| X      |   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  |
|--------|--------|---------------------------------------------------------------------|
|   |   | EXCHANGE ACT OF 1934                                                |
|   |   |                                                                |
|   |   | For the quarterly period ended September 30, 2010                   |
|   |   |                                                                |
|   |   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
|   |   | EXCHANGE ACT OF 1934                                                |
|   |   | For the transition period from ______ to _______                    |

| 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 September 30, 2010 and December 31, 2009                                                         | 3        |
|     |                                                                                                                               |     |
|     | Consolidated Statements of Loss for the three and nine months ended September 30, 2010 and 2009                                    | 4        |
|     |                                                                                                                               |     |
|     | Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009                                        | 5        |
|     |                                                                                                                               |     |
|     | Consolidated Statements of Shareholders’ Equity and Comprehensive Loss for the nine months ended September 30, 2010 and 2009 | 6        |
|     |                                                                                                                               |     |
|     | Notes to Consolidated Financial Statements                                                                                         | 7   |
|     |                                                                                                                               |     |
|     | Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations                                | 16       |
|     |                                                                                                                               |     |
|     | Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                                 | 35       |
|     |                                                                                                                               |     |
|     | Item 4. Controls and Procedures                                                                                                    |  35 |
|     |                                                                                                                               |     |
| Part II. | Other Information                                                                                                                  |     |
|     |                                                                                                                               |     |
|     | Item 1.   Legal Proceedings                                                                                         | 36       |
|     |                                                                                                                               |     |
|     | Item 1A. Risk Factors                                                                                                              | 36       |
|     |                                                                                                                               |     |
|     | Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds                                               | 36       |
|     |                                                                                                                               |     |
|     | Item 3.   Defaults Upon Senior Securities                                                                           | 36       |
|     |                                                                                                                               |     |
|     | Item 4.   Reserved                                                                                                  | 36       |
|     |                                                                                                                               |     |
|     | Item 5.   Other Information                                                                                         | 36       |
|     |                                                                                                                               |     |
|     | Item 6.   Exhibits                                                                                                  | 36       |
|     |                                                                                                                               |     |
|     | Signatures                                                                                                                         | 37       |

----

| Part 1.    Financial Information                                                                                                                                 |   |                   |    |   |         |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|--------------|--------|
| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES                                                                                                                                |   |                   |    |   |         |   |
| CONSOLIDATED BALANCE SHEETS                                                                                                                                                          |   |                   |    |   |         |   |
| September 30, 2010 and December 31, 2009                                                                                                                                             |   |                   |    |   |         |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |
|                                                                                                                                                                                 |   | September 30,          |    |   | December 31, |   |
| ASSETS                                                                                                                                                                               |   | 2010                   |    |   | 2009         |   |
|                                                                                                                                                                                 |   | (Unaudited)            |    |   | (Audited)    |   |
|                                                                                                                                                                                 |   | (DOLLARS IN THOUSANDS) |    |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| Cash and due from banks                                                                                                                                                              |   | $                      | 5,492   |   |         | $      | 5,103 |   |
| Interest earning balances with the Federal Reserve                                                                                                                                   |   |                   | 5,494   |   |         |   | 5,241 |   |
| Federal funds sold                                                                                                                                                                   |   |                   | 28,231  |   |         |   | 5,287 |   |
| Cash and cash equivalents                                                                                                                                                            |   |                   | 39,217  |   |         |   | 15,631 |   |
| Investment and mortgage-backed securities                                                                                                                                            |   |                   |    |   |         |   |   |   |
| Held to maturity (market value of $3,976,000 at December 31, 2009)                                                                                                                   |   |                   | --      |   |         |   | 3,934 |   |
| Available for sale                                                                                                                                                                   |   |                   | 135,145 |   |         |   | 147,816 |   |
| Total investment and mortgage-backed securities                                                                                                                                      |   |                   | 135,145 |   |         |   | 151,750 |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| Loans, net of unearned fees                                                                                                                                                          |   |                   | 219,595 |   |         |   | 255,999 |   |
| Allowance for loan losses (ALL)                                                                                                                                                      |   |                   | (5,834  | )      |         |   | (5,579 | ) |
| Loans, net of ALL                                                                                                                                                                    |   |                   | 213,761 |   |         |   | 250,420 |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| Real estate acquired through foreclosure                                                                                                                                             |   |                   | 9,855   |   |         |   | 5,917 |   |
| Office properties and equipment, net                                                                                                                                                 |   |                   | 5,205   |   |         |   | 5,447 |   |
| Federal Home Loan Bank stock, at cost                                                                                                                                                |   |                   | 3,664   |   |         |   | 3,947 |   |
| Federal Reserve Bank stock, at cost                                                                                                                                                  |   |                   | 832     |   |         |   | 832 |   |
| Accrued interest receivable                                                                                                                                                          |   |                   | 1,508   |   |         |   | 2,238 |   |
| Cash surrender value of life insurance                                                                                                                                               |   |                   | 8,768   |   |         |   | 9,332 |   |
| Other assets                                                                                                                                                                         |   |                   | 10,895  |   |         |   | 11,489 |   |
| TOTAL ASSETS                                                                                                                                                                         |   | $                      | 428,850 |   |         | $      | 457,003 |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| LIABILITIES                                                                                                                                                                          |   |                   |    |   |         |   |   |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| Demand and savings deposits                                                                                                                                                          |   | $                      | 165,585 |   |         | $      | 161,911 |   |
| Time deposits                                                                                                                                                                        |   |                   | 152,313 |   |         |   | 170,851 |   |
| Total deposits                                                                                                                                                                       |   |                   | 317,898 |   |         |   | 332,762 |   |
| Advances from the Federal Home Loan Bank                                                                                                                                             |   |                   | 59,500  |   |         |   | 64,500 |   |
| Securities sold under agreements to repurchase                                                                                                                                       |   |                   | 12,601  |   |         |   | 18,520 |   |
| Floating rate junior subordinated deferrable interest debentures                                                                                                                     |   |                   | 12,372  |   |         |   | 12,372 |   |
| Accrued interest payable                                                                                                                                                             |   |                   | 544     |   |         |   | 581 |   |
| Other liabilities                                                                                                                                                                    |   |                   | 3,813   |   |         |   | 2,147 |   |
| TOTAL LIABILITIES                                                                                                                                                                    |   |                   | 406,728 |   |         |   | 430,882 |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| 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 September 30, 2010 and December 31, 2009, respectively |   |                   | 9,249   |   |         |   | 9,245 |   |
| Common stock - $0.01 par value, authorized - 5,000,000 shares, issued and outstanding - 1,790,599 shares at September 30, 2010 and 1,790,599 at December 31, 2009     |   |                   | 20      |   |         |   | 20 |   |
| Common stock warrants                                                                                                                                                                |   |                   | 25      |   |         |   | 25 |   |
| Additional paid-in capital                                                                                                                                                           |   |                   | 12,919  |   |         |   | 12,919 |   |
| Accumulated other comprehensive loss                                                                                                                                                 |   |                   | (1,197  | )      |         |   | (972 | ) |
| Retained earnings, substantially restricted                                                                                                                                          |   |                   | 7,406   |   |         |   | 11,184 |   |
| Treasury stock, at cost                                                                                                                                                              |   |                   | (6,300  | )      |         |   | (6,300 | ) |
| TOTAL SHAREHOLDERS' EQUITY                                                                                                                                                           |   |                   | 22,122  |   |         |   | 26,121 |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                           |   | $                      | 428,850 |   |         | $      | 457,003 |   |
|                                                                                                                                                                                 |   |                   |    |   |         |   |   |   |
| See notes to consolidated financial statements.                                                                                                                                      |   |                   |    |   |         |   |   |   |

