----

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

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

| Delaware                        | 57-1001177          |
|---------------------------------|---------------------|
| (State or other Jurisdiction of | (I.R.S. Employer    |
| Incorporation or Organization)  | Identification No.) |

----

| Part I.  | Financial Information                                                                | Page                                        |
|----------|--------------------------------------------------------------------------------------|---------------------------------------------|
|     |                                                                                 |                                        |
|     | Item 1.  Financial Statements                                              |                                        |
|     |                                                                                 |                                        |
|     | Consolidated Balance Sheets as of March 31, 2011                                     |                                        |
|     | and December 31, 2010                                                                |        3 |
|     |                                                                                 |                                        |
|     | Consolidated Statements of Income (Loss) for the three                               |                                        |
|     | months ended March 31, 2011 and 2010                                                 |       4       |
|     |                                                                                 |                                        |
|     | Consolidated Statements of Cash Flows for the three                                  |                                        |
|     | months ended March 31, 2011 and 2010                                                 |        5 |
|     |                                                                                 |                                        |
|     | Consolidated Statements of Changes in Shareholders’ Equity and                 |                                        |
|     | Comprehensive Loss for the three months ended                                        |                                        |
|     | March 31, 2011 and 2010                                                              | 6                                           |
|     |                                                                                 |                                        |
|     | Notes to Consolidated Financial Statements                                           | 7                                           |
|     |                                                                                 |                                        |
|     | Item 2. Management’s Discussion and Analysis of                                |                                        |
|     | Financial Condition and Results of Operations                                        |  21                                    |
|     |                                                                                 |                                        |
|     | Item 3. Quantitative and Qualitative Disclosures                                     |                                        |
|     | about Market Risk                                                                    | 40                                          |
|     |                                                                                 |                                        |
|     | Item 4. Controls and Procedures                                                      | 40                                          |
|     |                                                                                 |                                        |
| Part II. | Other Information                                                                    |                                        |
|     |                                                                                 |                                        |
|     | Item 1.   Legal Proceedings                                           |      41            |
|     |                                                                                 |                                        |
|     | Item 1A. Risk Factors                                                                |      41            |
|     |                                                                                 |                                        |
|     | Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds |      41            |
|     |                                                                                 |                                        |
|     | Item 3.   Defaults Upon Senior Securities                             |     41                  |
|     |                                                                                 |                                        |
|     | Item 4.   Reserved                                                    | 41                                          |
|     |                                                                                 |                                        |
|     | Item 5.   Other Information                                           |      41            |
|     |                                                                                 |                                        |
|     | Item 6.   Exhibits                                                    |      41            |
|     |                                                                                 |                                        |
|     | Signatures                                                                           | 42                                          |

----

| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES              |   |                   |    |   |         |   |
|--------------------------------------------------------------------|--------|------------------------|---------|--------|--------------|--------|
| CONSOLIDATED BALANCE SHEETS                                        |   |                   |    |   |         |   |
| March 31, 2011 and December 31, 2010                               |   |                   |    |   |         |   |
|                                                               |   |                   |    |   |         |   |
|                                                               |   | March 31,              |    |   | December 31, |   |
| ASSETS                                                             |   | 2011                   |    |   | 2010         |   |
|                                                               |   | (Unaudited)            |    |   | (Audited)    |   |
|                                                               |   | (DOLLARS IN THOUSANDS) |    |
| Cash and due from banks                                            |   | $                      | 4,545   |   |         | $      | 4,755 |   |
| Interest earning balances with the Federal Reserve                 |   |                   | 6,073   |   |         |   | 5,638 |   |
| Federal funds sold                                                 |   |                   | 25,302  |   |         |   | 14,472 |   |
| Cash and cash equivalents                                          |   |                   | 35,920  |   |         |   | 24,865 |   |
|                                                               |   |                   |    |   |         |   |   |   |
| Investment and mortgage-backed securities-available for sale       |   |                   | 141,897 |   |         |   | 148,469 |   |
|                                                               |   |                   |    |   |         |   |   |   |
| Loans, net of unearned fees                                        |   |                   | 194,472 |   |         |   | 206,275 |   |
| Allowance for loan losses (ALL)                                    |   |                   | (6,949  | )      |         |   | (7,379 | ) |
| Loans, net of ALL                                                  |   |                   | 187,523 |   |         |   | 198,896 |   |
|                                                               |   |                   |    |   |         |   |   |   |
| Real estate acquired through foreclosure                           |   |                   | 9,050   |   |         |   | 10,618 |   |
| Office properties and equipment, net                               |   |                   | 5,004   |   |         |   | 5,101 |   |
| Federal Home Loan Bank stock, at cost                              |   |                   | 3,526   |   |         |   | 3,526 |   |
| Federal Reserve Bank stock, at cost                                |   |                   | 832     |   |         |   | 832 |   |
| Accrued interest receivable                                        |   |                   | 1,274   |   |         |   | 1,575 |   |
| Cash surrender value of life insurance                             |   |                   | 8,713   |   |         |   | 8,623 |   |
| Other assets                                                       |   |                   | 6,524   |   |         |   | 6,213 |   |
| TOTAL ASSETS                                                       |   | $                      | 400,263 |   |         | $      | 408,718 |   |
|                                                               |   |                   |    |   |         |   |   |   |
| LIABILITIES                                                        |   |                   |    |   |         |   |   |   |
|                                                               |   |                   |    |   |         |   |   |   |
| Demand and savings deposits                                        |   | $                      | 163,578 |   |         | $      | 165,985 |   |
| Time deposits                                                      |   |                   | 144,751 |   |         |   | 147,143 |   |
| Total deposits                                                     |   |                   | 308,329 |   |         |   | 313,128 |   |
| Advances from the Federal Home Loan Bank                           |   |                   | 59,500  |   |         |   | 59,500 |   |
| Securities sold under agreements to repurchase                     |   |                   | 7,307   |   |         |   | 10,028 |   |
| Floating rate junior subordinated deferrable interest debentures   |   |                   | 12,372  |   |         |   | 12,372 |   |
| Accrued interest payable                                           |   |                   | 745     |   |         |   | 663 |   |
| Other liabilities                                                  |   |                   | 2,420   |   |         |   | 2,758 |   |
| TOTAL LIABILITIES                                                  |   |                   | 390,673 |   |         |   | 398,449 |   |
|                                                               |   |                   |    |   |         |   |   |   |
| Commitments and contingencies-Note 5                               |   |                   |    |   |         |   |   |   |
|                                                               |   |                   |    |   |         |   |   |   |
| SHAREHOLDERS' EQUITY                                               |   |                   |    |   |         |   |   |   |
|                                                               |   |                   |    |   |         |   |   |   |
| Serial preferred stock - $0.01 par value                           |   |                   |    |   |         |   |   |   |
|   authorized - 500, 000 shares                                |   |                   |    |   |         |   |   |   |
|   issued and outstanding - 9,266 shares                       |   |                   |    |   |         |   |   |   |
|   at March 31, 2011 and December 31, 2010, respectively       |   |                   | 9,251   |   |         |   | 9,250 |   |
| Common stock - $0.01 par value,                                    |   |                   |    |   |         |   |   |   |
|   authorized - 5,000,000 shares,                              |   |                   |    |   |         |   |   |   |
|   issued and outstanding - 1,790,599 shares at March 31, 2011 |   |                   |    |   |         |   |   |   |
|   and December 31, 2010,respectively                          |   |                   | 20      |   |         |   | 20 |   |
| Common stock warrants                                              |   |                   | 25      |   |         |   | 25 |   |
| Additional paid-in capital                                         |   |                   | 12,919  |   |         |   | 12,919 |   |
| Accumulated other comprehensive loss                               |   |                   | (3,568  | )      |         |   | (2,778 | ) |
| Retained deficit, substantially restricted                         |   |                   | (2,757  | )      |         |   | (2,867 | ) |
| Treasury stock, at cost                                            |   |                   | (6,300  | )      |         |   | (6,300 | ) |
| TOTAL SHAREHOLDERS' EQUITY                                         |   |                   | 9,590   |   |         |   | 10,269 |   |
|                                                               |   |                   |    |   |         |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         |   | $                      | 400,263 |   |         | $      | 408,718 |   |

