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

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

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

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| Item 1. | Description of Business |
|---------|-------------------------|

|   | Item 1A.Risk Factors |
|--------|----------------------|

| Item 2. | Properties |
|---------|------------|

| Item 3. | Legal Proceedings |
|---------|-------------------|

| Item 4. | Reserved |
|---------|----------|

| Item 5. | Market for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
|---------|-------------------------------------------------------------------------------------------------|

| Item 6. | Selected Financial Data |
|---------|-------------------------|

| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|---------|---------------------------------------------------------------------------------------------|

| Item 8. | Financial Statements |
|---------|----------------------|

|   | Reports of Independent Registered Public Accounting Firms on the Consolidated Financial Statements |
|--------|----------------------------------------------------------------------------------------------------|

|   | Consolidated Balance Sheets |
|--------|-----------------------------|

|   | Consolidated Statements of Operations |
|--------|---------------------------------------|

|   | Consolidated Statements of Changes of Shareholders’ Equity |
|--------|------------------------------------------------------------------|

|   | Consolidated Statements of Cash Flows |
|--------|---------------------------------------|

|   | Notes to Consolidated Financial Statements |
|--------|--------------------------------------------|

| Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure |
|---------|--------------------------------------------------------------------------------------|

| Item 9A. | Controls and Procedures |
|----------|-------------------------|

| Item 9B. | Other Information |
|----------|-------------------|

| Item 10. | Directors, Executive Officers, and Corporate Governance |
|----------|---------------------------------------------------------|

| Item 11. | Executive Compensation |
|----------|------------------------|

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
|----------|------------------------------------------------------------------------------------------------|

| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
|----------|---------------------------------------------------------------------------|

| Item 14. | Principal Accounting Fees and Services |
|----------|----------------------------------------|

| Item 15. | Exhibits |
|----------|----------|

|   | Signatures |
|--------|------------|

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|   | Item 1.  Description of Business |
|--------|--------------------------------------------|

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|   | · | The Dodd-Frank Act establishes a new Financial Stability Oversight Counsel to monitor systemic financial risks.  The Board of Governors of the Federal Reserve are given extensive new authorities to impose strict controls on large bank holding companies with total consolidated assets equal to or in excess of $50 billion and systemically significant non-bank financial companies to limit the risk they might pose for the economy and to other large interconnected companies.  The Dodd-Frank Act also grants to the Treasury Department, FDIC and the FRB broad new powers to seize, close and wind-down “too big to fail” financial institutions (including non-bank institutions) in an orderly fashion. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Dodd-Frank Act also establishes a new independent Federal regulatory body for consumer protection within the Federal Reserve System known as the Bureau of Consumer Financial Protection (the “Bureau”), which will assume responsibility for most consumer protection laws. It will also be in charge of setting appropriate consumer banking fees and caps.  The Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets.  Banks and savings institutions with $10 billion or less in assets, like the Bank, will continue to be examined by their applicable bank regulators. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Dodd-Frank Act restricts the amount of trust preferred securities (“TPS”) that may be considered Tier 1 Capital.  For depository institution holding companies below $15 billion in total assets, TPS issued before May 19, 2010 will be grandfathered, so their status as Tier 1 capital does not change. However going forward, TPS will be disallowed as Tier 1 capital. Since the Company had less than $15 billion in assets, under the Dodd-Frank Act, the Company will be able to continue to include its existing TPS in Tier 1 capital to the extent permitted by FRB guidelines. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Dodd-Frank Act effects changes in the FDIC assessment base with stricter oversight. A new council of regulators led by the U.S. Treasury will set higher requirements for the amount of cash banks must keep on hand. The minimum reserve ratio is to be increased from 1.15 percent to 1.35 percent; however, financial institutions with assets of less than $10 billion like the Bank are to be exempt from the cost of the increase. FDIC insurance coverage is made permanent at the $250,000 level retroactive to January 1, 2008 and unlimited FDIC insurance is provided for non-interest-bearing demand deposits, which coverage will continue until December 31, 2012. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Under the Dodd-Frank Act, the Comptroller of the Currency’s ability to preempt state consumer protection laws was made more difficult by raising the applicable preemption standards and state attorneys general are granted greater authority to enforce state consumer protection laws against national banks and their operating subsidiaries. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Dodd-Frank Act adopts the so-called “Volcker rule,” which, subject to certain exceptions, prohibits any banking entity from engaging in proprietary trading, or sponsoring or investing in a hedge fund or private equity fund. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Dividends on the Treasury Department’s preferred stock at a rate of five percent for the first five years and nine percent thereafter; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Common stock dividends cannot be increased for three years while the Treasury Department is an investor unless preferred stock is redeemed or consent from the Treasury is received; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Treasury Department must consent to any buyback of other stock (common or other preferred); |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | The Treasury Department’s preferred stock will have the right to elect two directors if dividends have not been paid for six periods; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Treasury Department receives warrants equal to 15 percent of the Treasury Department’s total investment in the participating institution (provided, however, that the Company was not required to issue any warrants due to its status as a Community Development Financial Institution); and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The participating institution’s executives must agree to certain compensation restrictions, and restrictions on the amount of executive compensation that is tax deductible. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | govern disclosures of credit terms to consumer borrowers; |
|--------|--------|-----------------------------------------------------------|

|   | · | require financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | prohibit discrimination on the basis of race, creed, or other prohibited factors in extending credit; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | govern the use and provision of information to credit reporting agencies; and |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | govern the manner in which consumer debts may be collected by collection agencies. |
|--------|--------|------------------------------------------------------------------------------------|

|   | The Bank’s deposit operations are also subject to laws and regulations that: |
|--------|------------------------------------------------------------------------------------|

|   | · | impose a duty to maintain the confidentiality of consumer financial records and prescribe procedures for complying with administrative subpoenas of financial records; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | the creation of an independent accounting oversight board; |
|--------|--------|------------------------------------------------------------|

|   | · | auditor independence provisions that restrict non-audit services that accountants may provide to their audit clients; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

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|   | · | additional corporate governance and responsibility measures, including the requirement that the chief executive officer and chief financial officer certify financial statements; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a requirement that companies establish and maintain a system of internal control over financial reporting and that a company’s management provide an annual report regarding its assessment of the effectiveness of such internal control over financial reporting to the company’s independent accountants; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a requirement that the company’s independent accountants provide an attestation report with respect to management’s assessment of the effectiveness of the company’s internal control over financial reporting (the recently enacted Dodd-Frank Act exempts smaller reporting companies like Mission Community Bancorp from this requirement); |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer’s securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an increase in the oversight of, and enhancement of certain requirements relating to audit committees of public companies and how they interact with the company’s independent auditors; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the requirement that audit committee members must be independent and are absolutely barred from accepting consulting, advisory or other compensatory fees from the issuer; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the requirement that companies disclose whether at least one member of the committee is a “financial expert” (as such term is defined by the SEC) and if not, why not; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | expanded disclosure requirements for corporate insiders, including accelerated reporting of stock transactions by insiders and a prohibition on insider trading during pension blackout periods; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a prohibition on personal loans to directors and officers, except certain loans made by insured financial institutions; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | · | disclosure of a code of ethics and the requirement of filing of a Form 8-K for a change or waiver of such code; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | mandatory disclosure by analysts of potential conflicts of interest; and |
|--------|--------|--------------------------------------------------------------------------|