----

| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES |
|-------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF LOSS                       |

| Three and Nine Months Ended September 30, 2010 and 2009 (unaudited)              |   |                                    |      |   |                                    |   |      |          |   |   |
|----------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|--------|-----------------------------------------|--------|-----------|---------------|--------|--------|
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |
|                                                                             |   | Three Months Ended                      |      |   | Nine Months Ended                       |   |
|                                                                             |   | September 30,                           |      |   | September 30,                           |   |      | September 30, |   |   | September 30, |   |
|                                                                             |   | 2010                                    |      |   | 2009                                    |   |      | 2010          |   |   | 2009 |   |
|                                                                             |   | (DOLLARS IN THOUSANDS EXCEPT PER SHARE) |      |   | (DOLLARS IN THOUSANDS EXCEPT PER SHARE) |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |
| Interest Income:                                                                 |   |                                    |      |   |                                    |   |      |          |   |   |   |   |
| Loans                                                                            |   |                                    | 2,841     |   |                                    | $      | 3,640     |          |   | $      | 8,836 |   |   | $ | 10,881 |   |
| Deposits and federal funds sold                                                  |   |                                    | 9         |   |                                    |   | 5         |          |   |   | 23 |   |   |   | 18 |   |
| Interest and dividends on mortgage-backed securities                             |   |                                    | 346       |   |                                    |   | 897       |          |   |   | 992 |   |   |   | 2,929 |   |
| Interest and dividends on investment securities                                  |   |                                    | 938       |   |                                    |   | 810       |          |   |   | 2,923 |   |   |   | 2,006 |   |
| Total interest income                                                            |   |                                    | 4,134     |   |                                    |   | 5,352     |          |   |   | 12,774 |   |   |   | 15,834 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Interest Expense:                                                                |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Deposit accounts                                                                 |   |                                    | 1,171     |   |                                    |   | 2,010     |          |   |   | 4,012 |   |   |   | 6,214 |   |
| Floating rate junior subordinated deferrable interest debentures                 |   |                                    | 123       |   |                                    |   | 125       |          |   |   | 359 |   |   |   | 410 |   |
| Advances from the FHLB and other borrowings                                      |   |                                    | 637       |   |                                    |   | 763       |          |   |   | 2,012 |   |   |   | 2,304 |   |
| Total interest expense                                                           |   |                                    | 1,931     |   |                                    |   | 2,898     |          |   |   | 6,383 |   |   |   | 8,928 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Net Interest Income                                                              |   |                                    | 2,203     |   |                                    |   | 2,454     |          |   |   | 6,391 |   |   |   | 6,906 |   |
| Provision for loan losses                                                        |   |                                    | 3,947     |   |                                    |   | 1,425     |          |   |   | 6,030 |   |   |   | 5,050 |   |
| Net interest income (loss) after provision for loan losses                  |   |                                    | (1,744    | )      |                                    |   | 1,029     |          |   |   | 361 |   |   |   | 1,856 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Non-Interest Income:                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Fees for financial services                                                      |   |                                    | 723       |   |                                    |   | 757       |          |   |   | 2,119 |   |   |   | 2,166 |   |
| Other fees, net                                                                  |   |                                    | 18        |   |                                    |   | 14        |          |   |   | 52 |   |   |   | 68 |   |
| Other-than-temporary-impairment write-down on securities                         |   |                                    | (660      | )      |                                    |   | (739      | )             |   |   | (1,127 | ) |   |   | (1,830 | ) |
| Net gain on sale of investments                                                  |   |                                    | 619       |   |                                    |   | 381       |          |   |   | 1,824 |   |   |   | 760 |   |
| Total non-interest income                                                        |   |                                    | 700       |   |                                    |   | 413       |          |   |   | 2,868 |   |   |   | 1,164 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Non-Interest Expense:                                                            |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Compensation and employee benefits                                               |   |                                    | 1,057     |   |                                    |   | 1,090     |          |   |   | 3,239 |   |   |   | 3,424 |   |
| Occupancy and equipment                                                          |   |                                    | 630       |   |                                    |   | 729       |          |   |   | 1,833 |   |   |   | 1,953 |   |
| Deposit insurance premiums                                                       |   |                                    | 147       |   |                                    |   | 127       |          |   |   | 438 |   |   |   | 457 |   |
| Professional services                                                            |   |                                    | 127       |   |                                    |   | 95        |          |   |   | 325 |   |   |   | 272 |   |
| Advertising and public relations                                                 |   |                                    | 5         |   |                                    |   | 8         |          |   |   | 35 |   |   |   | 65 |   |
| Loan operations                                                                  |   |                                    | 475       |   |                                    |   | 38        |          |   |   | 733 |   |   |   | 216 |   |
| Intangible amortization                                                          |   |                                    | --        |   |                                    |   | 76        |          |   |   | -- |   |   |   | 247 |   |
| Items processing                                                                 |   |                                    | 102       |   |                                    |   | 93        |          |   |   | 262 |   |   |   | 260 |   |
| Telephone                                                                        |   |                                    | 44        |   |                                    |   | 46        |          |   |   | 131 |   |   |   | 147 |   |
| Other                                                                            |   |                                    | 180       |   |                                    |   | 178       |          |   |   | 568 |   |   |   | 572 |   |
| Total non-interest expense                                                       |   |                                    | 2,767     |   |                                    |   | 2,480     |          |   |   | 7,564 |   |   |   | 7,613 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Net loss before income taxes                                                     |   |                                    | (3,811    | )      |                                    |   | (1,038    | )             |   |   | (4,335 | ) |   |   | (4,593 | ) |
| Benefit for income taxes                                                         |   |                                    | (548      | )      |                                    |   | (402      | )             |   |   | (793 | ) |   |   | (1,696 | ) |
| Net loss                                                                         |   |                                    | (3,263    | )      |                                    |   | (636      | )             |   |   | (3,542 | ) |   |   | (2,897 | ) |
| Accretion of preferred stock to redemption value and preferred dividends accrued |   |                                    | 120       |   |                                    |   | 118       |          |   |   | 355 |   |   |   | 263 |   |
| Net loss to common shareholders                                                  |   |                                    | (3,383    | )      |                                    | $      | (754      | )             |   | $      | (3,897 | ) |   | $ | (3,160 | ) |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Net loss per common share (basic)                                                |   |                                    | (1.89     | )      |                                    | $      | (0.42     | )             |   | $      | (2.18 | ) |   | $ | (1.77 | ) |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Net loss per common share (diluted)                                              |   |                                    | (1.89     | )      |                                    | $      | (0.42     | )             |   | $      | (2.18 | ) |   | $ | (1.77 | ) |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Cash dividend per common share                                                   |   |                                    | --        |   |                                    | $      | --        |          |   | $      | -- |   |   | $ | 0.060 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Basic                                                                            |   |                                    | 1,790,599 |   |                                    |   | 1,790,599 |          |   |   | 1,790,599 |   |   |   | 1,789,455 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| Diluted                                                                          |   |                                    | 1,790,599 |   |                                    |   | 1,790,599 |          |   |   | 1,790,599 |   |   |   | 1,789,455 |   |
|                                                                             |   |                                    |      |   |                                    |   |      |          |   |   |   |   |   |   |   |   |
| See notes to consolidated financial statements.                                  |   |