----

| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES                            |   |                                   |      |   |      |   |
|----------------------------------------------------------------------------------|--------|----------------------------------------|-----------|--------|-----------|--------|
| CONSOLIDATED STATEMENTS OF INCOME (LOSS)                                         |   |                                   |      |   |      |   |
| Three Months Ended March 31, 2011 and 2010 (unaudited)                           |   |                                   |      |   |      |   |
|                                                                             |   |                                   |      |   |      |   |
|                                                                             |   | Three Months Ended                     |      |
|                                                                             |   | March 31,                              |      |   | March 31, |   |
|                                                                             |   | 2011                                   |      |   | 2010      |   |
|                                                                             |   | (DOLLARS IN THOUSANDSEXCEPT PER SHARE) |      |
|                                                                             |   |                                   |      |   |      |   |
| Interest Income:                                                                 |   |                                   |      |   |      |   |
| Loans                                                                            |   | $                                      | 2,444     |   |      | $      | 3,120 |   |
| Deposits and federal funds sold                                                  |   |                                   | 10        |   |      |   | 6 |   |
| Interest and dividends on mortgage-backed securities                             |   |                                   | 632       |   |      |   | 429 |   |
| Interest and dividends on investment securities                                  |   |                                   | 516       |   |      |   | 975 |   |
| Total interest income                                                            |   |                                   | 3,602     |   |      |   | 4,530 |   |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Interest Expense:                                                                |   |                                   |      |   |      |   |   |   |
| Deposit accounts                                                                 |   |                                   | 880       |   |      |   | 1,547 |   |
| Floating rate junior subordinated deferrable interest debentures                 |   |                                   | 118       |   |      |   | 118 |   |
| Advances from the FHLB and other borrowings                                      |   |                                   | 619       |   |      |   | 744 |   |
| Total interest expense                                                           |   |                                   | 1,617     |   |      |   | 2,409 |   |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Net Interest Income                                                              |   |                                   | 1,985     |   |      |   | 2,121 |   |
| Provision for loan losses                                                        |   |                                   | 0         |   |      |   | 896 |   |
| Net interest income after                                                        |   |                                   |      |   |      |   |   |   |
|   provision for loan losses                                                 |   |                                   | 1,985     |   |      |   | 1,225 |   |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Non-Interest Income:                                                             |   |                                   |      |   |      |   |   |   |
| Fees for financial services                                                      |   |                                   | 635       |   |      |   | 662 |   |
| Other fees, net                                                                  |   |                                   | 11        |   |      |   | 23 |   |
| Other-than-temporary-impairment write-down on securities                         |   |                                   | --        |   |      |   | (303 | ) |
| Net (loss) gain on sale of investments                                           |   |                                   | (4        | )      |      |   | 677 |   |
| Total non-interest income                                                        |   |                                   | 642       |   |      |   | 1,059 |   |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Non-Interest Expense:                                                            |   |                                   |      |   |      |   |   |   |
| Compensation and employee benefits                                               |   |                                   | 1,063     |   |      |   | 1,122 |   |
| Occupancy and equipment                                                          |   |                                   | 631       |   |      |   | 599 |   |
| Deposit insurance premiums                                                       |   |                                   | 178       |   |      |   | 144 |   |
| Professional services                                                            |   |                                   | 136       |   |      |   | 100 |   |
| Advertising and public relations                                                 |   |                                   | 11        |   |      |   | 13 |   |
| OREO and loan operations                                                         |   |                                   | 164       |   |      |   | 93 |   |
| Items processing                                                                 |   |                                   | 76        |   |      |   | 77 |   |
| Telephone                                                                        |   |                                   | 41        |   |      |   | 37 |   |
| Other                                                                            |   |                                   | 205       |   |      |   | 154 |   |
| Total non-interest expense                                                       |   |                                   | 2,505     |   |      |   | 2,339 |   |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Net Income (loss) before income taxes                                            |   |                                   | 122       |   |      |   | -55 |   |
| Expense (benefit) for income taxes                                               |   |                                   | 11        |   |      |   | (73 | ) |
| Net income                                                                       |   |                                   | 111       |   |      |   | 18 |   |
| Accretion of preferred stock to redemption value and preferred dividends accrued |   |                                   | 117       |   |      |   | 117 |   |
| Net loss to common shareholders                                                  |   | $                                      | (6        | )      |      | $      | (99 | ) |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Net loss per common share (basic)                                                |   | $                                      | (0.01     | )      |      | $      | (0.06 | ) |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Net loss per common share (diluted)                                              |   | $                                      | (0.01     | )      |      | $      | (0.06 | ) |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Weighted average number of common shares outstanding                             |   |                                   |      |   |      |   |   |   |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Basic                                                                            |   |                                   | 1,790,599 |   |      |   | 1,790,599 |   |
|                                                                             |   |                                   |      |   |      |   |   |   |
| Diluted                                                                          |   |                                   | 1,790,599 |   |      |   | 1,790,599 |   |

----

| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES                      |   |               |    |   |      |   |
|----------------------------------------------------------------------------|--------|--------------------|---------|--------|-----------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                      |   |               |    |   |      |   |
| Three Months Ended March 31, 2011 and 2010 (unaudited)                     |   |               |    |   |      |   |
|                                                                       |   |               |    |   |      |   |
|                                                                       |   | Three Months Ended |    |
|                                                                       |   | March 31,          |    |   | March 31, |   |
|                                                                       |   | 2011               |    |   | 2010      |   |
|                                                                       |   | (IN THOUSANDS)     |    |
|                                                                       |   |               |    |   |      |   |
| OPERATING ACTIVITIES:                                                      |   |               |    |   |      |   |
|                                                                       |   |               |    |   |      |   |
| Net income                                                                 |   | $                  | 111     |   |      | $      | 18 |   |
| Adjustments to reconcile net income to                                     |   |               |    |   |      |   |   |   |
|   net cash provided by operating activities:                          |   |               |    |   |      |   |   |   |
| Provision for loan losses                                                  |   |               | --      |   |      |   | 896 |   |
| Amortization of securities                                                 |   |               | 233     |   |      |   | 320 |   |
| Depreciation expense                                                       |   |               | 100     |   |      |   | 118 |   |
| Recognition of deferred income, net of costs                               |   |               | (29     | )      |      |   | (65 | ) |
| Deferral of fee income, net of costs                                       |   |               | 40      |   |      |   | 56 |   |
| Other than temporary impairment charge on  AFS securities        |   |               | --      |   |      |   | 303 |   |
| Loss (gain) on investment transactions                                     |   |               | 4       |   |      |   | (677 | ) |
| Gain on OREO sales                                                         |   |               | (15     | )      |      |   | -- |   |
| OREO impairment                                                            |   |               | 166     |   |      |   | -- |   |
| Changes in operating assets and liabilities:                               |   |               |    |   |      |   |   |   |
| Decrease in accrued interest receivable                                    |   |               | 301     |   |      |   | 375 |   |
| Increase in cash surrender value of life insurance                         |   |               | (90     | )      |      |   | (98 | ) |
| Decrease in other assets                                                   |   |               | 114     |   |      |   | (333 | ) |
| Increase (decrease) in other liabilities                                   |   |               | (338    | )      |      |   | 176 |   |
| Increase (decrease) in accrued interest payable                            |   |               | 82      |   |      |   | (42 | ) |
|                                                                       |   |               |    |   |      |   |   |   |
| Net cash provided by operating activities                                  |   |               | 679     |   |      |   | 1,047 |   |
|                                                                       |   |               |    |   |      |   |   |   |
| INVESTING ACTIVITIES:                                                      |   |               |    |   |      |   |   |   |
|                                                                       |   |               |    |   |      |   |   |   |
| Purchase of investment and mortgage-backed securities:                     |   |               |    |   |      |   |   |   |
| Available for sale                                                         |   |               | (14,488 | )      |      |   | (40,598 | ) |
| Proceeds from sale of investment and mortgage-                             |   |               |    |   |      |   |   |   |
|   backed securities:                                                  |   |               |    |   |      |   |   |   |
| Available for sale                                                         |   |               | 16,268  |   |      |   | 26,495 |   |
| Proceeds from maturity of investment and mortgage-                         |   |               |    |   |      |   |   |   |
|   backed securities:                                                  |   |               |    |   |      |   |   |   |
| Available for sale                                                         |   |               | 1       |   |      |   | 27,848 |   |
| Principal repayments on mortgage-backed securities:                        |   |               |    |   |      |   |   |   |
| Available for sale                                                         |   |               | 3,339   |   |      |   | 6,819 |   |
| Net decrease in loans                                                      |   |               | 10,883  |   |      |   | 11,582 |   |
| Proceeds from sales of foreclosed assets, net of costs and improvements    |   |               | 1,896   |   |      |   | 30 |   |
| Purchase of office properties and equipment                                |   |               | (3      | )      |      |   | (17 | ) |
|                                                                       |   |               |    |   |      |   |   |   |
| Net cash provided by investing activities                                  |   |               | 17,896  |   |      |   | 32,159 |   |
|                                                                       |   |               |    |   |      |   |   |   |
| FINANCING ACTIVITIES:                                                      |   |               |    |   |      |   |   |   |
|                                                                       |   |               |    |   |      |   |   |   |
| Dividends paid on preferred stock                                          |   |               | --      |   |      |   | (116 | ) |
| Decrease in other borrowings                                               |   |               | (2,721  | )      |      |   | (11,529 | ) |
| Decrease in deposit accounts                                               |   |               | (4,799  | )      |      |   | (6,816 | ) |
|                                                                       |   |               |    |   |      |   |   |   |
| Net cash used by financing activities                                      |   |               | (7,520  | )      |      |   | (18,461 | ) |
|                                                                       |   |               |    |   |      |   |   |   |
| NET INCREASE IN CASH                                                       |   |               |    |   |      |   |   |   |
|   AND CASH EQUIVALENTS                                                |   |               | 11,055  |   |      |   | 14,745 |   |
|                                                                       |   |               |    |   |      |   |   |   |
| CASH AND CASH EQUIVALENTS                                                  |   |               |    |   |      |   |   |   |
|   AT BEGINNING OF PERIOD                                              |   |               | 24,865  |   |      |   | 15,631 |   |
|                                                                       |   |               |    |   |      |   |   |   |
| CASH AND CASH EQUIVALENTS                                                  |   |               |    |   |      |   |   |   |
|   AT END OF PERIOD                                                    |   | $                  | 35,920  |   |      | $      | 30,376 |   |
|                                                                       |   |               |    |   |      |   |   |   |
| SUPPLEMENTAL DISCLOSURES:                                                  |   |               |    |   |      |   |   |   |
|                                                                       |   |               |    |   |      |   |   |   |
| Cash paid for:                                                             |   |               |    |   |      |   |   |   |
| Income taxes                                                               |   |               | --      |   |      | $      | 18 |   |
| Interest                                                                   |   |               | 1,535   |   |      |   | 2,451 |   |
|                                                                       |   |               |    |   |      |   |   |   |
| Non-cash transactions:                                                     |   |               |    |   |      |   |   |   |
| Loans foreclosed                                                           |   | $                  | 479     |   |      | $      | 559 |   |
| Unrealized gain (loss) on securities available for sale, net of income tax |   |               | (786    | )      |      |   | (395 | ) |

