or above       |   | 6% or above        |   | 5% or above                   |
| Adequately capitalized         |   | 8% or above        |   | 4% or above        |   | 4% or above                   |
| Undercapitalized               |   | Less than 8%       |   | Less than 4%       |   | Less than 4%                  |
| Significantly undercapitalized |   | Less than 6%       |   | Less than 3%       |   | Less than 3%                  |
| Critically undercapitalized    |   | -                  |   | -                  |   | A ratio of tangible equity    |
|                           |   |               |   |               |   | to total assets of 2% or less |

|                                     |   |   |       |   | Minimum for      |   |   | To be Well Capitalized  |   |
|------------------------------------------|--------|--------|------------|--------|------------------|--------|--------|-------------------------|--------|
|                                     |   |   |       |   | Capital Adequacy |   |   | Under Prompt Corrective |   |
|                                     |   | Actual |       |   | Purposes         |   |   | Action Provision        |   |
| As of June 30, 2011                      |   | Amount |       |   | Ratio            |   |   | Amount                  |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| Total Capital (to risk weighted assets)  |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |
| Bank                                     |   | $      | 13,437,000 |   |             |   | 5.71   | %                       |   | $ | 18,810,000 |   |   |   | 8 | % |   | $ | 23,512,000 |   |   |   | 10 | % |
| FNBH Bancorp                             |   |   | 13,314,000 |   |             |   | 5.66   | %                       |   |   | 18,810,000 |   |   |   | 8 | % |   |   | N/A |   |   |   | N/A |   |
|                                     |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital (to risk weighted assets) |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                     |   |   | 10,374,000 |   |             |   | 4.41   | %                       |   |   | 9,405,000 |   |   |   | 4 | % |   |   | 14,107,000 |   |   |   | 6 | % |
| FNBH Bancorp                             |   |   | 10,251,000 |   |             |   | 4.36   | %                       |   |   | 9,405,000 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |
|                                     |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital (to average assets)       |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                     |   |   | 10,374,000 |   |             |   | 3.54   | %                       |   |   | 11,715,000 |   |   |   | 4 | % |   |   | 14,644,000 |   |   |   | 5 | % |
| FNBH Bancorp                             |   |   | 10,251,000 |   |             |   | 3.50   | %                       |   |   | 11,715,000 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |
|                                     |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2010                  |   | Amount |       |   | Ratio            |   |   | Amount                  |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| Total Capital (to risk weighted assets)  |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                     |   | $      | 13,632,000 |   |             |   | 5.58   | %                       |   | $ | 19,530,000 |   |   |   | 8 | % |   | $ | 24,412,000 |   |   |   | 10 | % |
| FNBH Bancorp                             |   |   | 13,580,000 |   |             |   | 5.56   | %                       |   |   | 19,530,000 |   |   |   | 8 | % |   |   | N/A |   |   |   | N/A |   |
|                                     |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital (to risk weighted assets) |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                     |   |   | 10,442,000 |   |             |   | 4.28   | %                       |   |   | 9,765,000 |   |   |   | 4 | % |   |   | 14,647,000 |   |   |   | 6 | % |
| FNBH Bancorp                             |   |   | 10,390,000 |   |             |   | 4.26   | %                       |   |   | 9,765,000 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |
|                                     |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital (to average assets)       |   |   |       |   |             |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                     |   |   | 10,442,000 |   |             |   | 3.50   | %                       |   |   | 11,919,000 |   |   |   | 4 | % |   |   | 14,898,000 |   |   |   | 5 | % |
| FNBH Bancorp                             |   |   | 10,390,000 |   |             |   | 3.49   | %                       |   |   | 11,919,000 |   |   |   | 4 | % |   |   | N/A |   |   |   | N/A |   |

----

----

|   | · | Makes national banks (such as the Bank) and their subsidiaries subject to a number of state laws that were previously preempted by federal laws; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Imposes new restrictions on how mortgage brokers and loan originators may be compensated; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | Establishes a new federal consumer protection agency that will have broad authority to develop and implement rules regarding most consumer financial products; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Creates new rules affecting corporate governance and executive compensation at all publicly traded companies (such as the Corporation); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Broadens the base for FDIC insurance assessments and makes other changes to federal deposit insurance, including permanently increasing FDIC deposit insurance coverage to $250,000; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Allows depository institutions to pay interest on business checking accounts |
|--------|--------|------------------------------------------------------------------------------|

----

|   | (a) | Evaluation of Disclosure Controls and Procedures. |
|--------|-----|---------------------------------------------------|

|   | (b) | Changes in Internal Control Over Financial Reporting. |
|--------|-----|-------------------------------------------------------|

----

|   | 31.1 | Certificate of the Chief Executive Officer of FNBH Bancorp, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certificate of the Chief Financial Officer of FNBH Bancorp, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certificate of the Chief Executive Officer of FNBH Bancorp, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certificate of the Chief Financial Officer of FNBH Bancorp, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | FNBH BANCORP, INC.                    |   |
|--------|---------------------------------------|--------|
|   |                                  |   |
|   | /s/ Ronald L. Long                    |   |
|   | Ronald L. Long                        |   |
|   | President and Chief Executive Officer |   |
|   |                                  |   |
|   | /s/ Mark J. Huber                     |   |
|   | Mark J. Huber                         |   |
|   | Chief Financial Officer               |   |

----