----

| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES                      |   |              |     |   |          |   |
|----------------------------------------------------------------------------|--------|-------------------|----------|--------|---------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                      |   |              |     |   |          |   |
| Nine Months Ended September 30, 2010 and 2009 (unaudited)                  |   |              |     |   |          |   |
|                                                                       |   |              |     |   |          |   |
|                                                                       |   | Nine Months Ended |     |
|                                                                       |   | September 30,     |     |   | September 30, |   |
|                                                                       |   | 2010              |     |   | 2009          |   |
|                                                                       |   | (IN THOUSANDS)    |     |
|                                                                       |   |              |     |   |          |   |
| OPERATING ACTIVITIES:                                                      |   |              |     |   |          |   |
|                                                                       |   |              |     |   |          |   |
| Net loss                                                                   |   | $                 | (3,542   | )      |          | $      | (2,897 | ) |
| Adjustments to reconcile net loss to                                       |   |              |     |   |          |   |   |   |
| net cash provided by operating activities:                                 |   |              |     |   |          |   |   |   |
| Provision for loan losses                                                  |   |              | 6,030    |   |          |   | 5,050 |   |
| Amortization of intangibles                                                |   |              | --       |   |          |   | 247 |   |
| Depreciation expense                                                       |   |              | 349      |   |          |   | 404 |   |
| Recognition of deferred income, net of costs                               |   |              | (142     | )      |          |   | (271 | ) |
| Deferral of fee income, net of costs                                       |   |              | 26       |   |          |   | 218 |   |
| Other than temporary impairment charge on  AFS securities        |   |              | 1,127    |   |          |   | 1,830 |   |
| Adjustment to goodwill                                                     |   |              | --       |   |          |   | 1,172 |   |
| Gain on investment transactions                                            |   |              | (1,824   | )      |          |   | (760 | ) |
| Gain on sale of assets acquired from foreclosed loans                      |   |              | (15      | )      |          |   | (2 | ) |
| Changes in operating assets and liabilities:                               |   |              |     |   |          |   |   |   |
| (Increase) decrease in accrued interest receivable                         |   |              | 730      |   |          |   | (146 | ) |
| Increase in real estate acquired through foreclosure                       |   |              | (5,900   | )      |          |   | (5,460 | ) |
| Increase in cash surrender value of life insurance                         |   |              | (283     | )      |          |   | (300 | ) |
| (Increase) decrease in other assets                                        |   |              | 594      |   |          |   | (2,003 | ) |
| Increase in other liabilities                                              |   |              | 1,666    |   |          |   | 685 |   |
| Increase in accrued interest payable                                       |   |              | (37      | )      |          |   | (34 | ) |
|                                                                       |   |              |     |   |          |   |   |   |
| Net cash provided (used) by operating activities                           |   |              | (1,221   | )      |          |   | (2,267 | ) |
|                                                                       |   |              |     |   |          |   |   |   |
| INVESTING ACTIVITIES:                                                      |   |              |     |   |          |   |   |   |
|                                                                       |   |              |     |   |          |   |   |   |
| Purchase of investment and mortgage-backed securities:                     |   |              |     |   |          |   |   |   |
| Available for sale                                                         |   |              | (190,384 | )      |          |   | (119,123 | ) |
| Held to maturity                                                           |   |              | --       |   |          |   | (1,504 | ) |
| Proceeds from sale of investment and mortgage-backed securities:           |   |              |     |   |          |   |   |   |
| Available for sale                                                         |   |              | 84,450   |   |          |   | 35,747 |   |
| Held to maturity                                                           |   |              | 3,934    |   |          |   | -- |   |
| Proceeds from maturity of investment and mortgage-backed securities:       |   |              |     |   |          |   |   |   |
| Available for sale                                                         |   |              | 104,583  |   |          |   | 24,477 |   |
| Held to maturity                                                           |   |              | --       |   |          |   | 250 |   |
| Principal repayments on mortgage-backed securities:                        |   |              |     |   |          |   |   |   |
| Available for sale                                                         |   |              | 14,493   |   |          |   | 18,391 |   |
| Net decrease in loans                                                      |   |              | 30,772   |   |          |   | 10,370 |   |
| (Purchase) redemption of FHLB/FRB stock                                    |   |              | 283      |   |          |   | (251 | ) |
| Proceeds from sales of foreclosed assets, net of costs and improvements    |   |              | 1,950    |   |          |   | 69 |   |
| Purchase of office properties and equipment                                |   |              | (106     | )      |          |   | (89 | ) |
|                                                                       |   |              |     |   |          |   |   |   |
| Net cash  provided (used) by investing activities                |   |              | 49,975   |   |          |   | (31,663 | ) |
|                                                                       |   |              |     |   |          |   |   |   |
| FINANCING ACTIVITIES:                                                      |   |              |     |   |          |   |   |   |
|                                                                       |   |              |     |   |          |   |   |   |
| Proceeds from the dividend reinvestment plan                               |   |              | --       |   |          |   | 16 |   |
| Proceeds from issuance of preferred stock                                  |   |              | --       |   |          |   | 9,240 |   |
| Proceeds from issuance of warrants                                         |   |              | --       |   |          |   | 25 |   |
| Proceeds from redemption of life insurance                                 |   |              | 847      |   |          |   | 645 |   |
| Dividends paid in cash                                                     |   |              | --       |   |          |   | (107 | ) |
| Dividends paid on preferred stock                                          |   |              | (232     | )      |          |   | (196 | ) |
| Decrease in other borrowings                                               |   |              | (10,919  | )      |          |   | (6,640 | ) |
| Increase (decrease) in deposit accounts                                    |   |              | (14,864  | )      |          |   | 29,859 |   |
|                                                                       |   |              |     |   |          |   |   |   |
| Net cash  provided (used) by financing activities                |   |              | (25,168  | )      |          |   | 32,842 |   |
|                                                                       |   |              |     |   |          |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                       |   |              | 23,586   |   |          |   | (1,088 | ) |
|                                                                       |   |              |     |   |          |   |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                           |   |              | 15,631   |   |          |   | 21,370 |   |
|                                                                       |   |              |     |   |          |   |   |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 |   | $                 | 39,217   |   |          | $      | 20,282 |   |
|                                                                       |   |              |     |   |          |   |   |   |
| SUPPLEMENTAL DISCLOSURES:                                                  |   |              |     |   |          |   |   |   |
|                                                                       |   |              |     |   |          |   |   |   |
| Cash paid for:                                                             |   |              |     |   |          |   |   |   |
| Income taxes                                                               |   | $                 | 28       |   |          | $      | 510 |   |
| Interest                                                                   |   |              | 6,420    |   |          |   | 8,962 |   |
|                                                                       |   |              |     |   |          |   |   |   |
| Non-cash transactions:                                                     |   |              |     |   |          |   |   |   |
| Loans foreclosed                                                           |   | $                 | 6,091    |   |          | $      | 5,868 |   |
| Unrealized gain (loss) on securities available for sale, net of income tax |   |              | (657     | )      |          |   | 1,774 |   |
|                                                                       |   |              |     |   |          |   |   |   |
| See notes to consolidated financial statements.                            |   |              |     |   |          |   |   |   |

----

| PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES                                                                         |                                      |
|-------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|
| CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSS                                                        |                                      |
| Nine Months Ended September 30, 2010 and 2009 (unaudited)                                                                     |                                      |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   | Retained |   | Accumulated |   |   |   |   |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   | Additional |   | Earnings, |   | Other |   | Treasury |   | Total |   |
|                                                                                                                          | Preferred Stock                           |   | Common Stock |   |   |   | Paid-in |   | Substantially |   | Comprehensive |   | Stock |   | Shareholders' |   |
|                                                                                                                          | Shares                                    |   | Amount |   | Shares |   | Amount |   | Warrants |   | Capital |   | Restricted |   | Income (loss) |   | at Cost |   | Equity |   |
|                                                                                                                          | (Dollars in Thousands, Except Share Data) |   |
| BALANCE AT DECEMBER 31, 2008                                                                                                  |                                      | -- |   | $ | -- |   |   | 1,787,092 |   | $ | 20 |   | $ | -- |   | $ | 12,903 |   | $ | 18,997 |   | $ | (1,696 | ) | $ | (6,300 | ) | $ | 23,924 |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                      |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (2,897 | )  |   |   |   |   |   |   |   | (2,897 | ) |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss, net of tax on unrealized holding losses on securities available for sale arising during period      |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,774 |   |   |   |   |   | 1,774 |   |
| Less reclassification adjustment for gains and other than temporary investment charge in net loss                             |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (667 | ) |   |   |   |   | (667 | ) |
| Comprehensive loss                                                                                                            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,790 | ) |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend  reinvestment plan contributions                                                                           |                                      |   |   |   |   |   |   | 3,507 |   |   |   |   |   |   |   |   | 16 |   |   |   |   |   |   |   |   |   |   |   | 16 |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of preferred stock                                                                                                   |                                      | 9,266 |   |   | 9,240 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 9,240 |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of common stock warrants                                                                                             |                                      |   |   |   |   |   |   |   |   |   |   |   |   | 25 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 25 |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of Preferred Stock to redemption value                                                                              |                                      |   |   |   | 4 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (4 | )  |   |   |   |   |   |   |   | -- |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred stock dividend                                                                                                      |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (195 | )  |   |   |   |   |   |   |   | (195 | ) |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividend ($.06 per share)                                                                                                |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (107 | )  |   |   |   |   |   |   |   | (107 | ) |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT SEPTEMBER 30, 2009                                                                                                 |                                      | 9,266 |   | $ | 9,244 |   |   | 1,790,599 |   | $ | 20 |   | $ | 25 |   | $ | 12,919 |   | $ | 15,794 |   | $ | (589 | ) | $ | (6,300 | ) | $ | 31,113 |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT DECEMBER 31, 2009                                                                                                  |                                      | 9,266 |   | $ | 9,245 |   |   | 1,790,599 |   | $ | 20 |   | $ | 25 |   | $ | 12,919 |   | $ | 11,184 |   | $ | (972 | ) | $ | (6,300 | ) | $ | 26,121 |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                      |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,542 | )  |   |   |   |   |   |   |   | (3,542 | ) |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss, net of tax on unrealized holding losses on securities available for sale arising during period |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (657 | ) |   |   |   |   | (657 | ) |
| Less reclassification adjustment for gains and other than temporary investment charge in net income                           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 432 |   |   |   |   |   | 432 |   |
| Comprehensive loss                                                                                                            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,767 | ) |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of Preferred Stock to redemption value                                                                              |                                      |   |   |   | 4 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (4 | ) |   |   |   |   |   |   |   | -- |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred stock dividend                                                                                                      |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (232 | ) |   |   |   |   |   |   |   | (232 | ) |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT SEPTEMBER 30, 2010                                                                                                 |                                      | 9,266 |   | $ | 9,249 |   |   | 1,790,599 |   | $ | 20 |   | $ | 25 |   | $ | 12,919 |   | $ | 7,406 |   | $ | (1,197 | ) | $ | (6,300 | ) | $ | 22,122 |   |
|                                                                                                                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See notes to consolidated financial statements                                                                                |                                      |