----

| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES                                                                                            |            |
|--------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSS                                                                |            |
| Three Months Ended March 31, 2011 and 2010 (Unaudited)                                                                                           |            |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   | 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, 2009                                                                                                                     | 9,266           |   | $ | 9,245 |   | 1,790,599 |   | $ | 20 |   | $ | 25 |   | $ | 12,919 |   |   | $ | 11,184 |   |   | $ | (972 | ) |   | $ | (6,300 | ) |   | $ | 26,121 |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                       |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 18 |   |   |   |   |   |   |   |   |   |   |   | 18 |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Other comprehensive loss, net of tax of $87,000 on unrealized holding losses on securities available for sale arising during period       |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (395 | ) |   |   |   |   |   |   | (395 | ) |
|   Less reclassification adjustment for gains and other than temporary investment charge in net loss                                         |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 232 |   |   |   |   |   |   |   | 232 |   |
|   Comprehensive loss                                                                                                                        |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (145 | ) |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of Preferred Stock to redemption value                                                                                                 |            |   |   | 1 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1 | ) |   |   |   |   |   |   |   |   |   |   | -- |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred stock dividend                                                                                                                         |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (116 | ) |   |   |   |   |   |   |   |   |   |   | (116 | ) |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT MARCH 31, 2010                                                                                                                        | 9,266           |   | $ | 9,246 |   | 1,790,599 |   | $ | 20 |   | $ | 25 |   | $ | 12,919 |   |   | $ | 11,085 |   |   | $ | (1,135 | ) |   | $ | (6,300 | ) |   | $ | 25,860 |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT DECEMBER 31, 2010                                                                                                                     | 9,266           |   | $ | 9,250 |   | 1,790,599 |   | $ | 20 |   | $ | 25 |   | $ | 12,919 |   |   | $ | (2,867 | ) |   | $ | (2,778 | ) |   | $ | (6,300 | ) |   | $ | 10,269 |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                       |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 111 |   |   |   |   |   |   |   |   |   |   |   | 111 |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Other comprehensive loss, net of tax of $423,000 on unrealized holding losses on securities available for sale arising during period |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (786 | ) |   |   |   |   |   |   | (786 | ) |
|   Less reclassification adjustment for gains and other than temporary investment charge in net income                                       |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (4 | ) |   |   |   |   |   |   | (4 | ) |
|   Comprehensive loss                                                                                                                   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (679 | ) |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of Preferred Stock to redemption value                                                                                                 |            |   |   | 1 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1 | ) |   |   |   |   |   |   |   |   |   |   | -- |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT MARCH 31, 2011                                                                                                                        | 9,266           |   | $ | 9,251 |   | 1,790,599 |   | $ | 20 |   | $ | 25 |   | $ | 12,919 |   |   | $ | (2,757 | ) |   | $ | (3,568 | ) |   | $ | (6,300 | ) |   | $ | 9,590 |   |

----

PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | March 31, |         |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2011      |         |   | 2010         |   |
| Loans receivable for which there is a related allowance for credit losses determined in accordance with ASC 310-10                                                                                                                                                                                                                                                                                                                                                               |   | $         |   6,893 |   |         | $      |   6,301 |   |
| Other impaired loans                                                                                                                   |   |      | 14,339       |   |         |   | 12,525 |   |
|         Total impaired loans                                                                   |   | $         | 21,232       |   |         | $      | 18,826 |   |
| Average monthly balance of impaired loans                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $         | 20,029       |   |         | $      | 22,280 |   |
| Specific allowance for credit losses                                                                                              |   | $         | 1,788        |   |         | $      | 1,788 |   |

----

|                                |   |       |   |   | Unpaid    |   |        |      |   |   |      |   |   | Average    |     |
|-------------------------------------|--------|------------|--------|--------|-----------|--------|-------------|-----------|--------|--------|-----------|--------|--------|------------|----------|
| March 31, 2011                      |   | Recorded   |   |   | Principal |   |        | Related   |   |   | Specific  |   |   | Recorded   |     |
|                                |   | Investment |   |   | Balance   |   |        | Allowance |   |   | Allowance |   |   | Investment |     |
|                                |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |
| With no related allowance recorded: |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |
| Commercial                          |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |
| Commercial Real Estate              |   | $          | 2,448  |   |      | $      | 2,448       |      |   | $      | --        |   |   | $          | --       |   |   | $ | 2,448 |   |
| Commercial Real Estate              |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Construction                        |   |       | 3,285  |   |      |   | 3,285       |      |   |   | --        |   |   |       | --       |   |   |   | 3,285 |   |
| Commercial                          |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Non Real Estate                     |   |       | 159    |   |      |   | 159         |      |   |   | --        |   |   |       |  -- |   |   |   |  159 |   |
| Consumer                            |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Consumer – other              |   |       | 394    |   |      |   | 394         |      |   |   | --        |   |   |       | --       |   |   |   | 394 |   |
| Consumer – home equity        |   |       | 35     |   |      |   | 35          |      |   |   | --        |   |   |       | --       |   |   |   | 35 |   |
| Residential Real Estate             |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| 1-4 family                          |   |       | 1,120  |   |      |   | 1,120       |      |   |   | --        |   |   |       | --       |   |   |   | 1,120 |   |
|                                |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| With an allowance recorded:         |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Commercial                          |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Commercial Real Estate              |   | $          | 7,781  |   |      | $      | 5,229       |      |   | $      | 2,552     |   |   | $          | 1,502    |   |   | $ | 6,505 |   |
| Commercial Real Estate              |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Construction                        |   |       | 9,016  |   |      |   | 6,121       |      |   |   | 2,895     |   |   |       | 250      |   |   |   |  7,569 |   |
| Commercial                          |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Non Real Estate                     |   |       | 892    |   |      |   | 634         |      |   |   | 258       |   |   |       | --       |   |   |   | 763 |   |
| Consumer                            |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| Consumer – other              |   |       | 2,061  |   |      |   | 1,237       |      |   |   | 824       |   |   |       | 36       |   |   |   | 1,649 |   |
| Consumer-home equity                |   |       | 133    |   |      |   | 119         |      |   |   | 14        |   |   |       | --       |   |   |   | 126 |   |
| Residential Real Estate             |   |       |   |   |      |   |        |      |   |   |      |   |   |       |     |   |   |   |   |   |
| 1-4 family                          |   |       | 586    |   |      |   | 451         |      |   |   | 135       |   |   |       | --       |   |   |   | 519 |   |
| Total:                              |   | $          | 27,910 |   |      | $      | 21,232      |      |   | $      | 6,678     |   |   | $          | 1,788    |   |   | $ | 24,572 |   |
| Commercial                          |   |       | 23,581 |   |      |   | 17,876      |      |   |   | 5,705     |   |   |       | 250      |   |   |   | 20,729 |   |
| Consumer                            |   |       | 2,623  |   |      |   | 1,785       |      |   |   | 838       |   |   |       | 36       |   |   |   | 2,204 |   |
| Residential                         |   |       | 1,706  |   |      |   |  1,571 |      |   |   |  135 |   |   |       | --       |   |   |   |  1,639 |   |

----

|                                |   |       |         |   | Unpaid    |   |        |      |   |   |      |   |   | Average    |        |
|-------------------------------------|--------|------------|--------------|--------|-----------|--------|-------------|-----------|--------|--------|-----------|--------|--------|------------|-------------|
| December 31, 2010                   |   | Recorded   |         |   | Principal |   |        | Related   |   |   | Specific  |   |   | Recorded   |        |
|                                |   | Investment |         |   | Balance   |   |        | Allowance |   |   | Allowance |   |   | Investment |        |
|                                |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |
| With no related allowance recorded: |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |
| Commercial                          |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |
| Commercial Real Estate              |   | $          | 3,729        |   |      | $      | 3,729       |      |   | $      | --        |   |   | $          | --          |   |   | $ | 3,729 |   |
| Commercial Real Estate              |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Construction                        |   |       | 3,195        |   |      |   | 3,195       |      |   |   | --        |   |   |       | --          |   |   |   | 3,195 |   |
| Commercial                          |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Non Real Estate                     |   |       | 440          |   |      |   | 440         |      |   |   | --        |   |   |       | --          |   |   |   | 440 |   |
| Consumer                            |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Consumer – other              |   |       | 1,167        |   |      |   | 1,167       |      |   |   | --        |   |   |       | --          |   |   |   | 1,167 |   |
| Consumer – home equity        |   |       | 147          |   |      |   | 147         |      |   |   | --        |   |   |       | --          |   |   |   | 147 |   |
| Residential Real Estate             |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| 1-4 family                          |   |       | 1,148        |   |      |   | 1,148       |      |   |   | --        |   |   |       | --          |   |   |   | 1,148 |   |
|                                |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| With an allowance recorded:         |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Commercial                          |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Commercial Real Estate              |   | $          | 5,005        |   |      | $      | 2,174       |      |   | $      | 2,831     |   |   | $          | 1,502       |   |   | $ | 3,590 |   |
| Commercial Real Estate              |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Construction                        |   |       | 8,127        |   |      |   | 5,206       |      |   |   | 2,921     |   |   |       | 250         |   |   |   | 6,667 |   |
| Commercial                          |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Non Real Estate                     |   |       | 845          |   |      |   | 608         |      |   |   | 237       |   |   |       | --          |   |   |   | 726 |   |
| Consumer                            |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| Consumer – other              |   |       | 1,355        |   |      |   | 625         |      |   |   | 730       |   |   |       | 36          |   |   |   | 990 |   |
| Residential Real Estate             |   |       |         |   |      |   |        |      |   |   |      |   |   |       |        |   |   |   |   |   |
| 1-4 family                          |   |       | 575          |   |      |   | 387         |      |   |   | 189       |   |   |       | --          |   |   |   | 481 |   |
| Total:                              |   | $          | 25,733       |   |      | $      | 18,826      |      |   | $      | 6,908     |   |   | $          | 1,788       |   |   | $ | 22,280 |   |
| Commercial                          |   |       |  21,341 |   |      |   | 15,352      |      |   |   | 5,989     |   |   |       |  1,752 |   |   |   | 18,347 |   |
| Consumer                       |   |       |  2,669  |   |      |   |  1,939 |      |   |   |  730 |   |   |       |  36    |   |   |   |  2,304 |   |
| Residential                         |   |       | 1,723        |   |      |   |  1,535 |      |   |   | 189       |   |   |       |  --    |   |   |   | 1,629 |   |

|                                |   | March 31, |   |   | December 31, |    |
|-------------------------------------|--------|-----------|--------|--------|--------------|---------|
|                                |   | 2011      |   |   | 2010         |    |
| Commercial                          |   |      |   |   |         |    |
| Commercial real estate              |   | $         | 7,677  |   |         | $       | 5,904 |   |
| Commercial real estate construction |   |      | 9,406  |   |         |    | 8,401 |   |
| Commercial real estate other        |   |      | 793    |   |         |    | 1,048 |   |
| Consumer                            |   |      |   |   |         |    |   |   |
| Consumer – other              |   |      | 1,617  |   |         |    | 1,792 |   |
| Consumer – automobile         |   |      | 14     |   |         |    | -- |   |
| Consumer – home equity        |   |      | 154    |   |         |    | 147 |   |
| Residential Real Estate             |   |      |   |   |         |    |   |   |
| 1-4 family                          |   |      | 1,571  |   |         |    | 1,534 |   |
| Total                               |   | $    | 21,232 |   |         | $  | 18,826 |   |