|   | · | a range of enhanced penalties for fraud and other violations. |
|--------|--------|---------------------------------------------------------------|

|   | · | The agencies have observed that CRE concentrations have been rising over the past several years with small to mid-size institutions showing the most significant increase in CRE concentrations over the last decade.  However, some institutions’ risk management practices are not evolving with their increasing CRE concentrations, and therefore, the Guidance reminds institutions that strong risk management practices and appropriate levels of capital are important elements of a sound CRE lending program. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Guidance applies to national banks and state chartered banks and is also broadly applicable to bank holding companies.  For purposes of the Guidance, CRE loans include loans for land development and construction, other land loans and loans secured by multifamily and nonfarm nonresidential properties.  The definition also extends to loans to real estate investment trusts and unsecured loans to developers if their performance is closely linked to the performance of the general CRE market. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The agencies recognize that banks serve a vital role in their communities by supplying credit for business and real estate development.  Therefore, the Guidance is not intended to limit banks’ CRE lending.  Instead, the Guidance encourages institutions to identify and monitor credit concentrations, establish internal concentration limits, and report all concentrations to management and the board of directors on a periodic basis. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The agencies recognized that different types of CRE lending present different levels of risk, and therefore, institutions are encouraged to segment their CRE portfolios to acknowledge these distinctions.  However, the CRE portfolio should not be divided into multiple sections simply to avoid the appearance of risk concentration. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Institutions should address the following key elements in establishing a risk management framework for identifying, monitoring, and controlling CRE risk: (1) board of directors and management oversight; (2) portfolio management; (3) management information systems; (4) market analysis; (5) credit underwriting standards; (6) portfolio stress testing and sensitivity analysis; and (7) credit review function. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | As part of the ongoing supervisory monitoring processes, the agencies will use certain criteria to identify institutions that are potentially exposed to significant CRE concentration risk.  An institution that has experienced rapid growth in CRE lending, has notable exposure to a specific type of CRE, or is approaching or exceeds specified supervisory criteria may be identified for further supervisory analysis. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The revised statement emphasizes that the ALLL represents one of the most significant estimates in an institution’s financial statements and regulatory reports and that an assessment of the appropriateness of the ALLL is critical to an institution’s safety and soundness. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Each institution has a responsibility to develop, maintain, and document a comprehensive, systematic, and consistently applied process for determining the amounts of the ALLL.  An institution must maintain an ALLL that is sufficient to cover estimated credit losses on individual impaired loans as well as estimated credit losses inherent in the remainder of the portfolio. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The revised statement updated the previous guidance on the following issues regarding ALLL: (1) responsibilities of the board of directors, management, and bank examiners; (2) factors to be considered in the estimation of ALLL; and (3) objectives and elements of an effective loan review system. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to an amount equal to 10% of the bank’s capital and surplus, in the case of covered transactions with any one affiliate; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to an amount equal to 20% of the bank’s capital and surplus, in the case of covered transactions with all affiliates. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | a loan or extension of credit to an affiliate; |
|--------|--------|------------------------------------------------|

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|   | · | a purchase of, or an investment in, securities issued by an affiliate; |
|--------|--------|------------------------------------------------------------------------|

|   | · | a purchase of assets from an affiliate, with some exceptions; |
|--------|--------|---------------------------------------------------------------|

|   | · | the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | a bank and its subsidiaries may not purchase a low-quality asset from an affiliate; |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by collateral with a market value ranging from 100% to 130%, depending on the type of collateral, of the amount of the loan or extension of credit. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | a decrease in the demand for loans or other products and services we offer; |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | a decrease in the value of our loans or other assets secured by residential or commercial real estate; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | a decrease in deposit balances due to overall reductions in the accounts of customers; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | an impairment of our investment securities; and |
|--------|--------|-------------------------------------------------|

|   | · | an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us, which in turn could result in a higher level of nonperforming assets, net charge-offs and provision for loan and lease losses, which would reduce our earnings. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |   |
|--------|--------|

| Item 2. | Properties |
|---------|------------|

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| Item 5. | Market  for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
|---------|------------------------------------------------------------------------------------------------------------|

|   |        |   | Bid Prices |   |
|--------|-------------|--------|------------|--------|
|   |        |   | Low        |   |   | High |   |
| 2009   | 1st Quarter |   |  $    | 6.00   |   |   |  $ | 10.05 |   |
|   | 2nd Quarter |   |       | 7.30   |   |   |   | 9.00 |   |
|   | 3rd Quarter |   |       | 7.30   |   |   |   | 7.45 |   |
|   | 4th Quarter |   |       | 5.50   |   |   |   | 7.45 |   |
| 2010   | 1st Quarter |   |       | 3.60   |   |   |   | 5.05 |   |
|   | 2nd Quarter |   |       | 3.95   |   |   |   | 5.00 |   |
|   | 3rd Quarter |   |       | 3.00   |   |   |   | 5.00 |   |
|   | 4th Quarter |   |       | 3.00   |   |   |   | 4.45 |   |

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| Equity Compensation Plan Information                       |   |
|------------------------------------------------------------|--------|
|                                                       |   |   |   |   |   |   |   |   |   |
|                                                       |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights |   |   | Weighted average exercise price of outstanding options, warrants and rights |   |   | Number of additional securities available for future grant under the plan |   |
| Equity compensation plans approved by security holders     |   |   | 183,432 |   |   | $ | 10.39 |   |   |   | 60,408 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity compensation plans not approved by security holders |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                      |   |   | 183,432 |   |   | $ | 10.39 |   |   |   | 60,408 |   |