----

NOTES 

----

----

|                                                 |   | Amount Outstanding at September 30, |       |   |   |   |       |   |   |                        |   |
|------------------------------------------------------|--------|-------------------------------------|------------|--------|--------|--------|------------|--------|--------|-----------------------------|--------|
| Name                                                 |   | 2010                                |       |   | 2009   |   |       | Rate   |   |  PrepaymentOption Date |   |   Maturity |   | DistributionPaymentFrequency |
|                                                 |   |                                |       |   |   |   |       |   |   |                        |   |   |   |   |
| Provident Community Bancshares Capital Trust I  |   | $                                   | 4,000,000  |   |   | $      | 4,000,000  |   |   |                        | 7.39%  |   |  October 1, 2011 |   |  October 1, 2036 |   |  Quarterly |
| Provident Community Bancshares 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 |   |   |                        |   |   |   |   |   |   |   |

----

| Loan Commitments:                                     |   | Contract Amount |       |
|-------------------------------------------------------|--------|-----------------|------------|
|                                                  |   |            |       |
| Approved loan commitments                             |   | $               | 680,000    |   |
| Commitments to fund commercial and construction loans |   |            | 151,000    |   |
| Unused portions of loans and credit lines        |   |            | 33,283,000 |   |
| Total loan commitments                                |   | $               | 34,114,000 |   |

| 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 Active |   |     | Significant Other |   |   | Significant  |   |
|----------------------------------------|--------|---------------|--------------|--------|-------------------------|--------|----------|-------------------|--------|--------|--------------|--------|
|                                   |   |          |         |   | Markets for             |   |     | Observable        |   |   | Unobservable |   |
|                                   |   | September 30, |         |   | Identical Assets        |   |     | Inputs            |   |   | Inputs       |   |
|                                   |   | 2010          |         |   | (Level 1)               |   |     | (Level 2)         |   |   | (Level 3)    |   |
| Investment securities:                 |   |          |         |   |                    |   |     |              |   |   |         |   |
| U.S. Agency obligations                |   | $             | 2            |   |                    | $      | 2        |              |   | $      | --           |   |   | $ | -- |   |
| Government Sponsored Enterprises       |   |          | 62,837       |   |                    |   | 62,837   |              |   |   | --           |   |   |   | -- |   |
| Trust Preferred securities             |   |          | 4,883        |   |                    |   |  -- |              |   |   | 2,685        |   |   |   | 2,198 |   |
| Total investment securities            |   |          | 67,722       |   |                    |   | 62,839   |              |   |   | 2,685        |   |   |   | 2,198 |   |
| Mortgage-backed and related securities |   |          |  67,423 |   |                    |   |  -- |              |   |   | 67,423       |   |   |   |  -- |   |
| Total                                  |   | $             | 135,145      |   |                    | $      | 62,839   |              |   | $      | 70,108       |   |   | $ | 2,198 |   |

|                                        |   |         |    |   | Quoted Prices in Active |   |     | Significant Other |   |   | Significant  |   |
|---------------------------------------------|--------|--------------|---------|--------|-------------------------|--------|----------|-------------------|--------|--------|--------------|--------|
|                                        |   |         |    |   | Markets for             |   |     | Observable        |   |   | Unobservable |   |
|                                        |   | December 31, |    |   | Identical Assets        |   |     | Inputs            |   |   | Inputs       |   |
|                                        |   | 2009         |    |   | (Level 1)               |   |     | (Level 2)         |   |   | (Level 3)    |   |
| Investment securities:                      |   |         |    |   |                    |   |     |              |   |   |         |   |
| U.S. Agency obligations                |   | $            | 4       |   |                    | $      | 4        |              |   | $      | --           |   |   | $ | -- |   |
| Government Sponsored Enterprises            |   |         | 78,471  |   |                    |   | 78,471   |              |   |   | --           |   |   |   | -- |   |
| Municipal securities                        |   |         | 6,042   |   |                    |   | --       |              |   |   | 6,042        |   |   |   | -- |   |
| Trust Preferred securities                  |   |         | 5,912   |   |                    |   |  -- |              |   |   | 2,802        |   |   |   | 3,110 |   |
| Total investment securities                 |   |         | 90,429  |   |                    |   | 78,475   |              |   |   | 8,844        |   |   |   | 3,110 |   |
| Mortgage-backed and related securities |   |         | 57,387  |   |                    |   |  -- |              |   |   | 57,387       |   |   |   |  -- |   |
| Total                                       |   | $            | 147,816 |   |                    | $      | 78,475   |              |   | $      | 66,231       |   |   | $ | 3,110 |   |

|                                             |   | Fair Value Measurements Using Significant |       |
|--------------------------------------------------|--------|-------------------------------------------|------------|
|                                             |   | Unobservable Inputs (Level 3)             |       |
|                                             |   | Investment Securities                     |       |
|                                             |   | Available-for-Sale                        |       |
|                                             |   |                                      |       |
| Beginning balance at December 31, 2009      |   | $                                         | 3,110,000  |   |
| Transfers into Level 3                           |   |                                      | --         |   |
| Total gains/ (losses) included in:               |   |                                      |       |   |
| Net loss                                         |   |                                      | (1,127,000 | ) |
| Other comprehensive income                       |   |                                      | 215,000    |   |
| Purchases, sales, issuances and settlements, net |   |                                      | --         |   |
| Ending balance at September 30, 2010             |   | $                                         | 2,198,000  |   |

----

|                       |   | Total  |            |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3)       |   |
|----------------------------|--------|--------|-----------------|--------|-----------|--------|--------|-----------|--------|--------|-----------------|--------|
| Impaired loans             |   | $      | 23,294,000      |   |      | $      | --     |      |   | $      | 23,294,000      |   |   | $ | -- |   |
| Other real estate owned    |   |   |  9,855,000 |   |      |   | --     |      |   |   |  9,855,000 |   |   |   | -- |   |
| Total assets at fair value |   | $      | 33,149,000      |   |      | $      | --     |      |   | $      | 33,149,000      |   |   | $ | -- |   |

|                       |   | Total  |            |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3)       |   |
|----------------------------|--------|--------|-----------------|--------|-----------|--------|--------|-----------|--------|--------|-----------------|--------|
| Impaired loans             |   | $      | 20,869,000      |   |      | $      | --     |      |   | $      | 20,869,000      |   |   | $ | -- |   |
| Other real estate owned    |   |   |  5,917,000 |   |      |   | --     |      |   |   |  5,917,000 |   |   |   | -- |   |
| Total assets at fair value |   | $      | 26,786,000      |   |      | $      | --     |      |   | $      | 26,786,000      |   |   | $ | -- |   |

----

|                                                             |   | September 30, 2010   |    |
|------------------------------------------------------------------|--------|----------------------|---------|
|                                                             |   | Carrying Amount      |    |   | FairValue |   |
| Financial assets                                                 |   |                 |    |   |   |   |
| Cash and cash equivalents                                        |   | $                    | 39,217  |   |   | $ | 39,217 |   |
| Securities available for sale                                    |   |                 | 135,145 |   |   |   | 135,145 |   |
| Federal Home Loan Bank stock, at cost                            |   |                 | 3,664   |   |   |   | 3,664 |   |
| Federal Reserve Bank stock, at cost                              |   |                 | 832     |   |   |   | 832 |   |
| Loans, net                                                       |   |                 | 213,761 |   |   |   | 215,150 |   |
| Accrued interest receivable                                      |   |                 | 1,508   |   |   |   | 1,508 |   |
| Cash surrender value of life insurance                           |   |                 | 8,768   |   |   |   | 8,768 |   |
|                                                             |   |                 |    |   |   |   |   |   |
| Financial liabilities                                            |   |                 |    |   |   |   |   |   |
| Deposits                                                         |   | $                    | 317,898 |   |   | $ | 310,078 |   |
| Advances from FHLB                                               |   |                 | 59,500  |   |   |   | 62,256 |   |
| Securities sold under agreements to repurchase                   |   |                 | 12,601  |   |   |   | 12,601 |   |
| Floating rate junior subordinated deferrable interest debentures |   |                 | 12,372  |   |   |   | 11,826 |   |
| Accrued interest payable                                         |   |                 | 544     |   |   |   | 544 |   |
|                                                             |   |                 |    |   |   |   |   |   |
| Off-balance-sheet assets (liabilities)                           |   | Notional Amount |    |   | Fair Value |   |
| Commitments to extend credit                                     |   | $                    | 34,114  |   |   | $ | 0 |   |

