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

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

| Delaware                                                      | 57-1001177                          |
|---------------------------------------------------------------|-------------------------------------|
| (State or other Jurisdiction ofIncorporation or Organization) | (I.R.S. EmployerIdentification No.) |

----

| Part I.  | Financial Information                                                                                         | Page    |
|----------|---------------------------------------------------------------------------------------------------------------|---------|
|     |                                                                                                          |    |
|     | Item 1.  Financial Statements (unaudited)                                                           |    |
|     |                                                                                                          |    |
|     | Consolidated Balance Sheets as of June 30, 2009                                                               |    |
|     | and December 31, 2008                                                                                         | 3       |
|     |                                                                                                          |    |
|     | Consolidated Statements of Income (Loss) for the three                                                        |    |
|     | and six months ended June 30, 2009 and 2008                                                                   | 4  |
|     |                                                                                                          |    |
|     | Consolidated Statements of Cash Flows for the six                                                             |    |
|     | months ended June 30, 2009 and 2008                                                                           | 5       |
|     |                                                                                                          |    |
|     | Consolidated Statements of Shareholders’ Equity and                                                     |    |
|     | Comprehensive Income (Loss) for the six months                                                                |    |
|     | ended June 30, 2009 and 2008                                                                                  | 6       |
|     |                                                                                                          |    |
|     | Notes to Consolidated Financial Statements                                                                    | 7-16    |
|     |                                                                                                          |    |
|     | Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations | 16-30   |
|     |                                                                                                          |    |
|     | Item 3.  Quantitative and Qualitative Disclosures                                                   |    |
|     | about Market Risk                                                                                             | 30      |
|     |                                                                                                          |    |
|     | Item 4T.Controls and Procedures                                                                               | 30      |
|     |                                                                                                          |    |
| Part II. | Other Information                                                                                             |    |
|     |                                                                                                          |    |
|     | Item 1. Legal Proceedings                                                                                     | 31      |
|     |                                                                                                          |    |
|     | Item 1A. Risk Factors                                                                                         | 31      |
|     |                                                                                                          |    |
|     | Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds                          | 31      |
|     |                                                                                                          |    |
|     | Item 3.   Defaults Upon Senior Securities                                                      | 31      |
|     |                                                                                                          |    |
|     | Item 4.   Submission of Matters to a Vote of Security Holders                                  | 32      |
|     |                                                                                                          |    |
|     | Item 5.   Other Information                                                                    | 32      |
|     |                                                                                                          |    |
|     | Item 6.   Exhibits                                                                             | 32      |
|     |                                                                                                          |    |
|     | Signatures                                                                                                    | 33      |

----

|                                                                                                                         |   | June 30,               |    |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|--------------|--------|
| ASSETS                                                                                                                       |   | 2009                   |    |   | 2008         |   |
|                                                                                                                         |   | (Unaudited)            |    |   | (Audited)    |   |
|                                                                                                                         |   | (DOLLARS IN THOUSANDS) |    |
| Cash and due from banks                                                                                                      |   | $                      | 10,198  |   |         |   | 8,424 |   |
| Federal funds sold                                                                                                           |   |                   | 13,686  |   |         |   | 12,946 |   |
| Cash and cash equivalents                                                                                                    |   |                   | 23,884  |   |         |   | 21,370 |   |
| Investment and mortgage-backed securities                                                                                    |   |                   |    |   |         |   |   |   |
|   Held to maturity (market value of $3,755,000 and $2,310,000 at June 30, 2009    and December 31, 2008) |   |                   | 3,934   |   |         |   | 2,430 |   |
|   Available for sale                                                                                               |   |                   | 134,937 |   |         |   | 100,418 |   |
| Total investment and mortgage-backed securities                                                                              |   |                   | 138,871 |   |         |   | 102,848 |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| Loans, net of unearned fees                                                                                                  |   |                   | 274,643 |   |         |   | 285,443 |   |
|    Allowance for loan losses (ALL)                                                                            |   |                   | (7,842  | )      |         |   | (6,778 | ) |
| Loans, net of ALL                                                                                                            |   |                   | 266,801 |   |         |   | 278,665 |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| Real estate acquired through foreclosure                                                                                     |   |                   | 3,622   |   |         |   | 667 |   |
| Office properties and equipment, net                                                                                         |   |                   | 5,650   |   |         |   | 5,837 |   |
| Federal Home Loan Bank stock, at cost                                                                                        |   |                   | 3,947   |   |         |   | 3,929 |   |
| Federal Reserve Bank stock, at cost                                                                                          |   |                   | 599     |   |         |   | 599 |   |
| Accrued interest receivable                                                                                                  |   |                   | 1,919   |   |         |   | 2,087 |   |
| Intangible assets                                                                                                            |   |                   | 2,674   |   |         |   | 2,845 |   |
| Cash surrender value of life insurance                                                                                       |   |                   | 9,132   |   |         |   | 9,577 |   |
| Other assets                                                                                                                 |   |                   | 7,249   |   |         |   | 5,794 |   |
| TOTAL ASSETS                                                                                                                 |   | $                      | 464,348 |   |         | $      | 434,218 |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| LIABILITIES                                                                                                                  |   |                   |    |   |         |   |   |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| Demand and savings deposits                                                                                                  |   | $                      | 145,044 |   |         | $      | 119,755 |   |
| Time deposits                                                                                                                |   |                   | 190,270 |   |         |   | 187,066 |   |
|   Total deposits                                                                                                   |   |                   | 335,314 |   |         |   | 306,821 |   |
| Advances from the Federal Home Loan Bank                                                                                     |   |                   | 64,500  |   |         |   | 69,500 |   |
| Securities sold under agreements to repurchase                                                                               |   |                   | 17,479  |   |         |   | 19,005 |   |
| Floating rate junior subordinated deferrable interest debentures                                                             |   |                   | 12,372  |   |         |   | 12,372 |   |
| Accrued interest payable                                                                                                     |   |                   | 736     |   |         |   | 701 |   |
| Other liabilities                                                                                                            |   |                   | 2,431   |   |         |   | 1,895 |   |
| TOTAL LIABILITIES                                                                                                            |   |                   | 432,832 |   |         |   | 410,294 |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| Commitments and contingencies-Note 5                                                                                         |   |                   |    |   |         |   |   |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| SHAREHOLDERS' EQUITY                                                                                                         |   |                   |    |   |         |   |   |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| Serial preferred stock - $0.01 par value                                                                                     |   |                   |    |   |         |   |   |   |
|   authorized - 500, 000 shares                                                                                     |   |                   |    |   |         |   |   |   |
|    issued and outstanding - 9,266  and 0 shares                                                     |   |                   | 9,243   |   |         |   | -- |   |
|   at June 30, 2009 and December 31, 2008, respectively                                                             |   |                   |    |   |         |   |   |   |
| Common stock - $0.01 par value,                                                                                              |   |                   |    |   |         |   |   |   |
|   authorized - 5,000,000 shares,                                                                                   |   |                   |    |   |         |   |   |   |
|    issued and outstanding - 1,790,599 shares at June 30, 2009                                                 |   |                   | 20      |   |         |   | 20 |   |
|    and 1,787,092 at December 31, 2008, respectively                                                           |   |                   |    |   |         |   |   |   |
| Common stock warrants                                                                                                        |   |                   | 25      |   |         |   | -- |   |
| Additional paid-in capital                                                                                                   |   |                   | 12,919  |   |         |   | 12,903 |   |
| Accumulated other comprehensive income (loss)                                                                                |   |                   | (938    | )      |         |   | (1,696 | ) |
| Retained earnings, substantially restricted                                                                                  |   |                   | 16,547  |   |         |   | 18,997 |   |
| Treasury stock, at cost                                                                                                      |   |                   | (6,300  | )      |         |   | (6,300 | ) |
| TOTAL SHAREHOLDERS' EQUITY                                                                                                   |   |                   | 31,516  |   |         |   | 23,924 |   |
|                                                                                                                         |   |                   |    |   |         |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                   |   | $                      | 464,348 |   |         | $      | 434,218 |   |