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|                                                  |   | Year Ended December 31, |      |
|-------------------------------------------------------|--------|-------------------------|-----------|
|                                                  |   |                    |      |   |   |   |   |   |   |
| In thousands, except share and per share data         |   | 2010                    |      |   | 2009 |   |   | 2008 |   |
| Interest income                                       |   | $                       | 8,882     |   |   | $ | 10,283 |   |   | $ | 11,073 |   |
| Interest expense                                      |   |                    | 1,991     |   |   |   | 3,877 |   |   |   | 4,830 |   |
| Net interest income                                   |   |                    | 6,891     |   |   |   | 6,406 |   |   |   | 6,243 |   |
| Provision for loan losses                             |   |                    | 5,800     |   |   |   | 5,056 |   |   |   | 4,245 |   |
| Non-interest income                                   |   |                    | 1,711     |   |   |   | 833 |   |   |   | 346 |   |
| Non-interest expense                                  |   |                    | 9,486     |   |   |   | 8,275 |   |   |   | 7,121 |   |
| Loss before income taxes                              |   |                    | (6,684    | ) |   |   | (6,092 | ) |   |   | (4,777 | ) |
| Income tax expense (benefit)                          |   |                    | -         |   |   |   | 835 |   |   |   | (929 | ) |
| Net loss                                              |   | $                       | (6,684    | ) |   | $ | (6,927 | ) |   | $ | (3,848 | ) |
| Net loss allocable to common stock                    |   | $                       | (6,754    | ) |   | $ | (6,557 | ) |   | $ | (3,465 | ) |
|                                                  |   |                    |      |   |   |   |   |   |   |   |   |   |
| Balance Sheet Data at End of Year                     |   |                    |      |   |   |   |   |   |   |   |   |   |
| Assets                                                |   | $                       | 217,801   |   |   | $ | 193,105 |   |   | $ | 215,490 |   |
| Earning assets                                        |   |                    | 206,015   |   |   |   | 183,548 |   |   |   | 199,880 |   |
| Total loans                                           |   |                    | 120,225   |   |   |   | 136,410 |   |   |   | 153,311 |   |
| Deposits                                              |   |                    | 173,240   |   |   |   | 163,770 |   |   |   | 144,804 |   |
| Total shareholders' equity                            |   |                    | 39,143    |   |   |   | 18,638 |   |   |   | 20,517 |   |
| Preferred equity                                      |   |                    | 5,684     |   |   |   | 6,227 |   |   |   | 1,686 |   |
| Common equity                                         |   |                    | 33,459    |   |   |   | 12,411 |   |   |   | 18,831 |   |
| Number of common shares outstanding                   |   |                    | 7,094,274 |   |   |   | 1,345,602 |   |   |   | 1,345,602 |   |
| Average Balance Sheet Data                            |   |                    |      |   |   |   |   |   |   |   |   |   |
| Assets                                                |   | $                       | 204,864   |   |   | $ | 217,268 |   |   | $ | 190,792 |   |
| Earning assets                                        |   |                    | 193,067   |   |   |   | 207,865 |   |   |   | 181,232 |   |
| Loans                                                 |   |                    | 128,666   |   |   |   | 148,636 |   |   |   | 142,342 |   |
| Deposits                                              |   |                    | 164,956   |   |   |   | 159,866 |   |   |   | 130,841 |   |
| Shareholders' equity                                  |   |                    | 30,916    |   |   |   | 24,791 |   |   |   | 18,451 |   |
| Per Common Share Data                                 |   |                    |      |   |   |   |   |   |   |   |   |   |
| Basic loss per share                                  |   | $                       | (1.54     | ) |   | $ | (4.87 | ) |   | $ | (3.18 | ) |
| Diluted loss per share                                |   |                    | (1.54     | ) |   |   | (4.87 | ) |   |   | (3.18 | ) |
| Average number of common shares outstanding - basic   |   |                    | 7,094,274 |   |   |   | 1,345,602 |   |   |   | 1,090,569 |   |
| Average number of common shares outstanding - diluted |   |                    | 7,094,274 |   |   |   | 1,345,602 |   |   |   | 1,090,569 |   |
| Book value per common share                           |   | $                       | 4.72      |   |   | $ | 9.22 |   |   | $ | 13.99 |   |
| Cash dividends declared                               |   |                    | -         |   |   |   | - |   |   |   | - |   |
| Performance Ratios                                    |   |                    |      |   |   |   |   |   |   |   |   |   |
| Return (loss) on average assets                       |   |                    | (3.26     | )% |   |   | (3.19 | )% |   |   | (2.02 | )% |
| Return (loss) on average shareholders' equity         |   |                    | (21.62    | )% |   |   | (27.94 | )% |   |   | (20.86 | )% |
| Average equity to average assets                      |   |                    | 15.09     | % |   |   | 11.41 | % |   |   | 9.67 | % |
| Efficiency ratio                                      |   |                    | 117.04    | % |   |   | 118.35 | % |   |   | 108.07 | % |
| Leverage ratio                                        |   |                    | 19.37     | % |   |   | 10.06 | % |   |   | 10.31 | % |
| Net interest margin                                   |   |                    | 3.64      | % |   |   | 3.15 | % |   |   | 3.53 | % |
| Non-interest revenue to total revenue                 |   |                    | 19.89     | % |   |   | 11.51 | % |   |   | 5.25 | % |
| Asset Quality                                         |   |                    |      |   |   |   |   |   |   |   |   |   |
| Non-performing assets                                 |   | $                       | 15,141    |   |   | $ | 8,363 |   |   | $ | 4,580 |   |
| Allowance for loan losses                             |   |                    | 3,198     |   |   |   | 5,537 |   |   |   | 3,942 |   |
| Net charge-offs                                       |   |                    | 8,139     |   |   |   | 3,461 |   |   |   | 1,453 |   |
| Non-performing assets to total assets                 |   |                    | 6.95      | % |   |   | 4.33 | % |   |   | 2.13 | % |
| Allowance for loan losses to loans                    |   |                    | 2.66      | % |   |   | 4.06 | % |   |   | 2.57 | % |
| Net charge-offs to average loans                      |   |                    | 6.33      | % |   |   | 2.33 | % |   |   | 1.02 | % |

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|   | Executive Summary |
|--------|-------------------|