----

|                                                             |   | December 31, 2009    |    |
|------------------------------------------------------------------|--------|----------------------|---------|
|                                                             |   | Carrying Amount      |    |   | Fair Value |   |
| Financial assets                                                 |   |                 |    |   |   |   |
| Cash and cash equivalents                                        |   | $                    | 15,631  |   |   | $ | 15,631 |   |
| Securities available for sale                                    |   |                 | 147,816 |   |   |   | 147,816 |   |
| Securities held to maturity                                      |   |                 | 3,934   |   |   |   | 3,976 |   |
| Federal Home Loan Bank stock, at cost                            |   |                 | 3,947   |   |   |   | 3,947 |   |
| Federal Reserve Bank stock, at cost                              |   |                 | 832     |   |   |   | 832 |   |
| Loans, net                                                       |   |                 | 250,420 |   |   |   | 250,455 |   |
| Accrued interest receivable                                      |   |                 | 2,238   |   |   |   | 2,238 |   |
| Cash surrender value of life insurance                           |   |                 | 9,332   |   |   |   | 9,332 |   |
|                                                             |   |                 |    |   |   |   |   |   |
| Financial liabilities                                            |   |                 |    |   |   |   |   |   |
| Deposits                                                         |   | $                    | 332,762 |   |   | $ | 323,113 |   |
| Advances from FHLB                                               |   |                 | 64,500  |   |   |   | 67,457 |   |
| Securities sold under agreements to repurchase                   |   |                 | 18,520  |   |   |   | 18,544 |   |
| Floating rate junior subordinated deferrable interest debentures |   |                 | 12,372  |   |   |   | 10,758 |   |
| Accrued interest payable                                         |   |                 | 581     |   |   |   | 581 |   |
|                                                             |   |                 |    |   |   |   |   |   |
| Off-balance-sheet assets (liabilities)                           |   | Notional Amount |    |   | Fair Value |   |
| Commitments to extend credit                                     |   | $                    | 40,131  |   |   | $ | 0 |   |

----

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

----

----

|                 |   | September 30, 2010  |   |   | December 31, 2009 |   |
|----------------------|--------|---------------------|--------|--------|-------------------|--------|
|                 |   | Amortized Cost |   |   | Fair Value   |   |   | Amortized Cost |   |   | FairValue |   |
|                 |   |                |   |   |              |   |   |   |   |   |   |   |
| Municipal Securities |   | $                   | --     |   |              | $      | -- |   |   | $ | 3,934 |   |   | $ | 3,976 |   |

----

|                    |   | September 30, 2010  |   |   | December 31, 2009 |   |
|-------------------------|--------|---------------------|--------|--------|-------------------|--------|
|                    |   | Amortized Cost |   |   | Fair Value   |   |   | Amortized Cost |   |   | FairValue |   |
| Investment Securities:  |   |                |   |   |              |   |   |   |   |   |   |   |
| U.S. Agency Obligations |   | $                   | 2      |   |              | $      |  2 |   |   | $ | 4 |   |   | $ | 4 |   |

| Government Sponsored Enterprises    |   |   |  62,701 |   |   |   | 62,837       |   |   |   | 79,162      |   |   |   | 78,471      |   |
|-------------------------------------|--------|--------|--------------|--------|--------|--------|--------------|--------|--------|--------|-------------|--------|--------|--------|-------------|--------|
| Municipal Securities                |   |   |  --     |   |   |   | --           |   |   |   | 5,781       |   |   |   | 6,042       |   |
| Trust Preferred Securities          |   |   | 7,491        |   |   |   |   4,883 |   |   |   |  8,570 |   |   |   |  5,912 |   |
| Total Investment Securities         |   |   | 70,194       |   |   |   | 67,722       |   |   |   | 93,517      |   |   |   | 90,429      |   |
| Mortgage-backed Securities:         |   |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Fannie Mae                          |   |   |  6,506  |   |   |   | 6,727        |   |   |   | 35,561      |   |   |   | 36,723      |   |
| Ginnie Mae                          |   |   | 48,039       |   |   |   | 48,420       |   |   |   | 16,569      |   |   |   | 17,030      |   |
| Freddie Mac                         |   |   |  11,708 |   |   |   | 11,757       |   |   |   | 3,068       |   |   |   | 3,154       |   |
| Collateralized Mortgage Obligations |   |   |  540    |   |   |   |  519    |   |   |   |  597   |   |   |   |  480   |   |
| Total Mortgage-backed Securities    |   |   | 66,793       |   |   |   | 67,423       |   |   |   | 55,795      |   |   |   | 57,387      |   |
| Total Available for Sale            |   | $      | 136,987      |   |   | $      | 135,145      |   |   | $      | 149,312     |   |   | $      | 147,816     |   |

|                                   |   | September 30, 2010 |         |   | December 31, 2009   |   |
|----------------------------------------|--------|--------------------|--------------|--------|---------------------|--------|
|                                   |   | FairValue          |         |   | Percent ofPortfolio |   |   | FairValue |   |   | Percent ofPortfolio |   |
| Available for sale:                    |   |               |         |   |                |   |   |   |   |   |   |   |
| Investment securities:                 |   |               |         |   |                |   |   |   |   |   |   |   |
| U.S. Agency obligations                |   | $                  | 2            |   |                |   | 0.01 | % |   | $ | 4 |   |   |   | 0.01 | % |
| Government Sponsored Enterprises       |   |               | 62,837       |   |                |   | 46.49 |   |   |   | 78,471 |   |   |   | 53.08 |   |
| Municipal securities                   |   |               | --           |   |                |   | -- |   |   |   | 6,042 |   |   |   | 4.09 |   |
| Trust Preferred securities             |   |               |  4,883  |   |                |   |  3.61 |   |   |   | 5,912 |   |   |   | 4.00 |   |
| Total investment securities            |   |               |  67,722 |   |                |   | 50.11 |   |   |   | 90,429 |   |   |   | 61.18 |   |
| Mortgage-backed and related securities |   |               |  67,423 |   |                |   |  49.89 |   |   |   | 57,387 |   |   |   | 38.82 |   |
| Total                                  |   | $                  | 135,145      |   |                |   | 100.00 | % |   | $ | 147,816 |   |   |   | 100.00 | % |
|                                   |   |               |         |   |                |   |
|                                   |   | September 30, 2010 |         |   | December 31, 2009   |   |
|                                   |   | CarryingValue      |         |   | Percent ofPortfolio |   |   | CarryingValue |   |   | Percent ofPortfolio |   |
| Held to maturity:                      |   |               |         |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Municipal securities                   |   | $                  | --           |   |                |   | -- | % |   | $ | 3,934 |   |   |   | 100.00 | % |

----

|                                |   | As of September 30, 2010 |    |
|-------------------------------------|--------|--------------------------|---------|
|                                |   | AmortizedCost            |    |   | Gross Unrealized |   |   | Fair Value |   |
|                                | Gains  |                     |    | Losses |   |
| Investment Securities:              |   |                     |    |   |   |   |   |   |   |   |   |   |
| U.S. Agency Obligations             |   | $                        | 2       |   |   | $ | – |   |   | $ | -- |   |   | $ | 2 |   |
| Government Sponsored Enterprises    |   |                     | 62,701  |   |   |   | 190 |   |   |   | (54 | ) |   |   | 62,837 |   |
| Trust Preferred Securities          |   |                     | 7,491   |   |   |   | – |   |   |   | (2,608 | ) |   |   | 4,883 |   |
| Total Investment Securities         |   |                     | 70,194  |   |   |   | 190 |   |   |   | (2,662 | ) |   |   | 67,722 |   |
| Mortgage-backed Securities:         |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                          |   |                     | 6,506   |   |   |   | 221 |   |   |   | – |   |   |   | 6,727 |   |
| Ginnie Mae                          |   |                     | 48,039  |   |   |   | 381 |   |   |   | – |   |   |   | 48,420 |   |
| Freddie Mac                         |   |                     | 11,708  |   |   |   | 59 |   |   |   | (10 | ) |   |   | 11,757 |   |
| Collateralized Mortgage Obligations |   |                     | 540     |   |   |   | – |   |   |   | (21 | ) |   |   | 519 |   |
| Total Mortgage-backed Securities    |   |                     | 66,793  |   |   |   | 661 |   |   |   | (31 | ) |   |   | 67,423 |   |
| Total available for sale            |   | $                        | 136,987 |   |   | $ | 851 |   |   | $ | (2,693 | ) |   | $ | 135,145 |   |

|                 |   | As of December 31, 2009 |   |
|----------------------|--------|-------------------------|--------|
|                 |   | AmortizedCost           |   |   | Gross Unrealized |   |   | Fair Value |   |
|                 | Gains  |                    |   | Losses |   |
|                 |   |                    |   |   |   |   |   |   |   |   |   |   |
| Municipal Securities |   | $                       | 3,934  |   |   | $ | 52 |   |   | $ | (10 | ) |   | $ | 3,976 |   |