----

|                       |   |       |   |   | Commercial  |   |   |     |   |   |        |   |   |   |   |
|----------------------------|--------|------------|--------|--------|-------------|--------|--------|----------|--------|--------|-------------|--------|--------|--------|--------|
|                       |   | Commercial |   |   | Real Estate |   |   | Consumer |   |   | Residential |   |   | Total  |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |
| March 31, 2011             |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |
| Allowance for loan losses: |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |
| Beginning balance          |   | $          | 2,166  |   |        | $      | 4,602  |     |   | $      | 335         |   |   | $      | 276    |   |   | $ | 7,379 |   |
| Chargeoffs                 |   |       | (167   | )      |        |   | (279   | )        |   |   | (133        | )      |   |   | --     |   |   |   | (579 | ) |
| Recoveries                 |   |       | 31     |   |        |   | 53     |     |   |   | 4           |   |   |   | 61     |   |   |   | 149 |   |
| Provisions                 |   |       | --     |   |        |   | --     |     |   |   | --          |   |   |   | --     |   |   |   | -- |   |
| Ending balance             |   | $          | 2,030  |   |        | $      | 4,376  |     |   | $      | 206         |   |   | $      | 337    |   |   | $ | 6,949 |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Loans receivable:          |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Ending balance - total     |   | $          | 42,719 |   |        | $      | 94,083 |     |   | $      | 43,401      |   |   | $      | 14,513 |   |   | $ | 194,716 |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Ending balances:           |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Individually evaluated     |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| for impairment             |   | $          | 792    |   |        | $      | 17,084 |     |   | $      | 1,785       |   |   | $      | 1,571  |   |   | $ | 21,232 |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Collectively evaluated     |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| for impairment             |   | $          | 41,927 |   |        | $      | 76,999 |     |   | $      | 41,616      |   |   | $      | 12,942 |   |   | $ | 173,484 |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| December 31, 2010          |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses: |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Beginning balance          |   | $          | 1,947  |   |        | $      | 2,773  |     |   | $      | 502         |   |   | $      | 357    |   |   | $ | 5,579 |   |
| Chargeoffs                 |   |       | (976   | )      |        |   | (6,044 | )        |   |   | (1,423      | )      |   |   | (262   | ) |   |   | (8,705 | ) |
| Recoveries                 |   |       | 118    |   |        |   | 1,203  |     |   |   | 25          |   |   |   | 69     |   |   |   | 1,415 |   |
| Provisions                 |   |       | 1,077  |   |        |   | 6,670  |     |   |   | 1,231       |   |   |   | 112    |   |   |   | 9,090 |   |
| Ending balance             |   | $          | 2,166  |   |        | $      | 4,602  |     |   | $      | 335         |   |   | $      | 276    |   |   | $ | 7,379 |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Loans receivable:          |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Ending balance - total     |   | $          | 46,809 |   |        | $      | 99,612 |     |   | $      | 45,269      |   |   | $      | 14,831 |   |   | $ | 206,521 |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Ending balances:           |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Individually evaluated     |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| for impairment             |   | $          | 1,048  |   |        | $      | 14,304 |     |   | $      | 1,939       |   |   | $      | 1,535  |   |   | $ | 18,826 |   |
|                       |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| Collectively evaluated     |   |       |   |   |        |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |
| for impairment             |   | $          | 45,761 |   |        | $      | 85,308 |     |   | $      | 43,330      |   |   | $      | 13,296 |   |   | $ | 187,695 |   |

----

|                                                                                                                                 |   |             |     |   |         |   |     | Commercial |   |   | Commercial Real |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|----------|--------|--------------|--------|----------|------------|--------|--------|-----------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | Commercial-Other |     |   | Construction |   |     | Estate     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | March 31,        |     |   | December 31, |   |     | March 31,  |   |   | December 31,    |   |   | March 31, |   |   | December 31, |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2011             |     |   | 2010         |   |     | 2011       |   |   | 2010            |   |   | 2011 |   |   | 2010 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             |     |   |         |   |     |       |   |   |            |   |   |   |   |   |   |   |
| Grade 1  Superior Quality                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                | 4        |   |         | $      | 4        |       |   | $      | --              |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
| Grade 2  Good Quality                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             | 338      |   |         |   | 340      |       |   |   | --              |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Grade 3  Satisfactory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             | 1,081    |   |         |   | 1,879    |       |   |   | 1,746           |   |   |   | 1,818 |   |   |   | 6,586 |   |   |   | 7,000 |   |
| Grade 4  Acceptable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |             | 13,403   |   |         |   | 14,925   |       |   |   | 7,279           |   |   |   | 7,785 |   |   |   | 64,937 |   |   |   | 72,885 |   |
| Grade 5  Special Mention                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |             | 2,561    |   |         |   | 2,866    |       |   |   | 2,742           |   |   |   | 1,302 |   |   |   | 10,292 |   |   |   | 8,304 |   |
| Grade 6  Substandard                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |             | 2,564    |   |         |   | 3,901    |       |   |   | 11 ,001         |   |   |   | 11,989 |   |   |   | 12,244 |   |   |   | 11,423 |   |
| Grade 7  Doubtful                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |             |  -- |   |         |   |  -- |       |   |   | --              |   |   |   | -- |   |   |   |   24 |   |   |   |  -- |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                | 19,951   |   |         | $      | 23,915   |       |   | $      | 22,768          |   |   | $ | 22,894 |   |   | $ | 94,083 |   |   | $ | 99,612 |   |

|            |   | Residential |   |   | Consumer     |   |
|-----------------|--------|-------------|--------|--------|--------------|--------|
|            |   | March 31,   |   |   | December 31, |   |   | March 31, |   |   | December 31, |   |
|            |   | 2011        |   |   | 2010         |   |   | 2011 |   |   | 2010 |   |
| Grade:          |   |        |   |   |         |   |   |   |   |   |   |   |
| Pass            |   | $           | 12,653 |   |         | $      | 13,282 |   |   | $ | 40,361 |   |   | $ | 42,273 |   |
| Special mention |   |        | --     |   |         |   | -- |   |   |   | -- |   |   |   | -- |   |
| Substandard     |   |        | 1,860  |   |         |   |  1,549 |   |   |   |  3,040 |   |   |   | 2,996 |   |
| Total           |   | $           | 14,513 |   |         | $      | 14,831 |   |   | $ | 43,401 |   |   | $ | 45,269 |   |

|          |   |      |   |   | Consumer     |   |   |        |   |   | Residential real estate |   |
|---------------|--------|-----------|--------|--------|--------------|--------|--------|-------------|--------|--------|-------------------------|--------|
|          |   | Other     |   |   | Automobile   |   |   | Home equity |   |   | 1-4 family              |   |
|          |   | March 31, |   |   | December 31, |   |   | March 31,   |   |   | December 31,            |   |   | March 31, |   |   | December 31, |   |   | March 31, |   |   | December 31, |   |
|          |   | 2011      |   |   | 2010         |   |   | 2011        |   |   | 2010                    |   |   | 2011 |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
|          |   |      |   |   |         |   |   |        |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performing    |   | $         | 24,776 |   |         | $      | 25,366 |        |   | $      | 1,235                   |   |   | $ | 1,502 |   |   | $ | 15,605 |   |   | $ | 16,462 |   |   | $ | 12,942 |   |   | $ | 13,297 |   |
| Nonperforming |   |      | 1,617  |   |         |   | 1,792  |        |   |   | 14                      |   |   |   | -- |   |   |   | 154 |   |   |   | 147 |   |   |   | 1,571 |   |   |   | 1,534 |   |
| Total         |   | $         | 26,393 |   |         | $      | 27,158 |        |   | $      | 1,249                   |   |   | $ | 1,502 |   |   | $ | 15,759 |   |   | $ | 16,609 |   |   | $ | 14,513 |   |   | $ | 14,831 |   |