|   | · | A high level of provision for loan losses.  Real estate conditions weakened as the overall economy contracted during the first year of the Great Recession.  As the real estate contraction became more prolonged in 2009 and 2010, more of our borrowers were unable to weather the storm.  We charged off $1.8 million of construction and land development loans and $0.9 million of commercial and residential real estate loans in 2009.  Net charge-offs totaled $3.5 million in 2009, up from $1.5 million in 2008.  We had set aside additional reserves in 2008 that covered the 2009 charge-offs, but by year-end 2009 we had increased the allowance for loan and lease losses to $5.1 million—approximately $1.6 million higher than at the end of 2008.  In 2010, the provision for loan and lease losses increased to $5.8 million, although $5.25 million of that amount was directly related to a reclassification of certain loans to “held for sale,” as discussed below. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A reclassification of certain loans to “held for sale.”  In order to allow for an orderly workout of some of the Bank’s larger classified loans, the Bank in mid-year 2010 reclassified $22.2 million of those loans to held for sale.  Those loans, along with all of the Bank’s OREO properties, were then sold by the Bank to the Company’s new Mission Asset Management, Inc. subsidiary.  Generally accepted accounting principles require that loans held for sale be carried at the lower of amortized cost or fair value.  Therefore, in conjunction with the reclassification, the Bank wrote down the value of those loans by $5.488 million, through charge-offs to the allowance for loan and lease losses.  The loan charge-offs did not directly affect net income but $5.250 million in loan loss provision was required to replenish the allowance for loan and lease losses to the appropriate level following the substantial level of charge-offs as a result of the reclassification to held for sale.  Excluding the loan loss provision related to this reclassification, the 2010 provision for loan losses would have been $550 thousand. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An increase in non-performing assets.  Even as portions of the economy began to recover in 2009 and 2010, real estate related segments of the economy remained in recessionary territory, further stressing our loan portfolio.  Non-performing loans, including troubled debt restructurings, increased in 2009 to $6.7 million, up from $4.5 million at the end of 2008.  By December 31, 2010, non-performing loans had increased to $12.0 million.  Foreclosed real estate increased from $83 thousand at the end of 2008 to $1.6 million as of December 31, 2009, and $3.1 million at the end of 2010. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A changing net interest margin.  The net interest margin for 2009 was 3.15%, down 0.38 percentage points from 2008.  For 2010, the margin recovered to 3.66%, an increase of 0.51 percentage points from 2009.  Short-term interest rates dropped 4 full percentage points in 2008 and remained at that low level throughout 2009 and 2010.  The steep rate drop in 2008 put downward pressure on the margin, as competition for deposits in the local market would not permit decreases in deposit rates at the same speed or to the same degree as loan rates were falling.  As reductions in deposit rates eventually caught up with the drop in loan rates, and high-cost borrowed funds were repaid, the margin began a steady improvement in April 2009, which continued until April 2010.  By mid-year 2010, an increase in non-accrual loans and a much more liquid balance sheet put more downward pressure on the margin. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | We increased our valuation allowance for deferred tax assets.  The valuation allowance ($7.4 million in 2010 and $4.6 million in 2009) was established because the Company’s cumulative net operating losses exceed its ability to fully recognize deferred tax assets by carrying the losses back to previous tax years.  The valuation allowance can begin to be reversed—providing a potential increase to net income in future years—as the Company returns to profitability. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We raised $33.9 million in additional capital ($33.5 million net of stock issuance costs) over the past two years.  In 2009 the Company issued to the United States Department of the Treasury (“the Treasury”) a total of 5,116 shares of Series D Fixed Rate Cumulative Perpetual Preferred Stock at $1,000 per share.  This transaction was a part of the Capital Purchase Program of the TARP.  The $5.1 million in new capital was subsequently invested in Mission Community Bank as Tier 1 capital.  In 2010 the Company’s largest shareholder purchased an additional 5,000,000 shares of common stock and warrants to purchase 5,000,000 shares of common stock for an aggregate purchase price of $25 million.  A substantial majority of the proceeds from sales of these securities was used to enable a newly-formed subsidiary of the Company, Mission Asset Management, Inc., to purchase from the Bank certain non-performing loans and other real estate owned assets.  Subsequently, the Company conducted a Rights Offering to its other shareholders, pursuant to which each shareholder received, with respect to each share of common stock owned by the shareholder, the right to purchase 15 additional shares of common stock, each paired with a warrant, at a price of $5.00 per unit of common stock and warrant.  Rights to purchase 748,672 shares of common stock and warrants to purchase an additional 748,672 shares of common stock were exercised in the Rights Offering for gross proceeds to Bancorp of $3,743,360. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Net Interest Analysis                                                                           |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |
|-------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|--------|-------------------|--------|--------|---------|--------|--------|----------|---------|--------|---------|--------|--------|---------|--------|--------|----------|--------|--------|---------|---------|
|  (Dollars in thousands)                                                                    |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |
|                                                                                            |   | For the Year Ended |    |
|                                                                                            |   | December 31, 2010  |    |   | December 31, 2009 |   |   | December 31, 2008 |   |
|                                                                                            |   | Average            |    |   |              |   |   | Average           |   |   | Average |   |   |     |    |   | Average |   |   | Average |   |   |     |   |   | Average |    |
|                                                                                            |   | Balance            |    |   | Interest          |   |   | Rate              |   |   | Balacce |   |   | Interest |    |   | Rate    |   |   | Balance |   |   | Interest |   |   | Rate    |    |
| ASSETS                                                                                          |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |
| Interest-earning assets:                                                                        |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |
|   Loans, net of unearned income*                                                      |   | $                  | 128,666 |   |              | $      | 7,539  |              |   |   | 5.91    | % *    |   | $        | 148,636 |   |    | $      | 8,889  |    |   |   | 6.03     | % *    |   | $       | 142,342 |   |   | $ | 9,598 |   |   |   | 6.80 | % * |
|   Investment securities*                                                              |   |               | 48,141  |   |              |   | 1,296  |              |   |   | 2.87    | % *    |   |     | 35,945  |   |    |   | 1,259  |    |   |   | 3.70     | % *    |   |    | 23,966  |   |   |   | 1,122 |   |   |   | 4.99 | % * |
|   Federal funds sold                                                                  |   |               | -       |   |              |   | -      |              |   |   | -       |   |   |     | 7,419   |   |    |   | 16     |    |   |   | 0.21     | %      |   |    | 7,314   |   |   |   | 122 |   |   |   | 1.67 | % |
|   Other interest income                                                               |   |               | 16,260  |   |              |   | 47     |              |   |   | 0.29    | %      |   |     | 15,865  |   |    |   | 119    |    |   |   | 0.75     | %      |   |    | 7,610   |   |   |   | 231 |   |   |   | 3.03 | % |
| Total interest-earning assets / interest income                                                 |   |               | 193,067 |   |              |   | 8,882  |              |   |   | 4.68    | %      |   |     | 207,865 |   |    |   | 10,283 |    |   |   | 5.02     | %      |   |    | 181,232 |   |   |   | 11,073 |   |   |   | 6.19 | % |
| Non-interest-earning assets:                                                                    |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
|   Allowance for loan losses                                                           |   |               | (4,253  | )      |              |   |   |              |   |   |    |   |   |     | (3,635  | )      |    |   |   |    |   |   |     |   |   |    | (2,118  | ) |   |   |   |   |   |   |   |   |
|   Cash and due from banks                                                             |   |               | 3,251   |   |              |   |   |              |   |   |    |   |   |     | 2,720   |   |    |   |   |    |   |   |     |   |   |    | 2,987   |   |   |   |   |   |   |   |   |   |
|   Premises and equipment                                                              |   |               | 3,318   |   |              |   |   |              |   |   |    |   |   |     | 2,833   |   |    |   |   |    |   |   |     |   |   |    | 3,529   |   |   |   |   |   |   |   |   |   |
|   Other assets                                                                        |   |               | 9,481   |   |              |   |   |              |   |   |    |   |   |     | 7,485   |   |    |   |   |    |   |   |     |   |   |    | 5,162   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                    |   | $                  | 204,864 |   |              |   |   |              |   |   |    |   |   | $        | 217,268 |   |    |   |   |    |   |   |     |   |   | $       | 190,792 |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                            |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                                   |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
|   Interest-bearing deposits:                                                          |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
|     Interest-bearing demand accounts                                        |   | $                  | 18,353  |   |              |   | 135    |              |   |   | 0.73    | %      |   | $        | 12,594  |   |    |   | 145    |    |   |   | 1.15     | %      |   | $       | 17,187  |   |   |   | 361 |   |   |   | 2.10 | % |
|     Savings and Money Market deposit accounts                               |   |               | 38,846  |   |              |   | 348    |              |   |   | 0.90    | %      |   |     | 30,585  |   |    |   | 370    |    |   |   | 1.21     | %      |   |    | 19,309  |   |   |   | 327 |   |   |   | 1.70 | % |
|     Certificates of deposit                                                 |   |               | 84,513  |   |              |   | 1,192  |              |   |   | 1.41    | %      |   |     | 93,540  |   |    |   | 2,150  |    |   |   | 2.30     | %      |   |    | 72,187  |   |   |   | 2,471 |   |   |   | 3.42 | % |
|     Total interest-bearing deposits                                         |   |               | 141,712 |   |              |   | 1,675  |              |   |   | 1.18    | %      |   |     | 136,719 |   |    |   | 2,665  |    |   |   | 1.95     | %      |   |    | 108,683 |   |   |   | 3,159 |   |   |   | 2.91 | % |
|   Federal Home Loan Bank advances                                                     |   |               | 3,616   |   |              |   | 181    |              |   |   | 4.99    | %      |   |     | 28,161  |   |    |   | 1,096  |    |   |   | 3.89     | %      |   |    | 37,232  |   |   |   | 1,450 |   |   |   | 3.89 | % |
|   Other borrowed funds                                                                |   |               | 613     |   |              |   | 32     |              |   |   | 5.28    | %      |   |     | 10      |   |    |   | -      |    |   |   | 0.61     | %      |   |    | 34      |   |   |   | 1 |   |   |   | 2.81 | % |
|   Subordinated debt                                                                   |   |               | 3,093   |   |              |   | 103    |              |   |   | 3.34    | %      |   |     | 3,093   |   |    |   | 116    |    |   |   | 3.75     | %      |   |    | 3,093   |   |   |   | 220 |   |   |   | 7.12 | % |
|     Total borrowed funds                                                    |   |               | 7,322   |   |              |   | 316    |              |   |   | 4.32    | %      |   |     | 31,264  |   |    |   | 1,212  |    |   |   | 3.88     | %      |   |    | 40,359  |   |   |   | 1,671 |   |   |   | 4.14 | % |
| Total interest-bearing liabilities / interest expense                                           |   |               | 149,034 |   |              |   | 1,991  |              |   |   | 1.34    | %      |   |     | 167,983 |   |    |   | 3,877  |    |   |   | 2.31     | %      |   |    | 149,042 |   |   |   | 4,830 |   |   |   | 3.24 | % |
| Non-interest-bearing liabilities:                                                               |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
|   Non-interest-bearing deposits                                                       |   |               | 23,244  |   |              |   |   |              |   |   |    |   |   |     | 23,147  |   |    |   |   |    |   |   |     |   |   |    | 22,158  |   |   |   |   |   |   |   |   |   |
|   Other liabilities                                                                   |   |               | 1,670   |   |              |   |   |              |   |   |    |   |   |     | 1,347   |   |    |   |   |    |   |   |     |   |   |    | 1,141   |   |   |   |   |   |   |   |   |   |
|   Total liabilities                                                                   |   |               | 173,948 |   |              |   |   |              |   |   |    |   |   |     | 192,477 |   |    |   |   |    |   |   |     |   |   |    | 172,341 |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                                                                            |   |               | 30,916  |   |              |   |   |              |   |   |    |   |   |     | 24,791  |   |    |   |   |    |   |   |     |   |   |    | 18,451  |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders' equity                                                      |   | $                  | 204,864 |   |              |   |   |              |   |   |    |   |   | $        | 217,268 |   |    |   |   |    |   |   |     |   |   | $       | 190,792 |   |   |   |   |   |   |   |   |   |
| Net interest-rate spread                                                                        |   |               |    |   |              |   |   |              |   |   | 3.34    | %      |   |     |    |   |    |   |   |    |   |   | 2.71     | %      |   |    |    |   |   |   |   |   |   |   | 2.95 | % |
| Impact of non-interest-bearing                                                                  |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
|   sources and other changes in                                                        |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
|   balance sheet composition                                                           |   |               |    |   |              |   |   |              |   |   | 0.30    | %      |   |     |    |   |    |   |   |    |   |   | 0.44     | %      |   |    |    |   |   |   |   |   |   |   | 0.58 | % |
| Net interest income / margin on earning assets                                                  |   |               | $       | 6,891  |              |   |   | 3.64              | % **   |   |    |   |   |     | $       | 6,406  |    |   |   | 3.15    | % **   |   |     |   |   |    | $       | 6,243 |   |   |   | 3.53 | % ** |
|                                                                                            |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |
| *Yields on municipal securities and loans have been adjusted to their fully-taxable equivalents |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |
| ** Net interest income as a % of earning assets                                                 |   |               |    |   |              |   |   |              |   |   |    |   |   |     |    |   |    |   |   |    |   |   |     |   |   |    |    |   |   |   |   |   |   |   |   |   |