----

|                                                                                      |   | Three Months Ended                      |      |   | Six Months Ended                        |   |
|-------------------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|--------|-----------------------------------------|--------|
|                                                                                      |   | June 30,                                |      |   | June 30,                                |   |   | June 30, |   |   | June 30, |   |
|                                                                                      |   | 2009                                    |      |   | 2008                                    |   |   | 2009 |   |   | 2008 |   |
|                                                                                      |   | (DOLLARS IN THOUSANDS EXCEPT PER SHARE) |      |   | (DOLLARS IN THOUSANDS EXCEPT PER SHARE) |   |
| Interest Income:                                                                          |   |                                    |      |   |                                    |   |   |   |   |   |   |   |
|   Loans                                                                         |   | $                                       | 3,644     |   |                                    | $      | 4,378 |   |   | $ | 7,240 |   |   | $ | 9,000 |   |
|   Deposits and federal funds sold                                               |   |                                    | 5         |   |                                    |   | 6 |   |   |   | 13 |   |   |   | 22 |   |
|   Interest and dividends on mortgage-backed securities                          |   |                                    | 1,137     |   |                                    |   | 687 |   |   |   | 2,032 |   |   |   | 1,363 |   |
|   Interest and dividends on investment securities                               |   |                                    | 558       |   |                                    |   | 629 |   |   |   | 1,196 |   |   |   | 1,490 |   |
| Total interest income                                                                     |   |                                    | 5,344     |   |                                    |   | 5,700 |   |   |   | 10,481 |   |   |   | 11,875 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense:                                                                         |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|   Deposit accounts                                                              |   |                                    | 2,111     |   |                                    |   | 2,218 |   |   |   | 4,203 |   |   |   | 4,680 |   |
|   Floating rate junior subordinated deferrable interest    debentures |   |                                    | 135       |   |                                    |   | 175 |   |   |   | 285 |   |   |   | 384 |   |
|   Advances from the FHLB and other borrowings                                   |   |                                    | 758       |   |                                    |   | 843 |   |   |   | 1,542 |   |   |   | 1,845 |   |
| Total interest expense                                                                    |   |                                    | 3,004     |   |                                    |   | 3,236 |   |   |   | 6,030 |   |   |   | 6,909 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net Interest Income                                                                       |   |                                    | 2,340     |   |                                    |   | 2,464 |   |   |   | 4,451 |   |   |   | 4,966 |   |
|   Provision for loan losses                                                     |   |                                    | 925       |   |                                    |   | 365 |   |   |   | 3,625 |   |   |   | 675 |   |
| Net interest income (loss) after                                                          |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|    provision for loan losses                                               |   |                                    | 1,415     |   |                                    |   | 2,099 |   |   |   | 826 |   |   |   | 4,291 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Income:                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|   Fees for financial services                                                   |   |                                    | 736       |   |                                    |   | 756 |   |   |   | 1,410 |   |   |   | 1,507 |   |
|   Other fees, net                                                               |   |                                    | 31        |   |                                    |   | 28 |   |   |   | 53 |   |   |   | 50 |   |
|   Other-than-temporary-impairment write-down on    securities         |   |                                    | (782      | )      |                                    |   | -- |   |   |   | (1,091 | ) |   |   | -- |   |
|   Net gain on sale of investments                                               |   |                                    | 285       |   |                                    |   | 66 |   |   |   | 379 |   |   |   | 177 |   |
| Total non-interest income                                                                 |   |                                    | 270       |   |                                    |   | 850 |   |   |   | 751 |   |   |   | 1,734 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Expense:                                                                     |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|   Compensation and employee benefits                                            |   |                                    | 1,143     |   |                                    |   | 1,288 |   |   |   | 2,335 |   |   |   | 2,601 |   |
|   Occupancy and equipment                                                       |   |                                    | 613       |   |                                    |   | 636 |   |   |   | 1,224 |   |   |   | 1,257 |   |
|   Deposit insurance premiums                                                    |   |                                    | 273       |   |                                    |   | 7 |   |   |   | 329 |   |   |   | 15 |   |
|   Professional services                                                         |   |                                    | 85        |   |                                    |   | 104 |   |   |   | 177 |   |   |   | 203 |   |
|   Advertising and public relations                                              |   |                                    | 27        |   |                                    |   | 81 |   |   |   | 57 |   |   |   | 143 |   |
|   Loan operations                                                               |   |                                    | 92        |   |                                    |   | 32 |   |   |   | 179 |   |   |   | 66 |   |
|   Intangible amortization                                                       |   |                                    | 76        |   |                                    |   | 104 |   |   |   | 171 |   |   |   | 208 |   |
|   Items processing                                                              |   |                                    | 78        |   |                                    |   | 66 |   |   |   | 167 |   |   |   | 116 |   |
|   Telephone                                                                     |   |                                    | 47        |   |                                    |   | 45 |   |   |   | 100 |   |   |   | 94 |   |
|   Other                                                                         |   |                                    | 182       |   |                                    |   | 187 |   |   |   | 394 |   |   |   | 369 |   |
| Total non-interest expense                                                                |   |                                    | 2,616     |   |                                    |   | 2,550 |   |   |   | 5,133 |   |   |   | 5,072 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                                                         |   |                                    | (931      | )      |                                    |   | 399 |   |   |   | (3,556 | ) |   |   | 953 |   |
| Provision (benefit) for income taxes                                                      |   |                                    | (364      | )      |                                    |   | 83 |   |   |   | (1,295 | ) |   |   | 217 |   |
| Net income (loss)                                                                         |   |                                    | (567      | )      |                                    |   | 316 |   |   |   | (2,261 | ) |   |   | 736 |   |
| Accretion of preferred stock to redemption value   and preferred dividends accrued   |   |                                    | 118       |   |                                    |   | -- |   |   |   | 143 |   |   |   | -- |   |
| Net income (loss) to common shareholders                                                  |   | $                                       | (685      | )      |                                    | $      | 316 |   |   | $ | (2,404 | ) |   | $ | 736 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per common share (basic)                                                |   | $                                       | (0.32     | )      |                                    | $      | 0.18 |   |   | $ | (1.26 | ) |   | $ | 0.41 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per common share (diluted)                                              |   | $                                       | (0.32     | )      |                                    | $      | 0.18 |   |   | $ | (1.26 | ) |   | $ | 0.41 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividend per common share                                                            |   | $                                       | 0.030     |   |                                    | $      | 0.115 |   |   | $ | 0.060 |   |   | $ | 0.230 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                     |   |                                    | 1,789,844 |   |                                    |   | 1,782,395 |   |   |   | 1,788,873 |   |   |   | 1,783,436 |   |
|                                                                                      |   |                                    |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                                                                   |   |                                    | 1,789,844 |   |                                    |   | 1,783,708 |   |   |   | 1,788,873 |   |   |   | 1,794,027 |   |