----

|                                        |   |               |        |   |               |   |   | Greater |   |   |       |   |   |    |   |   |        |   |
|---------------------------------------------|--------|--------------------|-------------|--------|--------------------|--------|--------|---------|--------|--------|------------|--------|--------|---------|--------|--------|-------------|--------|
|                                        |   | 30 – 59 Days |        |   | 60 – 89 Days |   |   | Than    |   |   | Total Past |   |   |    |   |   | Total Loans |   |
|                                        |   | Past Due           |        |   | Past Due           |   |   | 90 Days |   |   | Due        |   |   | Current |   |   | Receivable  |   |
| March 31, 2011                              |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |
|                                        |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |
| Commercial non real estate                  |   | $                  | 39          |   |               | $      | 80     |    |   | $      | 843        |   |   | $       | 962    |   |        | $      | 18,989 |   |   | $ | 19,951 |   |
| Commercial real estate:                     |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
| Commercial real estate – other        |   |               | 579         |   |               |   | 2,245  |    |   |   | 6,131      |   |   |    | 8,955  |   |        |   | 85,128 |   |   |   | 94,083 |   |
| Commercial real estate – construction |   |               | 26          |   |               |   | 471    |    |   |   | 5,629      |   |   |    | 6,126  |   |        |   | 16,642 |   |   |   | 22,768 |   |
| Consumer:                                   |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
| Consumer – other                      |   |               | 496         |   |               |   | 190    |    |   |   | 892        |   |   |    | 1,578  |   |        |   | 24,815 |   |   |   | 26,393 |   |
| Consumer – automobile                 |   |               | 40          |   |               |   | 61     |    |   |   | --         |   |   |    | 101    |   |        |   | 1,148 |   |   |   | 1,249 |   |
| Consumer – home equity                |   |               | 203         |   |               |   | 35     |    |   |   | 61         |   |   |    | 299    |   |        |   | 15,460 |   |   |   | 15,759 |   |
| Residential 1-4 family                      |   |               |  1,603 |   |               |   | 417    |    |   |   |  516  |   |   |    | 2,536  |   |        |   | 11,977 |   |   |   | 14,513 |   |
| Total                                       |   | $                  | 2,986       |   |               | $      | 3,499  |    |   | $      | 14,072     |   |   | $       | 20,557 |   |        | $      | 174,159 |   |   | $ | 194,716 |   |
|                                        |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
| December 31, 2010                           |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
|                                        |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
| Commercial non real estate                  |   | $                  | 175         |   |               | $      | 221    |    |   | $      | 1,089      |   |   | $       | 1,485  |   |        | $      | 22,430 |   |   | $ | 23,915 |   |
| Commercial real estate:                     |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
| Commercial real estate – other        |   |               | 466         |   |               |   | 292    |    |   |   | 5,743      |   |   |    | 6,501  |   |        |   | 93,111 |   |   |   | 99,612 |   |
| Commercial real estate – construction |   |               | 1,202       |   |               |   | 1,591  |    |   |   | 7,246      |   |   |    | 10,039 |   |        |   | 12,855 |   |   |   | 22,894 |   |
| Consumer:                                   |   |               |        |   |               |   |   |    |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
| Consumer – other                      |   |               | 718         |   |               |   | 472    |    |   |   | 886        |   |   |    | 2,076  |   |        |   | 25,082 |   |   |   | 27,158 |   |
| Consumer – automobile                 |   |               | 66          |   |               |   | 32     |    |   |   | --         |   |   |    | 98     |   |        |   | 1,404 |   |   |   | 1,502 |   |
| Consumer – home equity                |   |               | 148         |   |               |   | 94     |    |   |   | 14         |   |   |    | 256    |   |        |   | 16,353 |   |   |   | 16,609 |   |
| Residential 1-4 family                      |   |               |  1,060 |   |               |   | 656    |    |   |   | 1,119      |   |   |    | 2,835  |   |        |   | 11,996 |   |   |   | 14,831 |   |
| Total                                       |   | $                  | 3,835       |   |               | $      | 3,358  |    |   | $      | 16,097     |   |   | $       | 23,290 |   |        | $      | 183,231 |   |   | $ | 206,521 |   |

----

| Loan Commitments:                                     |   | Contract Amount |       |
|-------------------------------------------------------|--------|-----------------|------------|
|                                                  |   |            |       |
| Approved loan commitments                             |   | $               | 786,600    |   |
| Commitments to fund commercial and construction loans |   |            | 143,000    |   |
| Unused portions of loans and credit lines             |   |            | 30,535,000 |   |
| Total loan commitments                                |   | $               | 31,464,600 |   |

----

|                                                 |   | Amount Outstanding atMarch 31, |            |   |   |   |            |   |                  | Distribution |
|------------------------------------------------------|--------|--------------------------------|-----------------|--------|--------|--------|-----------------|--------|-----------------------|--------------|
|  Name                                           |   | 2011                           |            |   | 2010   |   | 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 |   | 2.04%                 |         | March 1, 2012 |   | March 1, 2037 |   | Quarterly |
| Total                                                |   | $                              | 12,000,000      |   |   | $      | 12,000,000      |   |                  |         |   |   |   |   |   |

----

| 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.              |

----

|                                                                                                                                                                                                                                                                                                                             |   |      |         |   | Quoted Prices in   |   |     | Significant Other |   |   | Significant  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------------|--------|--------------------|--------|----------|-------------------|--------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                             |   |      |         |   | Active Markets for |   |     | Observable        |   |   | Unobservable |   |
|                                                                                                                                                                                                                                                                                                                             |   | March 31, |         |   | Identical Assets   |   |     | Inputs            |   |   | Inputs       |   |
|                                                                                                                                                                                                                                                                                                                             |   | 2011      |         |   | (Level 1)          |   |     | (Level 2)         |   |   | (Level 3)    |   |
| Investment securities:                                                                                                                                                                                                                                                                                                           |   |      |         |   |               |   |     |              |   |   |         |   |
| U.S. Agency obligations                                                                                                                                                                                                                                                                                                          |   | $         | 1            |   |               | $      | 1        |              |   | $      | --           |   |   | $ | -- |   |
| Government Sponsored Enterprises                                                                                                                                                                                                                                                                                                 |   |      | 58,914       |   |               |   | 58,914   |              |   |   | --           |   |   |   | -- |   |
| Trust Preferred securities                                                  |   |      | 4,633        |   |               |   |  -- |              |   |   | 2,583        |   |   |   | 2,050 |   |
| Total investment securities                                                                                                                                                                                                                                                                                                      |   |      | 63,548       |   |               |   | 58,915   |              |   |   | 2,583        |   |   |   | 2,050 |   |
| Mortgage-backed and related securities                                                                                                                                                                                                                                                                                           |   |      |  78,349 |   |               |   |  -- |              |   |   | 78,349       |   |   |   |  -- |   |
| Total                                                                                                                                                                                                                                                                                                                            |   | $         | 141,897      |   |               | $      | 58,915   |              |   | $      | 80,932       |   |   | $ | 2,050 |   |

|                                                                                                                                                                                                                                                                                                                                         |   |         |    |   | Quoted Prices in   |   |     | Significant Other |   |   | Significant  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------------------|--------|----------|-------------------|--------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                         |   |         |    |   | Active Markets for |   |     | Observable        |   |   | Unobservable |   |
|                                                                                                                                                                                                                                                                                                                                         |   | December 31, |    |   | Identical Assets   |   |     | Inputs            |   |   | Inputs       |   |
|                                                                                                                                                                                                                                                                                                                                         |   | 2010         |    |   | (Level 1)          |   |     | (Level 2)         |   |   | (Level 3)    |   |
| Investment securities:                                                                                                                                                                                                                                                                                                                       |   |         |    |   |               |   |     |              |   |   |         |   |
| U.S. Agency obligations                                                                                                                                                                                                                                                                                                                      |   | $            | 2       |   |               | $      | 2        |              |   | $      | --           |   |   | $ | -- |   |
| Government Sponsored Enterprises                                                                                                                                                                                                                                                                                                             |   |         | 54,772  |   |               |   | 54,772   |              |   |   | --           |   |   |   | -- |   |
| Trust Preferred securities                                                              |   |         | 4,548   |   |               |   |  -- |              |   |   | 2,614        |   |   |   | 1,934 |   |
| Total investment securities                                                                                                                                                                                                                                                                                                                  |   |         | 59,322  |   |               |   | 54,774   |              |   |   | 2,614        |   |   |   | 1,934 |   |
| Mortgage-backed and related securities                                                  |   |         | 89,147  |   |               |   |  -- |              |   |   | 89,147       |   |   |   |  -- |   |
| Total                                                                                                                                                                                                                                                                                                                                        |   | $            | 148,469 |   |               | $      | 54,774   |              |   | $      | 91,761       |   |   | $ | 1,934 |   |

|                                             |   | Fair Value Measurements Using Significant |      |
|--------------------------------------------------|--------|-------------------------------------------|-----------|
|                                             |   | Unobservable Inputs (Level 3)             |      |
|                                             |   | Investment Securities                     |      |
|                                             |   | Available-for-Sale                        |      |
| Beginning balance at December 31, 2010           |   | $                                         | 1,934,000 |   |
| Transfers into Level 3                           |   |                                      | --        |   |
| Total gains/ (losses) included in:               |   |                                      |      |   |
| Net loss                                         |   |                                      | --        |   |
| Other comprehensive income                       |   |                                      | 116,000   |   |
| Purchases, sales, issuances and settlements, net |   |                                      | --        |   |
| Ending balance at March 31, 2011                 |   | $                                         | 2,050,000 |   |

----

|                       |   | Total  |            |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3)       |   |
|----------------------------|--------|--------|-----------------|--------|-----------|--------|--------|-----------|--------|--------|-----------------|--------|
| Impaired loans             |   | $      | 21,232,000      |   |      | $      | --     |      |   | $      | 21,232,000      |   |   | $ | -- |   |
| Other real estate owned    |   |   |  9,050,000 |   |      |   | --     |      |   |   |  9,050,000 |   |   |   | -- |   |
| Total assets at fair value |   | $      | 30,282,000      |   |      | $      | --     |      |   | $      | 30,282,000      |   |   | $ | -- |   |

|                       |   | Total  |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3)  |   |
|----------------------------|--------|--------|------------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Impaired loans             |   | $      | 18,826,000 |   |      | $      | --     |      |   | $      | 18,826,000 |   |   | $ | -- |   |
| Other real estate owned    |   |   | 10,618,000 |   |      |   | --     |      |   |   | 10,618,000 |   |   |   | -- |   |
| Total assets at fair value |   | $      | 29,444,000 |   |      | $      | --     |      |   | $      | 29,444,000 |   |   | $ | -- |   |