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| Rate / Volume Variance Analysis                                     |   |                           |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------|--------|--------------------------------|--------|--------|--------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  (In thousands)                                                |   | Year Ended December 31, 2010   |   |   | Year Ended December 31, 2009   |   |
|                                                                |   | Compared to 2009               |   |   | Compared to 2008               |   |
|                                                                |   | Increase (Decrease)            |   |   | Increase (Decrease)            |   |
|                                                                |   | in interest income and expense |   |   | in interest income and expense |   |
|                                                                |   | due to changes in:             |   |   | due to changes in:             |   |
|                                                                |   | Volume                         |   |   | Rate                           |   |   | Total  |   |   | Volume |   |   | Rate   |   |   | Total  |   |
| Interest-earning assets:                                            |   |                           |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Loans, net of unearned income                           |   | $                              | (1,173 | )      |                           | $      | (177   | )      |   | $      | (1,350 | )      |   | $      | 411    |   |   | $      | (1,120 | ) |   | $ | (709 | ) |
|   Investment securities                                   |   |                           | 368    |   |                           |   | (331   | )      |   |   | 37     |   |   |   | 467    |   |   |   | (330 | ) |   |   | 137 |   |
|   Federal funds sold                                      |   |                           | (16    | )      |                           |   | -      |   |   |   | (16    | )      |   |   | 2      |   |   |   | (108 | ) |   |   | (106 | ) |
|   Other interest income                                   |   |                           | 3      |   |                           |   | (75    | )      |   |   | (72    | )      |   |   | 139    |   |   |   | (251 | ) |   |   | (112 | ) |
| Total increase (decrease) in interest income                        |   |                           | (818   | )      |                           |   | (583   | )      |   |   | (1,401 | )      |   |   | 1,019  |   |   |   | (1,809 | ) |   |   | (790 | ) |
|                                                                |   |                           |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                       |   |                           |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Transaction accounts                              |   |                           | 53     |   |                           |   | (63    | )      |   |   | (10    | )      |   |   | (80    | )      |   |   | (136 | ) |   |   | (216 | ) |
|    Savings deposits                                  |   |                           | 87     |   |                           |   | (109   | )      |   |   | (22    | )      |   |   | 155    |   |   |   | (112 | ) |   |   | 43 |   |
|    Certificates of deposit                           |   |                           | (191   | )      |                           |   | (767   | )      |   |   | (958   | )      |   |   | 617    |   |   |   | (938 | ) |   |   | (321 | ) |
|       Total interest-bearing deposits |   |                           | (51    | )      |                           |   | (939   | )      |   |   | (990   | )      |   |   | 692    |   |   |   | (1,186 | ) |   |   | (494 | ) |
|    FHLB advances                                     |   |                           | (1,159 | )      |                           |   | 244    |   |   |   | (915   | )      |   |   | (353   | )      |   |   | (1 | ) |   |   | (354 | ) |
|    Other borrowed funds                              |   |                           | 29     |   |                           |   | 3      |   |   |   | 32     |   |   |   | (1     | )      |   |   | - |   |   |   | (1 | ) |
|    Subordinated debt                                 |   |                           | -      |   |                           |   | (13    | )      |   |   | (13    | )      |   |   | -      |   |   |   | (104 | ) |   |   | (104 | ) |
|        Total borrowed funds      |   |                           | (1,130 | )      |                           |   | 234    |   |   |   | (896   | )      |   |   | (354   | )      |   |   | (105 | ) |   |   | (459 | ) |
| Total increase (decrease) in interest expense                       |   |                           | (1,181 | )      |                           |   | (705   | )      |   |   | (1,886 | )      |   |   | 338    |   |   |   | (1,291 | ) |   |   | (953 | ) |
| Increase (decrease) in net interest income                          |   | $                              | 363    |   |                           | $      | 122    |   |   | $      | 485    |   |   | $      | 681    |   |   | $      | (518 | ) |   | $ | 163 |   |