----

|                                                                            |   | Six Months Ended |    |
|---------------------------------------------------------------------------------|--------|------------------|---------|
|                                                                            |   | June 30,         |    |   | June 30, |   |
|                                                                            |   | 2009             |    |   | 2008 |   |
|                                                                            |   | (IN THOUSANDS)   |    |
|                                                                            |   |             |    |   |   |   |
| OPERATING ACTIVITIES:                                                           |   |             |    |   |   |   |
|                                                                            |   |             |    |   |   |   |
| Net income (loss)                                                               |   | $                | (2,261  | ) |   | $ | 736 |   |
| Adjustments to reconcile net income to                                          |   |             |    |   |   |   |   |   |
|   net cash provided by operating activities:                          |   |             |    |   |   |   |   |   |
|   Provision for loan losses                                           |   |             | 3,625   |   |   |   | 675 |   |
|   Amortization of intangibles                                         |   |             | 171     |   |   |   | 208 |   |
|   Depreciation expense                                                |   |             | 261     |   |   |   | 343 |   |
|   Recognition of deferred income, net of costs                        |   |             | (205    | ) |   |   | (265 | ) |
|   Deferral of fee income, net of costs                                |   |             | 141     |   |   |   | 209 |   |
|   Other than temporary impairment charge on  AFS securities |   |             | 1,091   |   |   |   | -- |   |
|   Gain on investment transactions                                     |   |             | (379    | ) |   |   | (177 | ) |
|   Gain on sale of assets acquired from foreclosed loans               |   |             | (2      | ) |   |   | -- |   |
|   Changes in operating assets and liabilities:                        |   |             |    |   |   |   |   |   |
|    Decrease in accrued interest receivable                       |   |             | 168     |   |   |   | 390 |   |
|    Increase in cash surrender value of life insurance            |   |             | (200    | ) |   |   | (199 | ) |
|    Increase in other assets                                      |   |             | (1,455  | ) |   |   | (26 | ) |
|    Increase (decrease) in other liabilities                      |   |             | 537     |   |   |   | (1,069 | ) |
|    Increase (decrease) in accrued interest payable               |   |             | 35      |   |   |   | (99 | ) |
|                                                                            |   |             |    |   |   |   |   |   |
| Net cash  provided by operating activities                            |   |             | 1,527   |   |   |   | 726 |   |
|                                                                            |   |             |    |   |   |   |   |   |
| INVESTING ACTIVITIES:                                                           |   |             |    |   |   |   |   |   |
|                                                                            |   |             |    |   |   |   |   |   |
| Purchase of investment and mortgage-backed securities:                          |   |             |    |   |   |   |   |   |
|    Available for sale                                            |   |             | (87,918 | ) |   |   | (14,242 | ) |
|    Held to maturity                                              |   |             | (1,504  | ) |   |   | -- |   |
| Proceeds from sale of investment and mortgage-                                  |   |             |    |   |   |   |   |   |
|     backed securities available for sale                    |   |             | 20,294  |   |   |   | 6,821 |   |
| Proceeds from maturity of investment and mortgage-                              |   |             |    |   |   |   |   |   |
|     backed securities:                                      |   |             |    |   |   |   |   |   |
|    Available for sale                                            |   |             | 21,234  |   |   |   | 23,813 |   |
|    Held to maturity                                              |   |             | 250     |   |   |   | 696 |   |
| Principal repayments on mortgage-backed securities:                             |   |             |    |   |   |   |   |   |
|    Available for sale                                            |   |             | 11,667  |   |   |   | 4,984 |   |
| Net (increase) decrease in loans                                                |   |             | 5,281   |   |   |   | (20,592 | ) |
| Purchase of FHLB/FRB stock                                                      |   |             | (18     | ) |   |   | (81 | ) |
| Proceeds from sales of foreclosed assets, net of costs and improvements         |   |             | 69      |   |   |   | -- |   |
| Purchase of office properties and equipment                                     |   |             | (74     | ) |   |   | (254 | ) |
|                                                                            |   |             |    |   |   |   |   |   |
| Net cash (used) provided by investing activities                                |   |             | (30,719 | ) |   |   | 1,145 |   |
|                                                                            |   |             |    |   |   |   |   |   |
| FINANCING ACTIVITIES:                                                           |   |             |    |   |   |   |   |   |
|                                                                            |   |             |    |   |   |   |   |   |
| Proceeds from the dividend reinvestment plan                                    |   |             | 16      |   |   |   | 61 |   |
| Proceeds from issuance of preferred stock                                       |   |             | 9,240   |   |   |   | -- |   |
| Proceeds from issuance of warrants                                              |   |             | 25      |   |   |   | -- |   |
| Proceeds from redemption of life insurance                                      |   |             | 645     |   |   |   | -- |   |
| Dividends paid in cash                                                          |   |             | (107    | ) |   |   | (411 | ) |
| Dividends paid on preferred stock                                               |   |             | (80     | ) |   |   | -- |   |
| Proceeds from the exercise of stock options                                     |   |             | --      |   |   |   | 2 |   |
| Split dollar post retirement liability recapitalization                         |   |             | --      |   |   |   | (60 | ) |
| Share repurchase program                                                        |   |             | --      |   |   |   | (316 | ) |
| Repayment of term borrowings,net                                                |   |             | --      |   |   |   | 1,661 |   |
| Decrease in other borrowings                                                    |   |             | (6,526  | ) |   |   | (4,165 | ) |
| Increase in deposit accounts                                                    |   |             | 28,493  |   |   |   | 1,786 |   |
|                                                                            |   |             |    |   |   |   |   |   |
| Net cash (used) provided by financing activities                                |   |             | 31,706  |   |   |   | (1,442 | ) |
|                                                                            |   |             |    |   |   |   |   |   |
| NET INCREASE IN CASH                                                            |   |             |    |   |   |   |   |   |
|    AND CASH EQUIVALENTS                                          |   |             | 2,514   |   |   |   | 429 |   |
|                                                                            |   |             |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                                                       |   |             |    |   |   |   |   |   |
|    AT BEGINNING OF PERIOD                                        |   |             | 21,370  |   |   |   | 11,890 |   |
|                                                                            |   |             |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                                                       |   |             |    |   |   |   |   |   |
|    AT END OF PERIOD                                              |   | $                | 23,884  |   |   | $ | 12,319 |   |
|                                                                            |   |             |    |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES:                                                       |   |             |    |   |   |   |   |   |
|                                                                            |   |             |    |   |   |   |   |   |
| Cash paid for:                                                                  |   |             |    |   |   |   |   |   |
|   Income taxes                                                        |   | $                | 510     |   |   | $ | 281 |   |
|   Interest                                                            |   |             | 5,995   |   |   |   | 7,008 |   |
|                                                                            |   |             |    |   |   |   |   |   |
| Non-cash transactions:                                                          |   |             |    |   |   |   |   |   |
|   Loans foreclosed                                                    |   | $                | 2,891   |   |   |   | -- |   |