----

|                                                             |   | March 31, 2011 |    |
|------------------------------------------------------------------|--------|----------------|---------|
|                                                             |   | CarryingAmount |    |   | FairValue |   |
| Financial assets                                                 |   |           |    |   |   |   |
| Cash and cash equivalents                                        |   | $              | 35,920  |   |   | $ | 35,920 |   |
| Securities available for sale                                    |   |           | 141,897 |   |   |   | 141,897 |   |
| Federal Home Loan Bank stock, at cost                            |   |           | 3,526   |   |   |   | 3,526 |   |
| Federal Reserve Bank stock, at cost                              |   |           | 832     |   |   |   | 832 |   |
| Loans, net                                                       |   |           | 187,523 |   |   |   | 187,111 |   |
| Accrued interest receivable                                      |   |           | 1,274   |   |   |   | 1,274 |   |
| Cash surrender value of life insurance                           |   |           | 8,713   |   |   |   | 8,713 |   |
|                                                             |   |           |    |   |   |   |   |   |
| Financial liabilities                                            |   |           |    |   |   |   |   |   |
| Deposits                                                         |   | $              | 308,329 |   |   | $ | 293,988 |   |
| Advances from FHLB                                               |   |           | 59,500  |   |   |   | 59,556 |   |
| Securities sold under agreements to repurchase                   |   |           | 7,307   |   |   |   | 7,306 |   |
| Floating rate junior subordinated deferrable interest debentures |   |           | 12,372  |   |   |   | 12,372 |   |
| Accrued interest payable                                         |   |           | 745     |   |   |   | 745 |   |
|                                                             |   |           |    |   |   |   |   |   |
| Off-balance-sheet assets (liabilities)                           |   | NotionalAmount |    |   | FairValue |   |
| Commitments to extend credit                                     |   | $              | 31,465  |   |   | $ | 0 |   |

----

|                                                             |   | December 31, 2010 |    |
|------------------------------------------------------------------|--------|-------------------|---------|
|                                                             |   | CarryingAmount    |    |   | FairValue |   |
| Financial assets                                                 |   |              |    |   |   |   |
| Cash and cash equivalents                                        |   | $                 | 24,865  |   |   | $ | 24,865 |   |
| Securities available for sale                                    |   |              | 148,469 |   |   |   | 148,469 |   |
| Federal Home Loan Bank stock, at cost                            |   |              | 3,526   |   |   |   | 3,526 |   |
| Federal Reserve Bank stock, at cost                              |   |              | 832     |   |   |   | 832 |   |
| Loans, net                                                       |   |              | 198,896 |   |   |   | 198,279 |   |
| Accrued interest receivable                                      |   |              | 1,575   |   |   |   | 1,575 |   |
| Cash surrender value of life insurance                           |   |              | 8,623   |   |   |   | 8,623 |   |
|                                                             |   |              |    |   |   |   |   |   |
| Financial liabilities                                            |   |              |    |   |   |   |   |   |
| Deposits                                                         |   | $                 | 313,128 |   |   | $ | 299,950 |   |
| Advances from FHLB                                               |   |              | 59,500  |   |   |   | 61,357 |   |
| Securities sold under agreements to repurchase                   |   |              | 10,028  |   |   |   | 10,027 |   |
| Floating rate junior subordinated deferrable interest debentures |   |              | 12,372  |   |   |   | 12,372 |   |
| Accrued interest payable                                         |   |              | 663     |   |   |   | 663 |   |
|                                                             |   |              |    |   |   |   |   |   |
| Off-balance-sheet assets (liabilities)                           |   | NotionalAmount    |    |   | FairValue |   |
| Commitments to extend credit                                     |   | $                 | 29,575  |   |   | $ | 0 |   |

----

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

----

----

----

|                                |   | March 31, 2011 |         |   | December 31, 2010 |   |
|-------------------------------------|--------|----------------|--------------|--------|-------------------|--------|
|                                |   |           |         |   |              |   |   |   |   |   |   |   |
|                                |   | Amortized      |         |   | Fair              |   |   | Amortized |   |   | Fair |   |
|                                |   | Cost           |         |   | Value             |   |   | Cost |   |   | Value |   |
| Investment Securities:              |   |           |         |   |              |   |   |   |   |   |   |   |
| U.S. Agency Obligations             |   | $              | 1            |   |              | $      | 1 |   |   | $ | 2 |   |   | $ | 2 |   |
| Government Sponsored Enterprises    |   |           |  60,699 |   |              |   | 58,914 |   |   |   | 55,881 |   |   |   | 54,772 |   |
| Trust Preferred Securities          |   |           | 7,279        |   |              |   |   4,633 |   |   |   |   7,271 |   |   |   |  4,548 |   |
| Total Investment Securities         |   |           | 67,979       |   |              |   | 63,548 |   |   |   | 63,154 |   |   |   | 59,322 |   |
| Mortgage-Backed Securities:         |   |           |         |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                          |   |           |  15,443 |   |              |   | 15,499 |   |   |   | 11,307 |   |   |   | 11,458 |   |
| Ginnie Mae                          |   |           | 48,200       |   |              |   | 47,388 |   |   |   | 61,617 |   |   |   | 61,312 |   |
| Freddie Mac                         |   |           |  15,335 |   |              |   | 15,055 |   |   |   | 16,216 |   |   |   | 15,962 |   |
| Collateralized Mortgage Obligations |   |           |  429    |   |              |   |  407 |   |   |   |  448 |   |   |   |  415 |   |
| Total Mortgage-Backed Securities    |   |           | 79,407       |   |              |   | 78,349 |   |   |   | 89,588 |   |   |   | 89,147 |   |
| Total Available for Sale            |   | $              | 147,386      |   |              | $      | 141,897 |   |   | $ | 152,742 |   |   | $ | 148,469 |   |

|                                                                                                                                                                                                                                                                    |   |           |         |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------------|
|                                                                                                                                                                                                                                                                    |   | March 31, 2011 |         |   | December 31, 2010 |   |
| Available for sale:                                                                                                                                                                                                                                                     |   | FairValue      |         |   | Percent ofPortfolio |   |   | FairValue |   |   | Percent ofPortfolio |   |
|                                                                                                                                                                                                                                                                    |   |           |         |   |   |   |   |   |   |   |   |   |
| Investment securities:                                                                                                                                                                                                                                                  |   |           |         |   |   |   |   |   |   |   |   |   |
| U.S. Agency obligations                                                                                                                                                                                                                                                 |   | $              | 1            |   |   |   | 0.00 | % |   | $ | 2 |   |   |   | 0.01 | % |
| Government Sponsored Enterprises                                                                                                                                                                                                                                   |   |           | 58,914       |   |   |   | 41.51 |   |   |   | 54,772 |   |   |   | 36.89 |   |
| Trust Preferred securities                                                                                                                                                                                                                                              |   |           |  4,633  |   |   |   |  3.27 |   |   |   | 4,548 |   |   |   | 3.06 |   |
| Total investment securities                                                                                                                                                                                                                                             |   |           |  63,548 |   |   |   | 44.78 |   |   |   | 59,322 |   |   |   | 39.96 |   |
| Mortgage-Backed securities                                                                                                                                                                                                                                              |   |           |  78,349 |   |   |   |  55.22 |   |   |   | 89,147 |   |   |   | 60.04 |   |
| Total                                            |   | $              | 141,897      |   |   |   | 100.00 | % |   | $ | 148,469 |   |   |   | 100.00 | % |

----

|                                |   | As of March 31, 2011 |    |
|-------------------------------------|--------|----------------------|---------|
|                                |   | AmortizedCost        |    |   | Gross Unrealized |   |   | Fair Value |   |
|                                | Gains  |                 |    | Losses |   |
| Investment Securities:              |   |                 |    |   |   |   |   |   |   |   |   |   |
| U.S. Agency Obligations             |   | $                    | 1       |   |   | $ | – |   |   | $ | -- |   |   | $ | 1 |   |
| Government Sponsored Enterprises    |   |                 | 60,699  |   |   |   | 81 |   |   |   | (1,866 | ) |   |   | 58,914 |   |
| Trust Preferred Securities          |   |                 | 7,279   |   |   |   | – |   |   |   | (2,646 | ) |   |   | 4,633 |   |
| Total Investment Securities         |   |                 | 67,979  |   |   |   | 81 |   |   |   | (4,512 | ) |   |   | 63,548 |   |
| Mortgage-Backed Securities:         |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                          |   |                 | 15,443  |   |   |   | 251 |   |   |   | (195 | ) |   |   | 15,499 |   |
| Ginnie Mae                          |   |                 | 48,200  |   |   |   | 5 |   |   |   | (817 | ) |   |   | 47,388 |   |
| Freddie Mac                         |   |                 | 15,335  |   |   |   | 11 |   |   |   | (291 | ) |   |   | 15,055 |   |
| Collateralized Mortgage Obligations |   |                 | 429     |   |   |   | – |   |   |   | (22 | ) |   |   | 407 |   |
| Total Mortgage-Backed Securities    |   |                 | 79,407  |   |   |   | 267 |   |   |   | (1,325 | ) |   |   | 78,349 |   |
| Total available for sale            |   | $                    | 147,386 |   |   | $ | 348 |   |   | $ | (5,837 | ) |   | $ | 141,897 |   |

|                                     |   | As of December 31, 2010 |            |
|------------------------------------------|--------|-------------------------|-----------------|
|                                     |   | AmortizedCost           |            |   | Gross Unrealized |   |   | Fair Value |   |
|                                     | Gains  |                    |            | Losses |   |
| Investment Securities:                   |   |                    |            |   |   |   |   |   |   |   |   |   |
| U.S. Agency Obligations                  |   | $                       | 2               |   |   | $ | -- |   |   | $ | -- |   |   | $ | 2 |   |
| Government Sponsored Enterprises    |   |                    |  55,881    |   |   |   |  49 |   |   |   |  (1,158 | ) |   |   |  54,772 |   |
| Trust Preferred Securities               |   |                    |  7,271     |   |   |   |  -- |   |   |   | (2,723 | ) |   |   |  4,548 |   |
| Total Investment Securities              |   |                    | 63,154          |   |   |   | 49 |   |   |   | (3,881 | ) |   |   | 59,322 |   |
| Mortgage-Backed Securities:              |   |                    |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                               |   |                    |  11,307    |   |   |   |  270 |   |   |   |  (119 | ) |   |   |  11,458 |   |
| Ginnie Mae                               |   |                    | 61,617          |   |   |   | 180 |   |   |   | (485 | ) |   |   | 61,312 |   |
| Freddie Mac                              |   |                    | 16,216          |   |   |   | 10 |   |   |   | (264 | ) |   |   | 15,962 |   |
| Collateralized Mortgage Obligations |   |                    |   448 |   |   |   |   -- |   |   |   |   (33 | ) |   |   |   415 |   |
| Total Mortgage-Backed Securities         |   |                    |  89,588    |   |   |   |  460 |   |   |   | (901 | ) |   |   | 89,147 |   |
| Total available for sale                 |   | $                       | 152,742         |   |   | $ | 509 |   |   | $ | (4,782 | ) |   | $ | 148,469 |   |