----

|                                     |   | As of December 31, 2009 |            |
|------------------------------------------|--------|-------------------------|-----------------|
|                                     |   | AmortizedCost           |            |   | Gross Unrealized |   |   | Fair Value |   |
|                                     | Gains  |                    |            | Losses |   |
| Investment Securities:                   |   |                    |            |   |   |   |   |   |   |   |   |   |
| U.S. Agency Obligations                  |   | $                       | 4               |   |   | $ | -- |   |   | $ | -- |   |   | $ | 4 |   |
| Government Sponsored Enterprises    |   |                    |  79,162    |   |   |   |  217 |   |   |   |  (908 | ) |   |   |  78,471 |   |
| Municipal Securities                     |   |                    | 5,781           |   |   |   | 261 |   |   |   | -- |   |   |   | 6,042 |   |
| Trust Preferred Securities               |   |                    |  8,570     |   |   |   |  -- |   |   |   | (2,658 | ) |   |   |  5,912 |   |
| Total Investment Securities              |   |                    | 93,517          |   |   |   |  478 |   |   |   | (3,566 | ) |   |   | 90,429 |   |
| Mortgage-backed Securities:              |   |                    |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                               |   |                    |  35,561    |   |   |   |  1,162 |   |   |   |  -- |   |   |   |  36,723 |   |
| Ginnie Mae                               |   |                    | 16,569          |   |   |   | 461 |   |   |   | -- |   |   |   | 17,030 |   |
| Freddie Mac                              |   |                    | 3,068           |   |   |   | 86 |   |   |   | -- |   |   |   | 3,154 |   |
| Collateralized Mortgage Obligations |   |                    |   597 |   |   |   |   -- |   |   |   |   (117 | ) |   |   |   480 |   |
| Total Mortgage-backed Securities         |   |                    |  55,795    |   |   |   |  1,709 |   |   |   |  (117 | ) |   |   |  57,387 |   |
| Total available for sale                 |   | $                       | 149,312         |   |   | $ | 2,187 |   |   | $ | (3,683 | ) |   | $ | 147,816 |   |

|                                                                                                                                                                                                                                                                                                                                            |   | Held to Maturity |     |   | Available for Sale |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|----------|--------|--------------------|--------|
|                                                                                                                                                                                                                                                                                                                                            |   | AmortizedCost    |     |   | FairValue          |   |   | Amortized Cost |   |   | FairValue |   |
|                                                                                                                                                                                                                                                                                                                                            |   |             |     |   |               |   |   |   |   |   |   |   |
| Due in one year or less                                                     |   | $                | --       |   |               | $      | -- |   |   | $ | 4 |   |   | $ | 4 |   |
| Due after one year through five years                                                                                                                                                                                                                                                                                                           |   |             | --       |   |               |   | -- |   |   |   | 46 |   |   |   | 48 |   |
| Due after five years through ten years                                                                                                                                                                                                                                                                                                          |   |             | --       |   |               |   | -- |   |   |   | 49,147 |   |   |   | 49,221 |   |
| Due after ten years                                                         |   |             |  -- |   |               |   |  -- |   |   |   | 87,790 |   |   |   | 85,872 |   |
| Total investment and mortgage-backed securities                                                                                                                                                                                                                                                                                                 |   | $                | --       |   |               | $      | -- |   |   | $ | 136,987 |   |   | $ | 135,145 |   |

|                               |   |   | Less than 12 Months |   |   |   | 12 Months or More      |   |   |   | Total                     |   |
|------------------------------------|--------|--------|---------------------|--------|--------|--------|------------------------|--------|--------|--------|---------------------------|--------|
|                               |   |   | Fair Value          |   |   |   | Unrealized Losses |   |   |   | Fair Value                |   |   |   | Unrealized Losses |   |   |   | Fair Value |   |   |   | Unrealized Losses |   |
| Securities Available for Sale |   |   |                |   |   |   |                   |   |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |   |                |   |   |   |                   |   |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Agency Obligations       |   | $      | –             |   |   | $      | –                |   |   | $      | –                   |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |
| Government Sponsored Enterprises   |   |   |   10,946       |   |   |   |   54              |   |   |   |    – |   |   |   |    – |   |   |   |   10,946 |   |   |   |   54 |   |
| Trust Preferred Securities         |   |   | –             |   |   |   | –                |   |   |   | 4,883                     |   |   |   | 2,608 |   |   |   | 4,883 |   |   |   | 2,608 |   |
| Mortgage-backed Securities         |   |   |    1,028  |   |   |   |    10        |   |   |   |    552          |   |   |   |     21 |   |   |   |    1,580 |   |   |   |   31 |   |
| Total                              |   | $      | 11,974              |   |   | $      | 64                     |   |   | $      | 5,435                     |   |   | $ | 2,629 |   |   | $ | 17,409 |   |   | $ | 2,693 |   |

----

|                 |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total      |   |
|----------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                 |   | Fair Value          |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
| Held to Maturity     |   |                |   |   |              |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Municipal Securities |   | $                   | 494    |   |              | $      | 9      |       |   | $ | 833 |   |   | $ | 1 |   |   | $ | 1,326 |   |   | $ | 10 |   |
| Total                |   | $                   | 494    |   |              | $      | 9      |       |   | $ | 833 |   |   | $ | 1 |   |   | $ | 1,326 |   |   | $ | 10 |   |

|                               |   | Less than 12 Months |            |   | 12 Months or More      |   |                 | Total      |   |
|------------------------------------|--------|---------------------|-----------------|--------|------------------------|--------|----------------------|------------|--------|
|                               |   | Fair Value          |            |   | Unrealized Losses |   |                 | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
| Securities Available for Sale |   |                |            |   |                   |   |                 |       |   |   |   |   |   |   |   |   |   |   |
|                               |   |                |            |   |                   |   |                 |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Agency Obligations       |   | $                   | –         |   |                   | $      | –              |       |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |
| Government Sponsored Enterprises   |   |                | 41,040          |   |                   |   | 908                  |       |   |   |  – |   |   |   |  – |   |   |   | 41,040 |   |   |   | 908 |   |
| Municipal Securities               |   |                | –         |   |                   |   | –              |       |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Trust Preferred Securities         |   |                | –         |   |                   |   | –              |       |   |   | 5,912 |   |   |   | 2,658 |   |   |   | 5,912 |   |   |   | 2,658 |   |
| Mortgage-backed Securities    |   |                |    -- |   |                   |   |    -- |       |   |   |    532 |   |   |   |     117 |   |   |   |    532 |   |   |   |    117 |   |
| Total                              |   | $                   | 41,040          |   |                   | $      | 908                  |       |   | $ | 6,444 |   |   | $ | 2,775 |   |   | $ | 47,484 |   |   | $ | 3,683 |   |

----

|                                              |   | September 30,  |          |   | December 31, |   |
|---------------------------------------------------|--------|---------------------|---------------|--------|--------------|--------|
|                                              |   | 2010                |          |   | 2009         |   |
| Mortgage loans:                                   |   |                |          |   |         |   |
| Fixed-rate residential                            |   | $                   | 9,736         |   |         | $      | 10,675 |   |
| Adjustable-rate residential                       |   |                | 5,409         |   |         |   | 6,202 |   |
| Commercial real estate                            |   |                | 105,361       |   |         |   | 110,901 |   |
| Construction                                      |   |                |  856     |   |         |   |  2,923 |   |
| Total mortgage loans                              |   |                |  121,362 |   |         |   |  130,701 |   |
| Commercial loans:                                 |   |                |          |   |         |   |   |   |
| Commercial non-real estate                        |   |                | 25,952        |   |         |   | 34,429 |   |
| Commercial lines of credit                        |   |                |  25,772  |   |         |   |  39,096 |   |
| Total commercial loans                            |   |                | 51,724        |   |         |   | 73,525 |   |
| Consumer loans:                                   |   |                |          |   |         |   |   |   |
| Home equity                                       |   |                | 16,619        |   |         |   | 17,395 |   |
| Consumer and installment                          |   |                | 29,865        |   |         |   | 34,578 |   |
| Consumer lines of credit                          |   |                |  296     |   |         |   |  314 |   |
| Total consumer loans                              |   |                |  46,780  |   |         |   |  52,287 |   |
| Total loans                                       |   |                | 219,866       |   |         |   | 256,513 |   |
| Less:                                             |   |                |          |   |         |   |   |   |
| Undisbursed portion of interim construction loans |   |                | (151          | )      |         |   | (320 | ) |
| Unamortized loan discount                         |   |                | (277          | )      |         |   | (309 | ) |
| Allowance for loan losses                         |   |                | (5,834        | )      |         |   | (5,579 | ) |
| Net deferred loan origination costs               |   |                |  156     |   |         |   |  115 |   |
| Total, net                                        |   | $                   | 213,761       |   |         | $      | 250,420 |   |
|                                              |   |                |          |   |         |   |   |   |
| Weighted-average interest rate of loans           |   |                | 4.99          | %      |         |   | 4.87 | % |