----

|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   | Retained       |   |   | Accumulated   |   |   |    |   |   |   |   |
|------------------------------------------------------------------------------------------|--------|-----------------|--------|--------|--------------|--------|--------|-------------------------------------------|-----------|--------|-----------|---------------|----------|--------|---------------|--------|--------|----------------|--------|--------|---------------|--------|--------|---------|--------|--------|--------|--------|
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   | Additional    |   |   | Earnings,      |   |   | Other         |   |   |    |   |   | Total  |   |
|                                                                                     |   | Preferred Stock |   |   | Common Stock |   |   |                                      | Paid-in   |   |      | Substantially |     |   | Comprehensive |   |   | Treasury Stock |   |   | Shareholders' |   |
|                                                                                     |   | Shares          |   |   | Amount       |   |   | Shares                                    |      |   | Amount    |          | Warrants |   | Capital       |   |   | Restricted     |   |   | Income (loss) |   |   | at Cost |   |   | Equity |   |
|                                                                                     |   |            |   |   |         |   |   | (Dollars in Thousands, Except Share Data) |      |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |
| BALANCE AT DECEMBER 31, 2007                                                             |   |            |   |   |         |   |   |                                      | 1,794,866 |   |      | $             | 20       |   |          |   | $      | 12,781         |   |   | $             | 20,276 |   |    | $      | 191    |   |   | $ | (5,955 | ) |   | $ | 27,313 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                               |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          | 736    |   |    |   |   |   |   |   |   |   |   |   | 736 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|   Other comprehensive loss, net of tax on                                      |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|      unrealized holding losses on securities available for sale |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|      arising during period                                      |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   | (837   | )      |   |   |   |   |   |   | (837 | ) |
|   Less reclassification adjustment for gains included                          |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   | 133    |   |   |   |   |   |   |   | 133 |   |
|      in net income                                              |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|   Comprehensive income                                                         |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   | 32 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Stock option activity, net                                                               |   |            |   |   |         |   |   |                                      | 1,424     |   |      |          |     |   |          |   |   | 2              |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   | 2 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Dividend  reinvestment plan contributions                                      |   |            |   |   |         |   |   |                                      | 3,667     |   |      |          |     |   |          |   |   | 61             |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   | 61 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative effect of change in accounting principal                                      |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          | (60    | )      |    |   |   |   |   |   |   |   |   |   | (60 | ) |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Share repurchase program                                                                 |   |            |   |   |         |   |   |                                      | (16,920   | )      |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   | (316 | ) |   |   | (316 | ) |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividend ($.23 per share)                                                           |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          | (411   | )      |    |   |   |   |   |   |   |   |   |   | (411 | ) |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT JUNE 30, 2008                                                                 |   |            |   |   |         |   |   |                                      | 1,783,037 |   |      | $             | 20       |   |          |   | $      | 12,844         |   |   | $             | 20,541 |   |    | $      | (513   | )      |   | $ | (6,271 | ) |   | $ | 26,621 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT DECEMBER 31, 2008                                                             |   |            |   |   |         |   |   |                                      | 1,787,092 |   |      | $             | 20       |   |          |   | $      | 12,903         |   |   | $             | 18,997 |   |    | $      | (1,696 | )      |   | $ | (6,300 | ) |   | $ | 23,924 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                        |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          | (2,261 | )      |    |   |   |   |   |   |   |   |   |   | (2,261 | ) |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|   Other comprehensive loss, net of tax on                                      |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|      unrealized holding losses on securities available for sale |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|      arising during period                                      |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   | 1,221  |   |   |   |   |   |   |   | 1,221 |   |
|   Less reclassification adjustment for gains and other than                    |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   | (463   | )      |   |   |   |   |   |   | (463 | ) |
|      temporary investment charge in net loss                    |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|   Comprehensive loss                                                           |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   | (1,503 | ) |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Dividend  reinvestment plan contributions                                      |   |            |   |   |         |   |   |                                      | 3,507     |   |      |          |     |   |          |   |   | 16             |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   | 16 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of preferred stock                                                              |   |            | 9,266  |   |         |   | 9,240  |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   | 9,240 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of common stock warrants                                                        |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   | 25     |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   | 25 |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of Preferred Stock to redemption value                                         |   |            |   |   |         |   | 3      |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   | (3      | )      |   |   |   |   |   |   |   |   |   |   | -- |   |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred stock dividend                                                                 |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   | (79     | )      |   |   |   |   |   |   |   |   |   |   | (79 | ) |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividend ($.06 per share)                                                           |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   | (107    | )      |   |   |   |   |   |   |   |   |   |   | (107 | ) |
|                                                                                     |   |            |   |   |         |   |   |                                      |      |   |      |          |     |   |          |   |   |           |   |   |          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT June 30, 2009                                                                 |   |            | 9,266  |   |         | $      | 9,243  |                                      |      |   | 1,790,599 |          |     | $      | 20            |   | $25    |           | $      | 12,919 |          |   | $      | 16,547  |   |   | $      | (938   | ) |   | $ | (6,300 | ) |   | $ | 31,516 |   |

----

----

----

----

----

|                                                         |   | Amount Outstanding atJune 30, |            |   |   |   |            |   |   |                  | Distribution |
|--------------------------------------------------------------|--------|-------------------------------|-----------------|--------|--------|--------|-----------------|--------|--------|-----------------------|--------------|
| Name                                                         |   | 2009                          |            |   | 2008   |   |            | Rate   |   | PrepaymentOption Date |         | Maturity |   | PaymentFrequency |
|                                                         |   |                          |            |   |   |   |            |   |   |                  |         |   |   |   |
| Provident CommunityBancshares Capital Trust I                |   |                          | 4,000,000       |   |   |   | 4,000,000       |   |   |                  | 7.39         | % |  October 1, 2011 |   |  October 1, 2036 |   |  Quarterly |
|                                                         |   |                          |            |   |   |   |            |   |   |                  |         |   |   |   |   |   |   |
| Provident CommunityBancshares Capital Trust II               |   |                          |  8,000,000 |   |   |   |  8,000,000 |   |   |                  | 2.41         | % |  March 1, 2012 |   |  March 1, 2037 |   |  Quarterly |
|           Total |   |                          | $12,000,000     |   |   |   | $12,000,000     |   |   |                  |         |   |   |   |   |   |   |

| Loan Commitments:                                     |   | Contract Amount |       |
|-------------------------------------------------------|--------|-----------------|------------|
|                                                  |   |            |       |
| Approved loan commitments                             |   | $               | 1,076,000  |   |
| Commitments of fund commercial and construction loans |   |            | 207,000    |   |
| Unused portions of loans and credit lines             |   |            | 41,036,000 |   |
| Total loan commitments                                |   | $               | 42,319,000 |   |