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|   | · | Salary and benefits increased by $218 thousand, or 6%.  Actual outlays and accruals for salaries and benefits increased by only $136 thousand from 2009 to 2010.  However, salary and benefit costs deferred as loan origination costs in accordance with ASC 310-20 (an offset to salaries and benefits) were $82 thousand less in 2010 as compared to 2009.  Loan origination costs deferred under ASC 310-20 are amortized against interest income on loans over the life of the loans. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Occupancy expense increased by $267 thousand, or 27%, primarily due to lease costs and amortization of tenant improvements associated with the Bank’s new main office at South Higuera Street and Prado Road in San Luis Obispo. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Professional fees—including legal, accounting, internal audit, loan review and other consultants—were up $111 thousand, or 23%, in 2010, primarily due to legal, accounting loan review and consulting fees related to non-performing assets. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Insurance and regulatory assessments increased by $68 thousand, or 11%, because FDIC deposit insurance assessments were up by $98 thousand.  These increased assessments were the result of scheduled increases to deposit insurance rates. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Loan and lease expenses increased by $50 thousand, or 35%, principally due to $61 thousand in adjustments to the fair value of certain loans held for sale. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other real estate expenses increased by $154 thousand, or 426%, as the Company’s investment in other real estate (primarily foreclosures) has increased from $1.0 million as of December 31, 2008, to $2.2 million at December 31, 2009, and to $3.1 million at the end of 2010. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Prepayment fee on borrowed funds—In October 2010 the Bank chose to prepay the remaining $3.0 million of its borrowings from the Federal Home Loan Bank of San Francisco (“FHLB”), incurring a prepayment penalty of $377,966.  Those borrowings were scheduled to mature in 2013 and carried an average interest rate of 4.89%.  Prepayment of these borrowings will reduce the Bank’s interest expense from 2011 through 2013 by a total of approximately $431,000. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Marketing costs decreased $32 thousand, or 18% in 2010 as compared to 2009, as reductions were made in the Bank’s budget for advertising and sponsorships. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Investment securities composition |   |                   |   |   |              |   |   |              |   |   |      |   |   |    |   |   |   |   |   |      |   |   |    |   |   |   |   |
|-----------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|-------------------|--------|--------|-----------|--------|--------|---------|--------|--------|--------|--------|--------|-----------|--------|--------|---------|--------|--------|--------|--------|
|                              |   | December 31, 2010      |   |   | December 31, 2009 |   |   | December 31, 2008 |   |
|                              |   |                   |   |   | Approx.           |   |   |              |   |   |      |   |   | Approx. |   |   |   |   |   |      |   |   | Approx. |   |   |   |   |
|                              |   | Amortized              |   |   | Market            |   |   | %                 |   |   | Amortized |   |   | Market  |   |   | %      |   |   | Amortized |   |   | Market  |   |   | %      |   |
|                              |   | Cost                   |   |   | Value             |   |   | Yield             |   |   | Cost      |   |   | Value   |   |   | Yield  |   |   | Cost      |   |   | Value   |   |   | Yield  |   |
|                              |   | (Dollars in thousands) |   |
| U.S. Government agencies:         |   |                   |   |   |              |   |   |              |   |   |      |   |   |    |   |   |   |   |   |      |   |   |    |   |   |   |   |
| Within one year                   |   | $                      | -      |   |              | $      | -      |              |   |   |      |   | $      | 500     |   |   | $      | 502    |   |      |   | 4.00   | %       |   | $      | 2,000  |   |   | $ | 2,036 |   |   |   | 3.38 | % |
| One to five years                 |   |                   | 20,100 |   |              |   | 19,878 |              |   |   | 1.23      | %      |   |    | 14,442 |   |   |   | 14,465 |      |   |   | 2.12    | %      |   |   | 500    |   |   |   | 518 |   |   |   | 4.00 | % |
| Five to ten years                 |   |                   | -      |   |              |   | -      |              |   |   |      |   |   |    | 500    |   |   |   | 502    |      |   |   | 5.05    | %      |   |   | 1,000  |   |   |   | 1,016 |   |   |   | 5.18 | % |
| After 10 years                    |   |                   | 983    |   |              |   | 983    |              |   |   | 3.72      | %      |   |    | -      |   |   |   | -      |      |   |   |    |   |   |   | -      |   |   |   | - |   |   |   |   |   |
| Total U.S. Government agencies    |   |                   | 21,083 |   |              |   | 20,861 |              |   |   | 1.35      | %      |   |    | 15,442 |   |   |   | 15,469 |      |   |   | 2.27    | %      |   |   | 3,500  |   |   |   | 3,570 |   |   |   | 3.98 | % |
| Mortgage-backed                   |   |                   |   |   |              |   |   |              |   |   |      |   |   |    |   |   |   |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and asset-backed securities:      |   |                   |   |   |              |   |   |              |   |   |      |   |   |    |   |   |   |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Within one year                   |   |                   | 2      |   |              |   | 2      |              |   |   | 6.50      | %      |   |    | 245    |   |   |   | 249    |      |   |   | 4.28    | %      |   |   | 334    |   |   |   | 334 |   |   |   | 4.07 | % |
| One to five years                 |   |                   | -      |   |              |   | -      |              |   |   |      |   |   |    | 18     |   |   |   | 17     |      |   |   | 6.49    | %      |   |   | 577    |   |   |   | 582 |   |   |   | 4.66 | % |
| Five to ten years                 |   |                   | 15,302 |   |              |   | 15,297 |              |   |   | 2.30      | %      |   |    | 8,674  |   |   |   | 8,747  |      |   |   | 3.50    | %      |   |   | 1,810  |   |   |   | 1,873 |   |   |   | 4.83 | % |
| After 10 years                    |   |                   | 34,693 |   |              |   | 34,352 |              |   |   | 2.69      | %      |   |    | 9,522  |   |   |   | 9,698  |      |   |   | 3.96    | %      |   |   | 14,689 |   |   |   | 15,053 |   |   |   | 4.94 | % |
| Total mortgage-backed             |   |                   |   |   |              |   |   |              |   |   |      |   |   |    |   |   |   |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and asset-backed securities       |   |                   | 49,997 |   |              |   | 49,651 |              |   |   | 2.57      | %      |   |    | 18,459 |   |   |   | 18,711 |      |   |   | 3.75    | %      |   |   | 17,410 |   |   |   | 17,842 |   |   |   | 4.90 | % |
| Municipal securities:             |   |                   |   |   |              |   |   |              |   |   |      |   |   |    |   |   |   |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Within one year                   |   |                   | -      |   |              |   | -      |              |   |   |      |   |   |    | -      |   |   |   | -      |      |   |   |    |   |   |   | -      |   |   |   | - |   |   |   |   |   |
| One to five years                 |   |                   | -      |   |              |   | -      |              |   |   |      |   |   |    | -      |   |   |   | -      |      |   |   |    |   |   |   | -      |   |   |   | - |   |   |   |   |   |
| Five to ten years                 |   |                   | 374    |   |              |   | 378    |              |   |   | 4.15      | %      |   |    | -      |   |   |   | -      |      |   |   |    |   |   |   | -      |   |   |   | - |   |   |   |   |   |
| After 10 years                    |   |                   | 2,543  |   |              |   | 2,544  |              |   |   | 5.98      | %      |   |    | 2,918  |   |   |   | 2,974  |      |   |   | 5.99    | %      |   |   | 3,581  |   |   |   | 3,434 |   |   |   | 5.95 | % |
| Total municipal securities        |   |                   | 2,917  |   |              |   | 2,922  |              |   |   | 5.75      | %      |   |    | 2,918  |   |   |   | 2,974  |      |   |   | 5.99    | %      |   |   | 3,581  |   |   |   | 3,434 |   |   |   | 5.95 | % |
| Corporate debt securities:        |   |                   |   |   |              |   |   |              |   |   |      |   |   |    |   |   |   |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Within one year                   |   |                   | 1,980  |   |              |   | 2,000  |              |   |   | 5.48      | %      |   |    | 959    |   |   |   | 997    |      |   |   | 5.96    | %      |   |   | -      |   |   |   | - |   |   |   |   |   |
| One to five years                 |   |                   | -      |   |              |   | -      |              |   |   |      |   |   |    | 1,882  |   |   |   | 1,991  |      |   |   | 5.48    | %      |   |   | -      |   |   |   | - |   |   |   |   |   |
| Five to ten years                 |   |                   | -      |   |              |   | -      |              |   |   |      |   |   |    | -      |   |   |   | -      |      |   |   |    |   |   |   | -      |   |   |   | - |   |   |   |   |   |
| After 10 years                    |   |                   | -      |   |              |   | -      |              |   |   |      |   |   |    | -      |   |   |   | -      |      |   |   |    |   |   |   | -      |   |   |   | - |   |   |   |   |   |
| Total corporate securities        |   |                   | 1,980  |   |              |   | 2,000  |              |   |   | 5.48      | %      |   |    | 2,841  |   |   |   | 2,988  |      |   |   | 5.64    | %      |   |   | -      |   |   |   | - |   |   |   |   |   |
| Total investment securities       |   | $                      | 75,977 |   |              | $      | 75,434 |              |   |   | 2.43      | %      |   | $       | 39,660 |   |   | $      | 40,142 |      |   |   | 3.47    | %      |   | $      | 24,491 |   |   | $ | 24,846 |   |   |   | 4.92 | % |