----

|                                                                      |   | September 30, 2010 |   |   | December 31, 2009 |   |
|---------------------------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                                                      |   |               |   |   |              |   |
| Non-accruing loans which are contractually past due 90 days or more: |   |               |   |   |              |   |
|                                                                      |   |               |   |   |              |   |
| Residential real estate                                                   |   | $                  | 1,122  |   |              | $      | 649 |   |
| Commercial                                                           |   |               | 22,040 |   |              |   | 19,045 |   |
| Consumer                                                                  |   |               | 768    |   |              |   | 1,175 |   |
| Total nonperforming loans                                                 |   |               | 23,930 |   |              |   | 20,869 |   |
|                                                                      |   |               |   |   |              |   |   |   |
| Real estate acquired through foreclosure and repossessed assets           |   |               | 9,855  |   |              |   | 5,917 |   |
| Total nonperforming assets                                                |   | $                  | 33,785 |   |              | $      | 26,786 |   |
|                                                                      |   |               |   |   |              |   |   |   |
| Troubled debt restructurings                                              |   | $                  | 2,902  |   |              | $      | 3,320 |   |
|                                                                      |   |               |   |   |              |   |   |   |
| Nonperforming loans to total loans                                        |   |               | 10.88  | %      |              |   | 8.13 | % |
| Nonperforming assets to total assets                                      |   |               | 7.88   | %      |              |   | 5.86 | % |
| Allowance for loan losses to total loans outstanding                      |   |               | 2.66   | %      |              |   | 2.18 | % |
| Allowance for loan losses to nonperforming loans      |   |               | 24.37  | %      |              |   | 26.73 | % |
| Allowance for loan losses                                                 |   | $                  | 5,834  |   |              | $      | 5,579 |   |

----

|                                 |   | September 30,  |       |   | December 31, |   |
|--------------------------------------|--------|---------------------|------------|--------|--------------|--------|
|                                 |   | 2010                |       |   | 2009         |   |
|                                 |   |                |       |   |         |   |
| Balance at beginning of period       |   | $                   | 5,917      |   |         | $      | 667 |   |
| Foreclosures added during the period |   |                | 6,091      |   |         |   | 5,959 |   |
| Sales of foreclosed property         |   |                | (1,950     | )      |         |   | (69 | ) |
| Provision charged as a write-down    |   |                |  (203 | )      |         |   |  (640 | ) |
| Balance at the end of period         |   | $                   | 9,855      |   |         | $      | 5,917 |   |

----

|                              | September 30, 2010 |   |   | December 31, 2009 |   |
|-----------------------------------|--------------------|--------|--------|-------------------|--------|
|                              | Rate               |   |   | Balance           |   | % |   |   | Rate |   |   | Balance |   | % |   |
| Account Type                      |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| NOW accounts:                     |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Commercial non-interest-bearing   |               | --     |   |              | $      | 17,761 |   |   | 5.58% |   |   |   | -- |   |   | $ | 18,015 |   |   | 5.42% |   |
| Non-commercial                    |               | 1.60%  |   |              |   | 95,613 |   |   | 30.08% |   |   |   | 2.30% |   |   |   | 98,274 |   |   | 29.53% |   |
| Money market checking accounts    |               | 0.58%  |   |              |   | 23,608 |   |   | 7.43% |   |   |   | 1.57% |   |   |   | 32,239 |   |   | 9.69% |   |
| Regular savings                   |               | 0.81%  |   |              |   | 28,603 |   |   | 9.00% |   |   |   | 0.51% |   |   |   | 13,383 |   |   | 4.02% |   |
| Total demand and savings deposits |               | 1.15%  |   |              |   | 165,585 |   |   | 52.09% |   |   |   | 1.74% |   |   |   | 161,911 |   |   | 48.66% |   |
| Time deposits:                    |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              | Up to 2.00%        |   |   |              |   |   | 98,297 |   |   | 30.92% |   |   |   |   |   |   |   | 79,098 |   |   | 23.77% |   |
|                              | 2.01 %- 3.00%      |   |   |              |   |   | 49,937 |   |   | 15.71% |   |   |   |   |   |   |   | 55,966 |   |   | 16.82% |   |
|                              | 3.01 %- 4.00%      |   |   |              |   |   | 488 |   |   | 0.15% |   |   |   |   |   |   |   | 20,885 |   |   | 6.27% |   |
|                              | 4.01 %- 5.00%      |   |   |              |   |   | 2,994 |   |   | 0.94% |   |   |   |   |   |   |   | 13,744 |   |   | 4.13% |   |
|                              | 5.01 %- 6.00%      |   |   |              |   |   | 597 |   |   | 0.19% |   |   |   |   |   |   |   | 1,158 |   |   | 0.35% |   |
| Total time deposits               |               | 1.65%  |   |              |   | 152,313 |   |   | 47.91% |   |   |   | 2.27% |   |   |   | 170,851 |   |   | 51.34% |   |
| Total deposit accounts            |               | 1.39%  |   |              | $      | 317,898 |   |   | 100.00% |   |   |   | 2.02% |   |   | $ | 332,762 |   |   | 100.00% |   |

|                                               |   | September 30, 2010 |     |   | December 31, 2009 |   |
|----------------------------------------------------|--------|--------------------|----------|--------|-------------------|--------|
|                                               |   | Balance            |     |   | Wtd Avg Rate      |   |   | Balance |   |   | Wtd Avg Rate |   |
| Contractual Maturity:                              |   |               |     |   |              |   |   |   |   |   |   |   |
| Within one year - fixed rate                       |   | $                  | --       |   |              |   | -- |   |   | $ | 5,000 |   |   |   | 4.93% |   |
| After one but within three years - fixed rate      |   |               |  -- |   |              |   | -- |   |   |   |  -- |   |   |   | -- |   |
| After one but within three years - adjustable rate |   |               | 22,000   |   |              |   | 4.58% |   |   |   | 22,000 |   |   |   | 4.58% |   |
| Greater than five years - adjustable rate          |   |               | 37,500   |   |              |   | 3.89% |   |   |   | 37,500 |   |   |   | 3.89% |   |
| Total advances                                     |   | $                  | 59,500   |   |              |   | 4.15% |   |   | $ | 64,500 |   |   |   | 4.20% |   |

----

----

|                           |   | September 30, 2010 |   |   |               |   |
|--------------------------------|--------|--------------------|--------|--------|--------------------|--------|
|                           |   |               |   |   |               |   |   |   |   |
|                           |   | Actual             |   |   | Regulatory Minimum |   |   | “Well Capitalized” |   |
|                           |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   | Amount             |   |   | Ratio              |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                           |   | $                  |   |   | %                  |   |   | $ |   |   | % |   |   | $ |   |   | % |   |
| Leverage ratio                 |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                    |   |               | 24,611 |   |               |   | 5.75% |   |   |   | 17,131 |   |   |   | 4.00% |   |   |   | n/a |   |   |   | n/a |   |
| Bank                           |   |               | 28,739 |   |               |   | 6.71% |   |   |   | 17,121 |   |   |   | 4.00% |   |   |   | 21,401 |   |   |   | 5.00 |   |
|                           |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 capital ratio           |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                    |   |               | 24,611 |   |               |   | 9.37% |   |   |   | 10,507 |   |   |   | 4.00% |   |   |   | n/a |   |   |   | n/a |   |
| Bank                           |   |               | 28,739 |   |               |   | 10.95% |   |   |   | 10,495 |   |   |   | 4.00% |   |   |   | 15,743 |   |   |   | 6.00 |   |
|                           |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total risk-based capital ratio |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporation                    |   |               | 32,208 |   |               |   | 12.26% |   |   |   | 21,013 |   |   |   | 8.00% |   |   |   | n/a |   |   |   | n/a |   |
| Bank                           |   |               | 32,050 |   |               |   | 12.21% |   |   |   | 20,991 |   |   |   | 8.00% |   |   |   | 26,238 |   |   |   | 10.00 |   |