----

| Level 1 | Valuation is based upon quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                               |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 2 | Valuation is based upon quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  |
| Level 3 | Valuation is based upon quoted prices for similar assets or liabilities; quoted prices in markets that are not active; and model-based techniques whose value is determined using pricing models, discounted cash flow methodologies and similar techniques.                    |

----

|                          |   | Total |        |   | (Level 1) |   |       | (Level 2) |   |   | (Level 3)  |   |
|-------------------------------|--------|-------|-------------|--------|-----------|--------|------------|-----------|--------|--------|------------|--------|
| Available for Sale Securities |   | $     | 134,937,000 |   |      | $      | 32,938,000 |      |   | $      | 97,144,000 |   |   | $ | 4,855,000 |   |

|                          |   | Total |        |   | (Level 1) |   |       | (Level 2) |   |   | (Level 3)  |   |
|-------------------------------|--------|-------|-------------|--------|-----------|--------|------------|-----------|--------|--------|------------|--------|
| Available for Sale Securities |   | $     | 100,418,000 |   |      | $      | 28,236,000 |      |   | $      | 67,337,000 |   |   | $ | 4,845,000 |   |

----

|                                   | Fair Value Measurements Using Significant |       |
|----------------------------------------|-------------------------------------------|------------|
|                                   | Unobservable Inputs (Level 3)             |       |
|                                   | Investment Securities                     |       |
|                                   |  Available-for-Sale                  |       |
| Beginning balance at December 31, 2008 |                                      | $4,845,000 |   |
| Transfers in and/or out of Level 3     |                                      | 10,000     |   |
| Ending balance at June 30, 2009        |                                      | $4,855,000 |   |

|                           |   | Total  |            |   | (Level 1) |   |     | (Level 2) |   |   | (Level 3) |   |
|--------------------------------|--------|--------|-----------------|--------|-----------|--------|----------|-----------|--------|--------|-----------|--------|
| Loans                          |   | $      | 20,999,000      |   |      | $      | --       |      |   | $      | --        |   |   | $ | 20,999,000 |   |
| Other real estate owned        |   |   | 3,622,000       |   |      |   | --       |      |   |   | --        |   |   |   | 3,622,000 |   |
| Goodwill and intangible assets |   |   |  2,674,000 |   |      |   |  -- |      |   |   |  --  |   |   |   |  2,674,000 |   |
| Total assets at fair value     |   | $      | 27,295,000      |   |      | $      | --       |      |   | $      | --        |   |   | $ | 27,295,000 |   |

|                           |   | Total  |            |   | (Level 1) |   |     | (Level 2) |   |   | (Level 3) |   |
|--------------------------------|--------|--------|-----------------|--------|-----------|--------|----------|-----------|--------|--------|-----------|--------|
| Loans                          |   | $      | 16,001,000      |   |      | $      | --       |      |   | $      | --        |   |   | $ | 16,001,000 |   |
| Other real estate owned        |   |   | 667,000         |   |      |   | --       |      |   |   | --        |   |   |   | 667,000 |   |
| Goodwill and intangible assets |   |   |  2,845,000 |   |      |   |  -- |      |   |   |  --  |   |   |   | 2,845,000 |   |
| Total assets at fair value     |   | $      | 19,513,000      |   |      | $      | --       |      |   | $      | --        |   |   | $ | 19,513,000 |   |

----

|                                                             |   | June 30, 2009   |    |
|------------------------------------------------------------------|--------|-----------------|---------|
|                                                             |   | Carrying Amount |    |   | FairValue |   |
| Financial assets                                                 |   |            |    |   |   |   |
| Cash and due from banks                                          |   | $               | 23,884  |   |   | $ | 23,884 |   |
| Securities available for sale                                    |   |            | 134,937 |   |   |   | 134,937 |   |
| Securities held to maturity                                      |   |            | 3,934   |   |   |   | 3,755 |   |
| Federal Home Loan Bank stock, at cost                            |   |            | 3,947   |   |   |   | 3,947 |   |
| Federal Reserve Bank stock, at cost                              |   |            | 599     |   |   |   | 599 |   |
| Loans, net                                                       |   |            | 266,801 |   |   |   | 272,901 |   |
| Accrued interest receivable                                      |   |            | 1,919   |   |   |   | 1,919 |   |
| Cash surrender value of life insurance                           |   |            | 9,132   |   |   |   | 9,132 |   |
|                                                             |   |            |    |   |   |   |   |   |
| Financial liabilities                                            |   |            |    |   |   |   |   |   |
| Deposits                                                         |   | $               | 335,314 |   |   | $ | 339,300 |   |
| Advances from FHLB and other borrowings                          |   |            | 64,500  |   |   |   | 64,835 |   |
| Securities sold under agreement to repurchase                    |   |            | 17,479  |   |   |   | 17,645 |   |
| Floating rate junior subordinated deferrable interest debentures |   |            | 12,372  |   |   |   | 12,037 |   |
| Accrued interest payable                                         |   |            | 736     |   |   |   | 736 |   |
|                                                             |   |            |    |   |   |   |   |   |
| Off-balance-sheet assets (liabilities)                           |   |            |    |   |   |   |   |   |
| Commitments to extend credit                                     |   | $               | (42,319 | ) |   | $ | (42,319 | ) |

|                                                             |   | December 31, 2008 |    |
|------------------------------------------------------------------|--------|-------------------|---------|
|                                                             |   | CarryingAmount    |    |   | FairValue |   |
| Financial assets                                                 |   |              |    |   |   |   |
| Cash and due from banks                                          |   | $                 | 21,370  |   |   | $ | 21,370 |   |
| Securities available for sale                                    |   |              | 100,418 |   |   |   | 100,418 |   |
| Securities held to maturity                                      |   |              | 2,430   |   |   |   | 2,310 |   |
| Federal Home Loan Bank stock, at cost                            |   |              | 3,929   |   |   |   | 3,929 |   |
| Federal Reserve Bank stock, at cost                              |   |              | 599     |   |   |   | 599 |   |
| Loans, net                                                       |   |              | 278,665 |   |   |   | 286,004 |   |
| Accrued interest receivable                                      |   |              | 2,087   |   |   |   | 2,087 |   |
| Cash surrender value of life insurance                           |   |              | 9,577   |   |   |   | 9,577 |   |
|                                                             |   |              |    |   |   |   |   |   |
| Financial liabilities                                            |   |              |    |   |   |   |   |   |
| Deposits                                                         |   | $                 | 306,821 |   |   | $ | 315,542 |   |
| Advances from FHLB and other borrowings                          |   |              | 69,500  |   |   |   | 70,394 |   |
| Securities sold under agreement to repurchase                    |   |              | 19,005  |   |   |   | 19,232 |   |
| Floating rate junior subordinated deferrable interest debentures |   |              | 12,372  |   |   |   | 11,636 |   |
| Accrued interest payable                                         |   |              | 701     |   |   |   | 701 |   |
|                                                             |   |              |    |   |   |   |   |   |
| Off-balance-sheet assets (liabilities)                           |   |              |    |   |   |   |   |   |
| Commitments to extend credit                                     |   | $                 | (55,845 | ) |   | $ | (55,845 | ) |