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| Loan Portfolio Composition        |   |               |    |   |   |   |    |   |   |   |    |   |   |   |    |
|-----------------------------------|--------|--------------------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| (Dollars in thousands)            |   |               |    |   |   |   |    |   |   |   |    |   |   |   |    |
|                              |   | As of December 31, |    |
| Type of Loan                      |   | 2010               |    |   | 2009   |   |    | 2008   |   |   | 2007    |   |   | 2006   |    |
| Commercial and industrial         |   | $                  | 17,701  |   |   | $      | 19,633  |   |   | $      | 24,454  |   |   | $      | 25,653  |   |   | $ | 18,000 |   |
| Agricultural                      |   |               | 1,022   |   |   |   | 750     |   |   |   | -       |   |   |   | 122     |   |   |   | 123 |   |
| Leases, net of unearned income    |   |               | 1,047   |   |   |   | 1,335   |   |   |   | 1,491   |   |   |   | 839     |   |   |   | 1,041 |   |
| Municipal loans                   |   |               | 2,987   |   |   |   | 3,476   |   |   |   | 2,729   |   |   |   | 2,789   |   |   |   | 2,903 |   |
| Real estate                       |   |               | 87,005  |   |   |   | 96,956  |   |   |   | 98,049  |   |   |   | 72,009  |   |   |   | 66,591 |   |
| Construction and land development |   |               | 8,972   |   |   |   | 12,512  |   |   |   | 22,857  |   |   |   | 22,513  |   |   |   | 31,639 |   |
| Consumer                          |   |               | 1,491   |   |   |   | 1,748   |   |   |   | 3,731   |   |   |   | 2,504   |   |   |   | 2,502 |   |
| Total loans                       |   | $                  | 120,225 |   |   | $      | 136,410 |   |   | $      | 153,311 |   |   | $      | 126,429 |   |   | $ | 122,799 |   |
|                              |   |               |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Off-balance-sheet commitments:    |   |               |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Undisbursed loan commitments      |   | $                  | 19,482  |   |   | $      | 18,219  |   |   | $      | 28,427  |   |   | $      | 28,608  |   |   | $ | 35,375 |   |
| Standby letters of credit         |   |               | 1,251   |   |   |   | 301     |   |   |   | 304     |   |   |   | 693     |   |   |   | 213 |   |