----

----

|                                                             |   | Three Months Ended September 30, |               |
|------------------------------------------------------------------|--------|----------------------------------|--------------------|
|                                                             |   | 2010                             |               |   | 2009 |   |
|                                                             |   | Average Balance             |               |   |  Interest |   |   |  Average Yield/Cost(2) |   |   | Average Balance |   |   |   Interest |   |   | Average Yield/Cost(2) |   |
| Interest-earning assets:                                         |   |                             |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                        |   | $                                | 225,656            |   |   | $ | 2,841 |   |   |   | 5.04% |   |   | $ | 269,458 |   |   | $ | 3,640 |   |   |   | 5.40% |   |
| Mortgage-backed securities                                       |   |                             | 30,734             |   |   |   | 345 |   |   |   | 4.49% |   |   |   | 78,434 |   |   |   | 897 |   |   |   | 4.57% |   |
| Investment securities                                            |   |                             | 116,483            |   |   |   | 922 |   |   |   | 3.17% |   |   |   | 66,755 |   |   |   | 789 |   |   |   | 4.73% |   |
| Other interest-earning assets                                    |   |                             |  23,785       |   |   |   |  25 |   |   |   | 0.42% |   |   |   |  15,190 |   |   |   |  26 |   |   |   | 0.70% |   |
| Total interest-earning assets                                    |   |                             | 396,658            |   |   |   | 4,134 |   |   |   | 4.17% |   |   |   | 429,837 |   |   |   | 5,352 |   |   |   | 4.98% |   |
| Non-interest-earning assets                                      |   |                             |  37,921       |   |   |   |   |   |   |   |   |   |   |   |  35,509 |   |   |   |   |   |   |   |   |   |
| Total assets                                                     |   | $                                | 434,579            |   |   |   |   |   |   |   |   |   |   | $ | 465,346 |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                    |   |                             |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                         |   |                             | 304,320            |   |   |   | 1,171 |   |   |   | 1.54% |   |   |   | 317,559 |   |   |   | 2,010 |   |   |   | 2.53% |   |
| Floating rate junior subordinated deferrable interest debentures |   |                             |   12,372      |   |   |   |   122 |   |   |   | 3.94% |   |   |   |   12,372 |   |   |   |   125 |   |   |   | 4.03% |   |
| FHLB advances and other borrowings                               |   |                             |  71,208       |   |   |   |   638 |   |   |   | 3.58% |   |   |   |  81,899 |   |   |   |   763 |   |   |   | 3.73% |   |
| Total interest-bearing liabilities                               |   |                             | 387,900            |   |   |   | 1,931 |   |   |   | 1.99% |   |   |   | 411,830 |   |   |   | 2,898 |   |   |   | 2.81% |   |
| Non-interest-bearing sources:                                    |   |                             |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing deposits                                    |   |                             |  18,110       |   |   |   |   |   |   |   |   |   |   |   |  18,275 |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing liabilities                                 |   |                             |  3,120        |   |   |   |   |   |   |   |   |   |   |   |  3,926 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                |   |                             | 409,130            |   |   |   |   |   |   |   |   |   |   |   | 434,031 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                       |   |                             |   25,449 |   |   |   |   |   |   |   |   |   |   |   |   31,315 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                 |   | $                                | 434,579            |   |   |   |   |   |   |   |   |   |   | $ | 465,346 |   |   |   |   |   |   |   |   |   |
| Net interest income                                              |   |                             |               |   |   | $ | 2,203 |   |   |   |   |   |   |   |   |   |   | $ | 2,454 |   |   |   |   |   |
| Interest rate spread                                             |   |                             |               |   |   |   |   |   |   |   | 2.18% |   |   |   |   |   |   |   |   |   |   |   | 2.17% |   |
| Impact of non-interest-bearing deposits                          |   |                             |               |   |   |   |   |   |   |   | 0.04 |   |   |   |   |   |   |   |   |   |   |   | 0.12 |   |
| Net interest margin                                              |   |                             |               |   |   |   |   |   |   |   | 2.22% |   |   |   |   |   |   |   |   |   |   |   | 2.28% |   |

----

----

----

|                                                             |   | Nine Months Ended September 30, |               |
|------------------------------------------------------------------|--------|---------------------------------|--------------------|
|                                                             |   | 2010                            |               |   | 2009 |   |
|                                                             |   | Average Balance            |               |   |  Interest |   |   | Average Yield/Cost(2) |   |   | Average Balance |   |   |  Interest |   |   | Average Yield/Cost(2) |   |
| Interest-earning assets:                                         |   |                            |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                        |   | $                               | 236,235            |   |   | $ | 8,836 |   |   |   | 4.99% |   |   | $ | 277,990 |   |   | $ | 10,881 |   |   |   | 5.22% |   |
| Mortgage-backed securities                                       |   |                            | 32,243             |   |   |   | 992 |   |   |   | 4.10% |   |   |   | 78,340 |   |   |   | 2,929 |   |   |   | 4.98% |   |
| Investment securities                                            |   |                            | 112,112            |   |   |   | 2,864 |   |   |   | 3.41% |   |   |   | 53,065 |   |   |   | 1,955 |   |   |   | 4.91% |   |
| Other interest-earning assets                                    |   |                            |  22,911       |   |   |   |  82 |   |   |   | 0.48% |   |   |   |  17,353 |   |   |   |  69 |   |   |   | 0.53% |   |
| Total interest-earning assets                                    |   |                            | 403,501            |   |   |   | 12,774 |   |   |   | 4.22% |   |   |   | 426,748 |   |   |   | 15,834 |   |   |   | 4.95% |   |
| Non-interest-earning assets                                      |   |                            |  37,926       |   |   |   |   |   |   |   |   |   |   |   |  32,237 |   |   |   |   |   |   |   |   |   |
| Total assets                                                     |   | $                               | 441,427            |   |   |   |   |   |   |   |   |   |   | $ | 458,985 |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                    |   |                            |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                         |   | $                               | 306,687            |   |   |   | 4,012 |   |   |   | 1.74% |   |   |   | 311,337 |   |   |   | 6,214 |   |   |   | 2.66% |   |
| Floating rate junior subordinated deferrable interest debentures |   |                            |   12,372      |   |   |   |   359 |   |   |   | 3.87% |   |   |   |   12,372 |   |   |   |   410 |   |   |   | 4.42% |   |
| FHLB advances and other borrowings                               |   |                            |  74,606       |   |   |   |  2,012 |   |   |   | 3.60% |   |   |   |  84,355 |   |   |   |  2,304 |   |   |   | 3.64% |   |
| Total interest-bearing liabilities                               |   |                            | 393,665            |   |   |   | 6,383 |   |   |   | 2.16% |   |   |   | 408,064 |   |   |   | 8,928 |   |   |   | 2.92% |   |
| Non-interest-bearing sources:                                    |   |                            |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing deposits                                    |   |                            |  18,637       |   |   |   |   |   |   |   |   |   |   |   |  18,690 |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing liabilities                                 |   |                            |  3,139        |   |   |   |   |   |   |   |   |   |   |   |  4,712 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                |   |                            | 415,441            |   |   |   |   |   |   |   |   |   |   |   | 431,466 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                       |   |                            |   25,986 |   |   |   |   |   |   |   |   |   |   |   |   27,519 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                 |   | $                               | 441,427            |   |   |   |   |   |   |   |   |   |   | $ | 458,985 |   |   |   |   |   |   |   |   |   |
| Net interest income                                              |   |                            |               |   |   | $ | 6,391 |   |   |   |   |   |   |   |   |   |   | $ | 6,906 |   |   |   |   |   |
| Interest rate spread                                             |   |                            |               |   |   |   |   |   |   |   | 2.06% |   |   |   |   |   |   |   |   |   |   |   | 2.03% |   |
| Impact of non-interest-bearing deposits                          |   |                            |               |   |   |   |   |   |   |   | 0.05 |   |   |   |   |   |   |   |   |   |   |   | 0.13 |   |
| Net interest margin                                              |   |                            |               |   |   |   |   |   |   |   | 2.11% |   |   |   |   |   |   |   |   |   |   |   | 2.16% |   |

----

|                           |   |   | September 30,2010 |   |   |   | September 30,2009 |   |
|--------------------------------|--------|--------|-------------------|--------|--------|--------|-------------------|--------|
|                           |   |   |              |   |   |   |              |   |
| Balance at beginning of period |   | $      | 5,579             |   |   | $      | 6,778             |   |
| Provision for loan losses      |   |   | 6,030             |   |   |   | 5,050             |   |
| Charge-offs, net               |   |   | (5,775            | )      |   |   | (2,765            | )      |
| Balance at end of period       |   | $      | 5,834             |   |   | $      | 9,063             |   |

----

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.  Reserved

Item 5.  Other Information

Item  6.   Exhibits

| 31(a)  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                               |
|--------|-------------------------------------------------------------------------------------------------|
|   |                                                                                            |
| 31(b)  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                               |
|   |                                                                                            |
| 32(a)  | Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|   |                                                                                            |
| 32(b)  | Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

----

SIGNATURES

| Date: November 10, 2010  | By:    | /s/ Dwight V. Neese       |   |
|-------------------------------|--------|--------------------------------|--------|
|                          |   | Dwight V. Neese, President and |   |
|                          |   | Chief Executive Officer        |   |
|                          |   |                           |   |

| Date: November 10, 2010 | By:    | /s/ Richard H. Flake         |   |
|-------------------------|--------|-----------------------------------|--------|
|                    |   | Richard H. Flake,                 |   |
|                    |   | Executive Vice President          |   |
|                    |   | and Chief Financial Officer  |   |