----

----

----

|                 |   | June 30, 2009 |   |      | December 31, 2008 |   |
|----------------------|--------|---------------|--------|-----------|-------------------|--------|
|                 |   | AmortizedCost |   | FairValue |              |   | AmortizedCost |   | Fair Value |   |
|                 |   |          |   |      |              |   |   |   |   |   |   |   |   |   |   |   |
| Municipal Securities |   | $             | 3,934  |      |              | $      | 3,755 |   |   | $ | 2,430 |   |   | $ | 2,310 |   |

|                                |   | June 30, 2009 |    |   | December 31, 2008 |   |
|-------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                |   | AmortizedCost |    |   | FairValue         |   |   | AmortizedCost |   |   | FairValue |   |
| Investment Securities:              |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Agency Obligations             |   | $             | 5       |   |              | $      | 5 |   |   | $ | 6 |   |   | $ | 6 |   |
| Government Sponsored Enterprises    |   |          | 32,586  |   |              |   | 32,933 |   |   |   | 27,901 |   |   |   | 28,230 |   |
| Municipal Securities                |   |          | 5,782   |   |              |   | 6,009 |   |   |   | 6,135 |   |   |   | 6,358 |   |
| Trust Preferred Securities          |   |          | 11,218  |   |              |   | 7,632 |   |   |   | 12,325 |   |   |   | 8,392 |   |
| Total Investment Securities         |   |          | 49,591  |   |              |   | 46,579 |   |   |   | 46,367 |   |   |   | 42,986 |   |
| Mortgage-backed Securities:         |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                          |   |          | 44,163  |   |              |   | 44,984 |   |   |   | 31,989 |   |   |   | 32,385 |   |
| Ginnie Mae                          |   |          | 33,968  |   |              |   | 34,596 |   |   |   | 21,311 |   |   |   | 21,878 |   |
| Freddie Mac                         |   |          | 7,972   |   |              |   | 8,204 |   |   |   | 2,551 |   |   |   | 2,574 |   |
| Collateralized Mortgage Obligations |   |          | 686     |   |              |   | 574 |   |   |   | 809 |   |   |   | 595 |   |
| Total Mortgage-backed Securities    |   |          | 86,789  |   |              |   | 88,358 |   |   |   | 56,660 |   |   |   | 57,432 |   |
| Total Available for Sale            |   | $             | 136,380 |   |              | $      | 134,937 |   |   | $ | 103,027 |   |   | $ | 100,418 |   |

----

|                                    |   | June 30, 2009 |    |   | December 31, 2008 |   |
|-----------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| Mortgage loans:                         |   |          |    |   |              |   |
| Fixed-rate residential                  |   | $             | 11,479  |   |              | $      | 12,847 |   |
| Adjustable-rate residential             |   |          | 6,621   |   |              |   | 7,388 |   |
| Commercial real estate                  |   |          | 114,234 |   |              |   | 110,589 |   |
| Construction                            |   |          | 3,222   |   |              |   | 5,867 |   |
| Total mortgage loans                    |   |          | 135,556 |   |              |   | 136,691 |   |
| Commercial loans:                       |   |          |    |   |              |   |   |   |
| Commercial non-real estate              |   |          | 30,784  |   |              |   | 27,946 |   |
| Commercial lines of credit              |   |          | 54,986  |   |              |   | 66,066 |   |
| Total commercial loans                  |   |          | 85,770  |   |              |   | 94,012 |   |
| Consumer loans:                         |   |          |    |   |              |   |   |   |
| Home equity                             |   |          | 17,461  |   |              |   | 17,371 |   |
| Consumer and installment                |   |          | 35,988  |   |              |   | 39,301 |   |
| Consumer lines of credit                |   |          | 308     |   |              |   | 330 |   |
| Total consumer loans                    |   |          | 53,757  |   |              |   | 57,002 |   |
| Total loans                             |   |          | 275,083 |   |              |   | 287,705 |   |
| Less:                                   |   |          |    |   |              |   |   |   |
| Undisbursed portion of interim          |   |          |    |   |              |   |   |   |
|  construction loans                |   |          | (207    | )      |              |   | (1,926 | ) |
| Unamortized loan discount               |   |          | (346    | )      |              |   | (383 | ) |
| Allowance for loan losses               |   |          | (7,842  | )      |              |   | (6,778 | ) |
| Net deferred loan origination costs     |   |          | 113     |   |              |   | 47 |   |
| Total, net                              |   | $             | 266,801 |   |              | $      | 278,665 |   |
|                                    |   |          |    |   |              |   |   |   |
| Weighted-average interest rate of loans |   |          | 5.14    | %      |              |   | 5.47 | % |

----

|                              |   |  June 30, 2009 |   |   | December 31, 2008 |   |
|-----------------------------------|--------|---------------------|--------|--------|-------------------|--------|
|                              |   | Rate                |   |   | Balance           |   |   | % |   |   | Rate |   |   | Balance |   |   | % |   |
| Account Type                      |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW accounts:                     |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial non-interest-bearing   |   |                | --     |   |              | $      | 18,320 |   |   |   | 5.46 | % |   |   | -- |   |   | $ | 17,002 |   |   |   | 5.54 | % |
| Non-commercial                    |   |                | 2.29   | %      |              |   | 83,281 |   |   |   | 24.84 | % |   |   | 2.06 | % |   |   | 68,033 |   |   |   | 22.18 | % |
| Money market checking accounts    |   |                | 1.55   | %      |              |   | 29,937 |   |   |   | 8.93 | % |   |   | 2.17 | % |   |   | 22,313 |   |   |   | 7.27 | % |
| Regular savings                   |   |                | 0.50   | %      |              |   | 13,506 |   |   |   | 4.03 | % |   |   | 0.57 | % |   |   | 12,407 |   |   |   | 4.04 | % |
| Total demand and savings deposits |   |                | 1.68   | %      |              |   | 145,044 |   |   |   | 43.26 | % |   |   | 1.92 | % |   |   | 119,755 |   |   |   | 39.03 | % |
| Time deposits:                    |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Up to 3.00%                       |   |                |   |   |              |   | 79,981 |   |   |   | 23.85 | % |   |   |   |   |   |   | 41,720 |   |   |   | 13.60 | % |
| 3.01 %- 4.00%                     |   |                |   |   |              |   | 64,389 |   |   |   | 19.20 | % |   |   |   |   |   |   | 79,176 |   |   |   | 25.80 | % |
| 4.01 %- 5.00%                     |   |                |   |   |              |   | 44,788 |   |   |   | 13.36 | % |   |   |   |   |   |   | 58,962 |   |   |   | 19.22 | % |
| 5.01 %- 6.00%                     |   |                |   |   |              |   | 1,084 |   |   |   | 0.32 | % |   |   |   |   |   |   | 7,180 |   |   |   | 2.34 | % |
| 6.01 %- 7.00%                     |   |                |   |   |              |   | 28 |   |   |   | 0.01 | % |   |   |   |   |   |   | 28 |   |   |   | 0.01 | % |
| Total time deposits               |   |                | 3.12   | %      |              |   | 190,270 |   |   |   | 56.74 | % |   |   | 3.56 | % |   |   | 187,066 |   |   |   | 60.97 | % |
| Total deposit accounts            |   |                | 2.50   | %      |              | $      | 335,314 |   |   |   | 100.00 | % |   |   | 2.91 | % |   | $ | 306,821 |   |   |   | 100.00 | % |