----

|                                            |   | Available for Sale |    |
|-------------------------------------------------|--------|--------------------|---------|
|                                            |   | AmortizedCost      |    |   | FairValue |   |
|                                            |   |               |    |   |   |   |
| Due in one year or less                         |   | $                  | 1       |   |   | $ | 1 |   |
| Due after one year through five years           |   |               | 39      |   |   |   | 41 |   |
| Due after five years through ten years          |   |               | 42,471  |   |   |   | 40,928 |   |
| Due after ten years                             |   |               | 104,875 |   |   |   | 100,927 |   |
| Total investment and mortgage-backed securities |   | $                  | 147,386 |   |   | $ | 141,897 |   |

|                             |   | Less than 12 Months |                |   | 12 Months or More |   |               | Total     |   |
|----------------------------------|--------|---------------------|---------------------|--------|-------------------|--------|--------------------|-----------|--------|
|                             |   | FairValue           |                |   | UnrealizedLosses  |   |               | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| Securities Available for Sale    |   |                |                |   |              |   |               |      |   |   |   |   |   |   |   |   |   |   |
| Government Sponsored Enterprises |   | $                   | 45,828              |   |              | $      | 1,866              |      |   | $ |  – |   |   | $ |   – |   |   | $ | 45,828 |   |   | $ | 1,866 |   |
| Trust Preferred Securities       |   |                | –             |   |              |   | –            |      |   |   | 4,633 |   |   |   | 2,646 |   |   |   | 4,633 |   |   |   | 2,646 |   |
| Mortgage-Backed Securities       |   |                |    71,253 |   |              |   |    1,301 |      |   |   |    433 |   |   |   |     22 |   |   |   |    71,686 |   |   |   |    1,323 |   |
| Total                            |   | $                   | 117,081             |   |              | $      | 3,167              |      |   | $ | 5,066 |   |   | $ | 2,668 |   |   | $ | 122,147 |   |   | $ | 5,835 |   |

|                             |   | Less than 12 Months |          |   | 12 Months or More |   |                  | Total     |   |
|----------------------------------|--------|---------------------|---------------|--------|-------------------|--------|-----------------------|-----------|--------|
|                             |   | FairValue           |          |   | UnrealizedLosses  |   |                  | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| Securities Available for Sale    |   |                |          |   |              |   |                  |      |   |   |   |   |   |   |   |   |   |   |
| Government Sponsored Enterprises |   | $                   | 43,531        |   |              | $      | 1,158                 |      |   | $ | – |   |   | $ | – |   |   | $ | 43,531 |   |   | $ | 1,158 |   |
| Trust Preferred Securities       |   |                | –       |   |              |   | –               |      |   |   | 4,548 |   |   |   | 2,723 |   |   |   | 4,548 |   |   |   | 2,723 |   |
| Mortgage-Backed Securities       |   |                |   59,963 |   |              |   |    868 |      |   |   |    444 |   |   |   |     33 |   |   |   |    60,407 |   |   |   |    901 |   |
| Total                            |   | $                   | 103,494       |   |              | $      | 2,026                 |      |   | $ | 4,992 |   |   | $ | 2,756 |   |   | $ | 108,486 |   |   | $ | 4,782 |   |

----

----

|                                    |   | March 31, |          |   | December 31, |   |
|-----------------------------------------|--------|-----------|---------------|--------|--------------|--------|
|                                    |   | 2011      |          |   | 2010         |   |
| Mortgage loans:                         |   |      |          |   |         |   |
| Fixed-rate residential                  |   | $         | 9,202         |   |         | $      | 9,102 |   |
| Adjustable-rate residential             |   |      | 4,654         |   |         |   | 5,064 |   |
| Commercial real estate                  |   |      | 94,083        |   |         |   | 99,612 |   |
| Construction                            |   |      | 657           |   |         |   | 665 |   |
| Total mortgage loans                    |   |      |  108,596 |   |         |   | 114,443 |   |
| Commercial loans:                       |   |      |          |   |         |   |   |   |
| Commercial non-real estate              |   |      | 24,027        |   |         |   | 23,137 |   |
| Commercial lines of credit              |   |      | 18,692        |   |         |   | 23,672 |   |
| Total commercial loans                  |   |      | 42,719        |   |         |   | 46,809 |   |
| Consumer loans:                         |   |      |          |   |         |   |   |   |
| Home equity                             |   |      | 15,759        |   |         |   | 16,409 |   |
| Consumer and installment                |   |      | 27,331        |   |         |   | 28,553 |   |
| Consumer lines of credit                |   |      | 311           |   |         |   | 307 |   |
| Total consumer loans                    |   |      | 43,401        |   |         |   | 45,269 |   |
| Total loans                             |   |      | 194,716       |   |         |   | 206,521 |   |
| Less:                                   |   |      |          |   |         |   |   |   |
| Undisbursed portion of interim          |   |      |          |   |         |   |   |   |
| construction loans                      |   |      | (143          | )      |         |   | (143 | ) |
| Unamortized loan discount               |   |      | (259          | )      |         |   | (269 | ) |
| Allowance for loan losses               |   |      | (6,949        | )      |         |   | (7,379 | ) |
| Net deferred loan origination costs     |   |      | 158           |   |         |   | 166 |   |
| Total, net                              |   | $         | 187,523       |   |         | $      | 198,896 |   |
|                                    |   |      |          |   |         |   |   |   |
| Weighted-average interest rate of loans |   |      | 5.06          | %      |         |   | 4.97 | % |

----

|                                    |   | March 31, 2011 |   |    | December 31, 2010 |   |
|-----------------------------------------|--------|----------------|--------|---------|-------------------|--------|
|                                    |   |           |   |    |              |   |
| Non-accruing loans which are            |   |           |   |    |              |   |
|   contractually past due 90 days   |   |           |   |    |              |   |
|   or more:                         |   |           |   |    |              |   |
|                                    |   |           |   |    |              |   |
| Residential real estate                 |   | $              | 1,571  |    |              | $      | 1,534 |   |
| Commercial                              |   |           | 17,876 |    |              |   | 15,353 |   |
| Consumer                                |   |           | 1,785  |    |              |   | 1,939 |   |
| Total nonperforming loans               |   |           | 21,232 |    |              |   | 18,826 |   |
|                                    |   |           |   |    |              |   |   |   |
| Troubled debt restructurings            |   |           | 3,611  |    |              |   | 5,667 |   |
| Real estate acquired through            |   |           |   |    |              |   |   |   |
| Foreclosure                             |   |           | 9,050  |    |              |   | 10,618 |   |
| Total nonperforming assets              |   | $              | 33,893 |    |              | $      | 35,111 |   |
|                                    |   |           |   |    |              |   |   |   |
| Nonperforming loans to total loans, net |   |           | 11.32  | %       |              |   | 9.46 | % |
| Nonperforming assets to total assets    |   |           | 8.49   | %       |              |   | 8.59 | % |
| Allowance for loan losses to total      |   |           |   |    |              |   |   |   |
|   loans outstanding                |   |           | 3.57   | %  |              |   | 3.58 | % |
| Allowance for loan losses to            |   |           |   |    |              |   |   |   |
|   nonperforming loans              |   |           | 32.73  | %       |              |   | 39.20 | % |
| Allowance for loan losses               |   | $              | 6,949  |    |              | $      | 7,379 |   |

----

|                                 |   | March 31, |       |   | December 31, |   |
|--------------------------------------|--------|-----------|------------|--------|--------------|--------|
|                                 |   | 2011      |       |   | 2010         |   |
|                                 |   |      |       |   |         |   |
| Balance at beginning of period       |   | $         | 10,618     |   |         | $      | 5,917 |   |
| Foreclosures added during the period |   |      | 479        |   |         |   | 9,271 |   |
| Sales of foreclosed property         |   |      | (1,881     | )      |         |   | (2,739 | ) |
| Provision charged as a write-down    |   |      |  (166 | )      |         |   | (1,831 | ) |
| Balance at the end of period         |   | $         | 9,050      |   |         | $      | 10,618 |   |