|                                               |   | June 30, 2009 |   |   | December 31, 2008 |   |
|----------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                               |   | Balance       |   |   | Wtd Avg Rate |   |   | Balance |   |   | Wtd Avg Rate |   |
| Contractual Maturity:                              |   |          |   |   |              |   |   |   |   |   |   |   |
| Within one year - fixed rate                       |   | $             | 5,000  |   |              |   | 4.93 | % |   | $ | 5,000 |   |   |   | 2.93 | % |
| After one but within three years - fixed rate      |   |          | --     |   |              |   | -- | % |   |   | 5,000 |   |   |   | 4.93 | % |
| After one but within three years - adjustable rate |   |          | 22,000 |   |              |   | 4.58 | % |   |   | 22,000 |   |   |   | 4.58 | % |
| Greater than five years - adjustable rate          |   |          | 37,500 |   |              |   | 3.89 | % |   |   | 37,500 |   |   |   | 3.89 | % |
| Total advances                                     |   | $             | 64,500 |   |              |   | 4.20 | % |   | $ | 69,500 |   |   |   | 4.11 | % |

----

----

| June 30, 2009                  |   |
|--------------------------------|--------|
|                           |   |   |   |   |   |   |   |   |   |
|                           |   | Actual |   |   | Regulatory Minimum |   |   | “Well Capitalized” |   |
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                           |   | $  |   |   | % |   |   |  $ |   |   | % |   |   |  $ |   |   | % |   |
| Leverage ratio                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                    |   |   | 40,598 |   |   |   | 8.82 | % |   |   | 18,416 |   |   |   | 4.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                           |   |   | 39,712 |   |   |   | 8.63 | % |   |   | 18,412 |   |   |   | 4.00 | % |   |   | 23,015 |   |   |   | 5.00 | % |
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 capital ratio           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                    |   |   | 40,598 |   |   |   | 13.13 | % |   |   | 12,369 |   |   |   | 4.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                           |   |   | 39,712 |   |   |   | 12.86 | % |   |   | 12,354 |   |   |   | 4.00 | % |   |   | 18,531 |   |   |   | 6.00 | % |
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total risk-based capital ratio |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                    |   |   | 45,690 |   |   |   | 14.78 | % |   |   | 24,737 |   |   |   | 8.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                           |   |   | 43,622 |   |   |   | 14.12 | % |   |   | 24,708 |   |   |   | 8.00 | % |   |   | 30,885 |   |   |   | 10.00 | % |

----

----

|                                                             |   | Three Months Ended June 30, |         |
|------------------------------------------------------------------|--------|-----------------------------|--------------|
|                                                             |   | 2009                        |         |   |  2008 |   |
|                                                             |   | Average Balance        |         |   |  Interest |   |   |  Average Yield/Cost |   |   |  Average Balance |   |   |  Interest |   |   |  AverageYield/Cost |   |
| Interest-earning assets:                                         |   |                        |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                        |   | $                           | 281,347      |   |   | $ | 3,644 |   |   |   | 5.18 | % |   | $ | 276,355 |   |   | $ | 4,378 |   |   |   | 6.34 | % |
| Mortgage-backed securities                                       |   |                        | 91,130       |   |   |   | 1,137 |   |   |   | 4.99 | % |   |   | 52,041 |   |   |   | 687 |   |   |   | 5.28 | % |
| Investment securities                                            |   |                        | 44,648       |   |   |   | 543 |   |   |   | 4.87 | % |   |   | 40,655 |   |   |   | 562 |   |   |   | 5.53 | % |
| Other interest-earning assets                                    |   |                        | 15,776       |   |   |   | 20 |   |   |   | 0.49 | % |   |   | 5,658 |   |   |   | 73 |   |   |   | 5.18 | % |
| Total interest-earning assets                                    |   |                        | 432,901      |   |   |   | 5,344 |   |   |   | 4.94 | % |   |   | 374,709 |   |   |   | 5,700 |   |   |   | 6.08 | % |
| Non-interest-earning assets                                      |   |                        | 30,172       |   |   |   |   |   |   |   |   |   |   |   | 32,608 |   |   |   |   |   |   |   |   |   |
| Total assets                                                     |   | $                           | 463,073      |   |   |   |   |   |   |   |   |   |   | $ | 407,317 |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                    |   |                        |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                         |   |                        | 314,075      |   |   |   | 2,111 |   |   |   | 2.69 | % |   |   | 255,630 |   |   |   | 2,218 |   |   |   | 3.47 | % |
| Floating rate junior subordinated deferrable interest debentures |   |                        | 12,372       |   |   |   | 135 |   |   |   | 4.36 | % |   |   | 12,372 |   |   |   | 175 |   |   |   | 5.65 | % |
| FHLB advances and other borrowings                               |   |                        | 83,105       |   |   |   |  758 |   |   |   | 3.65 | % |   |   | 91,084 |   |   |   | 843 |   |   |   | 3.70 | % |
| Total interest-bearing liabilities                               |   |                        | 409,552      |   |   |   | 3,004 |   |   |   | 2.93 | % |   |   | 359,086 |   |   |   | 3,236 |   |   |   | 3.60 | % |
|                                                             |   |                        |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing sources:                                    |   |                        |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing deposits                                    |   |                        | 18,278       |   |   |   |   |   |   |   |   |   |   |   | 17,773 |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing liabilities                                 |   |                        | 3,530        |   |   |   |   |   |   |   |   |   |   |   | 3,838 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                |   |                        | 431,360      |   |   |   |   |   |   |   |   |   |   |   | 380,697 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                       |   |                        |  31,713 |   |   |   |   |   |   |   |   |   |   |   | 26,620 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                 |   | $                           | 463,073      |   |   |   |   |   |   |   |   |   |   | $ | 407,317 |   |   |   |   |   |   |   |   |   |
| Net interest income                                              |   |                        |         |   |   | $ | 2,340 |   |   |   |   |   |   |   |   |   |   | $ | 2,464 |   |   |   |   |   |
| Interest rate spread                                             |   |                        |         |   |   |   |   |   |   |   | 2.01 | % |   |   |   |   |   |   |   |   |   |   | 2.48 | % |
|  Impact of non-interest-bearing deposits                    |   |                        |         |   |   |   |   |   |   |   | 0.15 |   |   |   |   |   |   |   |   |   |   |   | 0.15 |   |
|  Net interest margin                                        |   |                        |         |   |   |   |   |   |   |   |  2.16 | % |   |   |   |   |   |   |   |   |   |   |  2.63 | % |

----

----

----

|                                                             |   | Six Months Ended June 30, |
|------------------------------------------------------------------|--------|---------------------------|
|                                                             |   |  2009                |   | 2008 |
|                                                             |   | AverageBalance            |   |   |   Interest |   |   | AverageYield/Cost |   |   | AverageBalance |   |   |  Interest |   |   | AverageYield/Cost |   |
| Interest-earning assets:                                         |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                        |   | $                         | 282,936 |   |   | $ | 7,240 |   |   |   | 5.12 | % |   | $ | 270,183 |   |   | $ | 9,000 |   |   |   | 6.66 | % |
| Mortgage-backed securities                                       |   |                      | 78,292 |   |   |   | 2,032 |   |   |   | 5.19 | % |   |   | 51,472 |   |   |   | 1,363 |   |   |   | 5.30 | % |
| Investment securities                                            |   |                      | 46,107 |   |   |   | 1,167 |   |   |   | 5.06 | % |   |   | 49,128 |   |   |   | 1,365 |   |   |   | 5.56 | % |
| Other interest-earning assets                                    |   |                      | 18,452 |   |   |   | 42 |   |   |   | 0.46 | % |   |   | 6,090 |   |   |   | 147 |   |   |   | 4.84 | % |
| Total interest-earning assets                                    |   |                      | 425,787 |   |   |   | 10,481 |   |   |   | 4.92 | % |   |   | 376,873 |   |   |   | 11,875 |   |   |   | 6.08 | % |
| Non-interest-earning assets                                      |   |                      | 29,964 |   |   |   |   |   |   |   |   |   |   |   | 32,791 |   |   |   |   |   |   |   |   |   |
| Total assets                                                     |   | $                         | 455,751 |   |   |   |   |   |   |   |   |   |   | $ | 409,664 |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                    |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                         |   |                      | 308,403 |   |   |   | 4,203 |   |   |   | 2.73 | % |   |   | 255,787 |   |   |   | 4,680 |   |   |   | 3.66 | % |
| Floating rate junior subordinated deferrable interest debentures |   |                      | 12,372 |   |   |   | 285 |   |   |   | 4.61 | % |   |   | 12,372 |   |   |   | 384 |   |   |   | 6.21 | % |
| FHLB advances and other borrowings                               |   |                      | 85,604 |   |   |   | 1,542 |   |   |   | 3.60 | % |   |   | 94,244 |   |   |   | 1,845 |   |   |   | 3.92 | % |
| Total interest-bearing liabilities                               |   |                      | 406,379 |   |   |   | 6,030 |   |   |   | 2.97 | % |   |   | 362,403 |   |   |   | 6,909 |   |   |   | 3.81 | % |
| Non-interest-bearing sources:                                    |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing deposits                                    |   |                      | 18,671 |   |   |   |   |   |   |   |   |   |   |   | 16,808 |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing liabilities                                 |   |                      | 2,981 |   |   |   |   |   |   |   |   |   |   |   | 2,951 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                |   |                      | 428,031 |   |   |   |   |   |   |   |   |   |   |   | 382,162 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                       |   |                      |  27,720 |   |   |   |   |   |   |   |   |   |   |   | 27,502 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                 |   | $                         | 455,751 |   |   |   |   |   |   |   |   |   |   | $ | 409,664 |   |   |   |   |   |   |   |   |   |
| Net interest income                                              |   |                      |   |   |   | $ | 4,451 |   |   |   |   |   |   |   |   |   |   | $ | 4,966 |   |   |   |   |   |
| Interest rate spread                                             |   |                      |   |   |   |   |   |   |   |   | 1.95 | % |   |   |   |   |   |   |   |   |   |   | 2.49 | % |
| Impact of non-interest-bearing deposits                          |   |                      |   |   |   |   |   |   |   |   | 0.14 |   |   |   |   |   |   |   |   |   |   |   | 0.15 |   |
| Net interest margin                                              |   |                      |   |   |   |   |   |   |   |   |  2.09 | % |   |   |   |   |   |   |   |   |   |   | 2.64 | % |

----

|                           | (in thousands)  |
|--------------------------------|----------------------|
| Balance at beginning of period |                 | $ | 6,778 |   |
|                           |                 |   |   |   |
| Provision for loan losses      |                 |   | 3,625 |   |
|                           |                 |   |   |   |
| Charge-offs, net               |                 |   | (2,561 | ) |
|                           |                 |   |   |   |
| Balance at end of period       |                 | $ | 7,842 |   |

----

|                                                                      |   | June 30, 2009 |   |   | December 31, 2008 |   |
|---------------------------------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Non-accruing loans which are contractually past due 90 days or more: |   |          |   |   |              |   |
|                                                                      |   |          |   |   |              |   |
| Residential real estate                                                   |   | $             | 535    |   |              | $      | 389 |   |
| Commercial                                                                |   |          | 19,239 |   |              |   | 13,345 |   |
| Consumer                                                                  |   |          | 1,225  |   |              |   | 2,267 |   |
| Total nonperforming loans                                                 |   |          | 20,999 |   |              |   | 16,001 |   |
|                                                                      |   |          |   |   |              |   |   |   |
| Real estate acquired through foreclosure and repossessed assets           |   |          | 3,622  |   |              |   | 667 |   |
| Total nonperforming assets                                                |   | $             | 24,621 |   |              | $      | 16,668 |   |
|                                                                      |   |          |   |   |              |   |   |   |
| Nonperforming loans to total loans                                        |   |          | 8.95   | %      |              |   | 5.98 | % |
|                                                                      |   |          |   |   |              |   |   |   |
| Nonperforming assets to total assets                                      |   |          | 5.30   | %      |              |   | 3.84 | % |
|                                                                      |   |          |   |   |              |   |   |   |
| Allowance for loan losses to total loans outstanding                      |   |          | 2.85   | %      |              |   | 2.37 | % |
|                                                                      |   |          |   |   |              |   |   |   |
| Allowance for loan losses to Nonperforming loans                          |   |          | 37.34  | %      |              |   | 42.36 | % |
|                                                                      |   |          |   |   |              |   |   |   |
| Allowance for loan losses                                                 |   | $             | 7,842  |   |              | $      | 6,778 |   |

----

----

----

|   | 1. | The following individuals were elected as directors, each for a three-year term by the following vote: |
|--------|----|--------------------------------------------------------------------------------------------------------|

|   | Votes For |   | Votes Withheld |
|--------|-----------|--------|----------------|

|   | Russell H. Smart | 1,268,931 |        109,059 |
|--------|------------------|-----------|---------------------------------------------------|

|   | Philip C. Wilkins | 1,268,993 |        108,997 |
|--------|-------------------|-----------|---------------------------------------------------|

|   | 2. | The following individual was elected as directors for a one-year term by the following vote:  |
|--------|----|----------------------------------------------------------------------------------------------------|

|   | Votes For |   | Votes Withheld |
|--------|-----------|--------|----------------|

|   | Dwight V. Neese | 1,263,458 |        114,532 |
|--------|-----------------|-----------|---------------------------------------------------|

|   | 3. | The appointment of Elliott Davis, LLC, as auditors for the Corporation for the year ending December 31, 2008 was ratified by the stockholders by the following vote: |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For 1,395,350 | Against 19,779 |  Abstain 3,480 |
|--------|---------------|----------------|---------------------|

----

----