----

|                              | March 31, 2011 |   | December 31, 2010 |    |
|-----------------------------------|----------------|--------|-------------------|---------|
|                              | Rate           |   | Balance           |    |   | % |   | Rate |   | Balance |   |   | % |   |
| Account Type                      |           |   |              |    |   |   |   |   |   |   |   |   |   |   |
| NOW accounts:                     |           |   |              |    |   |   |   |   |   |   |   |   |   |   |
| Commercial non-interest-bearing   | --             |   | $                 | 19,886  |   |   |    6.45% |   | -- |   | $ | 18,414 |   |   |    5.88% |   |
| Non-commercial                    | 0.70%          |   |              | 91,566  |   |   |  29.70% |   | 1.60% |   |   | 98,075 |   |   |  31.32% |   |
| Money market checking accounts    | 0.54%          |   |              | 24,363  |   |   |    7.90% |   | 0.53% |   |   | 21,066 |   |   |    6.73% |   |
| Regular savings                   | 0.46%          |   |              | 27,763  |   |   |    9.00% |   | 0.84% |   |   | 28,430 |   |   |    9.08% |   |
| Total demand and savings deposits | 0.55%          |   |              | 163,578 |   |   |  53.05% |   | 1.15% |   |   | 165,985 |   |   |  53.01% |   |
| Time deposits:                    |           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Up to 3.00%                       |           |   |              | 141,404 |   |   | 45.86% |   |   |   |   | 143,562 |   |   |  45.85% |   |
| 3.01 %- 4.00%                     |           |   |              | 100     |   |   |    0.03% |   |   |   |   | 206 |   |   |    0.07% |   |
| 4.01 %- 5.00%                     |           |   |              | 2,639   |   |   |    0.86% |   |   |   |   | 2,800 |   |   |    0.89% |   |
| 5.01 %- 6.00%                     |           |   |              | 608     |   |   |    0.20% |   |   |   |   | 575 |   |   |    0.18% |   |
| Total time deposits               | 1.41%          |   |              | 144,751 |   |   |  46.95% |   | 1.55% |   |   | 147,143 |   |   |  46.99% |   |
| Total deposit accounts            | 0.95%          |   | $                 | 308,329 |   |   | 100.00% |   | 1.34% |   | $ | 313,128 |   |   | 100.00% |   |

|                                               |   | March 31, 2011 |   | December 31, 2010 |         |
|----------------------------------------------------|--------|----------------|--------|-------------------|--------------|
|                                               |   | Balance        |   |              | Wtd Avg Rate |   | Balance |   |   | Wtd Avg Rate |   |
| Contractual Maturity:                              |   |           |   |              |         |   |   |   |   |   |   |
| Within one year - adjustable rate                  |   | $              | 5,000  |              |         | 4.40% |   | $ | -- |   |   | -- |   |
| After one but within three years - adjustable rate |   |           | 17,000 |              |         | 4.63% |   |   | 22,000 |   |   | 4.58% |   |
| Greater than five years - adjustable rate          |   |           | 37,500 |              |         | 3.89% |   |   | 37,500 |   |   | 3.89% |   |
| Total advances                                     |   | $              | 59,500 |              |         | 4.14% |   | $ | 59,500 |   |   | 4.14% |   |

----

----

----

|                                                                                                                               |   |   |   |   |               |   |   | Minimum Capital Levels |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|
|                                                                                                                               |   | Actual |   |   | Regulatory Minimum |   |   | From Consent Order     |   |
|                                                                                                                               |   |   |   |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                               |   | Amount |   |   | Ratio              |   |   | Amount                 |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| Leverage ratio                                                                                                                     |   |   |   |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                                                                                        |   | $      | 16,491 |   |               |   | 4.05   | %                      |   | $ | 16,288 |   |   |   | 4.00 | % |   | $ | n/a |   |   |   | n/a | % |
| Bank                      |   |   | 24,209 |   |               |   | 5.95   |                   |   |   | 16,273 |   |   |   | 4.00 |   |   |   | 32,545 |   |   |   | 8.00 |   |
| Tier 1 capital ratio                                                                                                               |   |   |   |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                                                                                        |   |   | 16,491 |   |               |   | 6.91   |                   |   |   | 9,547 |   |   |   | 4.00 |   |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                                                                               |   |   | 24,209 |   |               |   | 10.16  |                   |   |   | 9,532 |   |   |   | 4.00 |   |   |   | n/a |   |   |   | n/a | (1) |
| Total risk-based capital ratio                                                                                                     |   |   |   |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                                                                                        |   |   | 27,133 |   |               |   | 11.37  |                   |   |   | 19,095 |   |   |   | 8.00 |   |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                                                                               |   |   | 27,237 |   |               |   | 11.43  |                   |   |   | 19,064 |   |   |   | 8.00 |   |   |   | 28,596 |   |   |   | 12.00 |   |

----

|   | •       | Revised its liquidity risk management program, which assesses, on an ongoing basis, the Bank’s current and projected funding needs, and ensures that sufficient funds exist to meet those needs.  The plan includes specific plans for how the Bank plans to comply with regulatory restrictions which limit the interest rates the Bank can offer to depositors; |
|--------|---------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •   | Revised its loan policy, and created a commercial real estate concentration management program.  The Bank also established a new loan review program to ensure the timely and independent identification of problem loans and  modified  its existing program for the maintenance of an adequate allowance for loan and lease losses; |
|--------|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •   | Took immediate and continuing action to protect the Bank’s interest in certain assets identified by the OCC or any other bank examiner and developed a criticized assets report covering the entire credit relationship with respect to such assets; |
|--------|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •   | Implemented and adhered to a program for the maintenance of an adequate ALLL that is consistent with OCC requirements; |
|--------|---------------------|------------------------------------------------------------------------------------------------------------------------|

|   | •   | ensured that the Bank has competent management in place on a full-time basis to carry out the board’s policies and operate the Bank in a safe and sound manner. |
|--------|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                            |   | Three Months Ended March 31, |               |
|-----------------------------------------------------------------|--------|------------------------------|--------------------|
|                                                            |   | 2011                         |               |   | 2010 |   |
|                                                            |   | Average                      |               |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                                            |   | Balance                      |               |   | Interest |   |   | Yield/Cost(2) |   |   | Balance |   |   | Interest |   |   | Yield/Cost(2) |   |
| Interest-earning assets:                                        |   |                         |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                       |   | $                            | 198,006            |   |   | $ | 2,444 |   |   |   | 5.01 | % |   | $ | 247,998 |   |   | $ | 3,120 |   |   |   | 5.03 | % |
| Mortgage-backed securities                                      |   |                         | 76,590             |   |   |   | 632 |   |   |   | 3.35 | % |   |   | 43,735 |   |   |   | 429 |   |   |   | 3.92 | % |
| Investment securities                                           |   |                         | 58,781             |   |   |   | 496 |   |   |   | 3.42 | % |   |   | 97,181 |   |   |   | 962 |   |   |   | 3.96 | % |
| Other interest-earning assets                                   |   |                         |  38,956       |   |   |   |  30 |   |   |   | 0.31 | % |   |   |  25,306 |   |   |   |  19 |   |   |   | 0.31 | % |
| Total interest-earning assets                                   |   |                         | 372,333            |   |   |   | 3,602 |   |   |   | 3.92 | % |   |   | 414,220 |   |   |   | 4,530 |   |   |   | 4.37 | % |
| Non-interest-earning assets                                     |   |                         |  35,664       |   |   |   |   |   |   |   |   |   |   |   |  40,716 |   |   |   |   |   |   |   |   |   |
| Total assets                                                    |   | $                            | 407,997            |   |   |   |   |   |   |   |   |   |   | $ | 454,936 |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                   |   |                         |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                        |   |                         | 293,654            |   |   |   | 880 |   |   |   | 1.22 | % |   |   | 312,594 |   |   |   | 1,547 |   |   |   | 1.98 | % |
| Floating rate junior subordinateddeferrable interest debentures |   |                         |   12,372      |   |   |   |   118 |   |   |   | 3.87 | % |   |   |   12,372 |   |   |   |   118 |   |   |   | 3.82 | % |
| FHLB advances and other borrowings                              |   |                         |  68,322       |   |   |   |   619 |   |   |   | 3.67 | % |   |   |  81,532 |   |   |   |   744 |   |   |   | 3.65 | % |
| Total interest-bearing liabilities                              |   |                         | 374,348            |   |   |   | 1,617 |   |   |   | 1.75 | % |   |   | 406,498 |   |   |   | 2,409 |   |   |   | 2.37 | % |
| Non-interest-bearing sources:                                   |   |                         |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing deposits                                   |   |                         |  19,866       |   |   |   |   |   |   |   |   |   |   |   |  18,733 |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing liabilities                                |   |                         |  3,495        |   |   |   |   |   |   |   |   |   |   |   |  3,228 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                               |   |                         | 397,709            |   |   |   |   |   |   |   |   |   |   |   | 428,459 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                      |   |                         |   10,288 |   |   |   |   |   |   |   |   |   |   |   |   26,477 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’equity                 |   | $                            | 407,997            |   |   |   |   |   |   |   |   |   |   | $ | 454,936 |   |   |   |   |   |   |   |   |   |
| Net interest income                                             |   |                         |               |   |   | $ | 1,985 |   |   |   |   |   |   |   |   |   |   | $ | 2,121 |   |   |   |   |   |
| Interest rate spread                                            |   |                         |               |   |   |   |   |   |   |   | 2.17 | %          |   |   |   |   |   |   |   |   |   |   | 2.00 | %          |
| Impact of non-interest-bearingdeposits                          |   |                         |               |   |   |   |   |   |   |   | 0.08 | % |   |   |   |   |   |   |   |   |   |   | 0.05 | % |
| Net interest margin                                        |   |                         |               |   |   |   |   |   |   |   | 2.25 | % |   |   |   |   |   |   |   |   |   |   | 2.05 | % |

----

----

|                           |   | March 31, |       |   | March 31, |   |
|--------------------------------|--------|-----------|------------|--------|-----------|--------|
|                           |   | 2011      |       |   | 2010      |   |
| Balance at beginning of period |   | $         | 7,379      |   |      | $      | 5,579 |   |
| Provision for loan losses      |   |      | --         |   |      |   | 896 |   |
| Charge-offs, net               |   |      |  (430 | )      |      |   | (1,042 | ) |
| Balance at end of period       |   | $         | 6,949      |   |      | $      | 5,433 |   |

----

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Item 4.  Controls and Procedures

----

Item 1.           Legal Proceedings

Item 1A.        Risk Factors

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.           Defaults upon Senior Securities

Item 4.           [Removed and Reserved]

Item 5.           Other Information

Item 6.           Exhibits

----

SIGNATURES

| Date: May 10, 2011 | By:    | /s/ Dwight V. Neese                                             |   |
|--------------------|--------|-----------------------------------------------------------------|--------|
|               |   | Dwight V. Neese,                                                |   |
|               |   | President and Chief Executive Officer                           |   |
|               |   |                                                            |   |
|               |   |                                                            |   |
| Date: May 10, 2011 | By:    | /s/ Richard H. Flake                                            |   |
|               |   | Richard H. Flake,                                               |   |
|               |   | Executive Vice President  and Chief Financial Officer |   |