| Maturity and Rate Sensitivity of Loans |   |     |   |   |                     |   |   |      |   |   |   |   |   |                     |    |   |     |   |
|----------------------------------------|--------|----------|--------|--------|--------------------------|--------|--------|-----------|--------|--------|--------|--------|--------|--------------------------|---------|--------|----------|--------|
| (Dollars in thousands)                 |   |     |   |   |                     |   |   |      |   |   |   |   |   |                     |    |   |     |   |
|                                   |   |     |   |   |                     |   |   |      |   |   |   |   |   | Rate Structure for Loans |    |
|                                   |   | Maturity |   |   | Maturing Beyond One Year |   |
|                                   |   | One year |   |   | One through              |   |   | Over five |   |   |   |   |   | Fixed                    |    |   | Floating |   |
|                                   |   | or less  |   |   | five years               |   |   | years     |   |   | Total  |   |   | Rate                     |    |   | Rate     |   |
| Commercial and industrial              |   | $        | 4,277  |   |                     | $      | 6,274  |      |   | $      | 6,570  |   |   | $                        | 17,121  |   |     | $      | 756 |   |   | $ | 12,087 |   |
| Agricultural                           |   |     | 450    |   |                     |   | 296    |      |   |   | 276    |   |   |                     | 1,022   |   |     |   | - |   |   |   | 572 |   |
| Leases, net of unearned income         |   |     | 25     |   |                     |   | 1,022  |      |   |   | -      |   |   |                     | 1,047   |   |     |   | 1,022 |   |   |   | - |   |
| Municipal loans                        |   |     | 350    |   |                     |   | 200    |      |   |   | 2,436  |   |   |                     | 2,986   |   |     |   | 350 |   |   |   | 2,286 |   |
| Real estate                            |   |     | 644    |   |                     |   | 25,511 |      |   |   | 61,074 |   |   |                     | 87,229  |   |     |   | 2,192 |   |   |   | 84,393 |   |
| Construction and land development      |   |     | 8,081  |   |                     |   | 733    |      |   |   | 215    |   |   |                     | 9,029   |   |     |   | 739 |   |   |   | 210 |   |
| Consumer Loans                         |   |     | 634    |   |                     |   | 829    |      |   |   | 26     |   |   |                     | 1,489   |   |     |   | 74 |   |   |   | 782 |   |
| Total Loans                            |   | $        | 14,461 |   |                     | $      | 34,865 |      |   | $      | 70,597 |   |   | $                        | 119,923 |   |     | $      | 5,133 |   |   | $ | 100,330 |   |

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| Non-Performing Assets                                                          |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------|--------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (Dollars in thousands)                                                         |   | As of December 31, |   |
|                                                                           |   | 2010               |   |   | 2009   |   |   | 2008   |   |   | 2007   |   |   | 2006   |   |
| Loans in nonaccrual status:                                                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonaccrual loans held for investment--                                         |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                                      |   | $                  | 1,311  |   |   | $      | 1,139  |   |   | $      | 578    |   |   | $      | 254    |   |   | $ | 240 |   |
| Real estate                                                                    |   |               | 682    |   |   |   | 2,724  |   |   |   | 1,427  |   |   |   | 190    |   |   |   | - |   |
| Construction & land development                                            |   |               | -      |   |   |   | 2,028  |   |   |   | 1,552  |   |   |   | 1,544  |   |   |   | - |   |
| Total nonaccrual loans held for investment                                     |   |               | 1,993  |   |   |   | 5,891  |   |   |   | 3,557  |   |   |   | 1,988  |   |   |   | 240 |   |
| Nonaccrual loans held for sale--                                               |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                                      |   |               | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Real estate                                                                    |   |               | 7,406  |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Construction & land development                                            |   |               | 2,605  |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Total nonaccrual loans held for sale                                           |   |               | 10,011 |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Total nonaccrual loans                                                         |   |               | 12,004 |   |   |   | 5,891  |   |   |   | 3,557  |   |   |   | 1,988  |   |   |   | 240 |   |
| Loans held for investment past due 90 days or more and accruing:               |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                                      |   |               | -      |   |   |   | -      |   |   |   | -      |   |   |   | 54     |   |   |   | - |   |
| Lease financing                                                                |   |               | -      |   |   |   | -      |   |   |   | -      |   |   |   | 14     |   |   |   | - |   |
| Real estate                                                                    |   |               | -      |   |   |   | -      |   |   |   | 265    |   |   |   | -      |   |   |   | - |   |
| Construction & land development                                            |   |               | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 1,929 |   |
| Total loans 90 days past due and accruing                                      |   |               | -      |   |   |   | -      |   |   |   | 265    |   |   |   | 68     |   |   |   | 1,929 |   |
| Restructured loans:                                                            |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                                      |   |               | -      |   |   |   | 731    |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Construction & land development                                            |   |               | -      |   |   |   | -      |   |   |   | 675    |   |   |   | -      |   |   |   | - |   |
| Consumer                                                                       |   |               | -      |   |   |   | 100    |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Total restructured loans                                                       |   |               | -      |   |   |   | 831    |   |   |   | 675    |   |   |   | -      |   |   |   | - |   |
| Total nonperforming loans                                                      |   |               | 12,004 |   |   |   | 6,722  |   |   |   | 4,497  |   |   |   | 2,056  |   |   |   | 2,169 |   |
| Foreclosed real estate                                                         |   |               | 3,137  |   |   |   | 1,641  |   |   |   | 83     |   |   |   | -      |   |   |   | - |   |
| Total nonperforming assets                                                     |   | $                  | 15,141 |   |   | $      | 8,363  |   |   | $      | 4,580  |   |   | $      | 2,056  |   |   | $ | 2,169 |   |
|                                                                           |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                                      |   | $                  | 3,198  |   |   | $      | 5,537  |   |   | $      | 3,942  |   |   | $      | 1,150  |   |   | $ | 1,026 |   |
|                                                                           |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Asset quality ratios:                                                          |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-performing assets to total assets                                          |   |               | 6.95   | %      |   |   | 4.33   | %      |   |   | 2.13   | %      |   |   | 1.30   | % |   |   | 1.37 | % |
|  Excluding loans held for sale*                                           |   |               | 2.53   | %      |   |   | 4.35   | %      |   |   | 2.14   | %      |   |   | 1.32   | % |   |   | 1.37 | % |
|                                                                           |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-performing loans to total loans                                            |   |               | 9.98   | %      |   |   | 4.93   | %      |   |   | 2.93   | %      |   |   | 1.63   | % |   |   | 1.77 | % |
|  Excluding loans held for sale*                                           |   |               | 1.90   | %      |   |   | 4.96   | %      |   |   | 2.96   | %      |   |   | 1.67   | % |   |   | 1.77 | % |
|                                                                           |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses to total loans                                       |   |               | 2.66   | %      |   |   | 4.06   | %      |   |   | 2.57   | %      |   |   | 0.91   | % |   |   | 0.84 | % |
|  Excluding loans held for sale*                                           |   |               | 3.04   | %      |   |   | 4.09   | %      |   |   | 2.59   | %      |   |   | 0.93   | % |   |   | 0.84 | % |
|                                                                           |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses to total                                             |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| non-performing loans                                                           |   |               | 27     | %      |   |   | 82     | %      |   |   | 88     | %      |   |   | 56     | % |   |   | 47 | % |
|  Excluding loans held for sale*                                           |   |               | 160    | %      |   |   | 82     | %      |   |   | 88     | %      |   |   | 56     | % |   |   | 47 | % |
|                                                                           |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| * Loans held for sale are carried at the lower of amortized cost or fair value |   |

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Table of Contents

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| Loan Concentrations                              |   |               |    |   |                   |   |   |   |   |   |                   |   |   |   |   |   |                   |   |    |   |   |   |                   |   |   |   |    |   |                   |   |
|--------------------------------------------------|--------|--------------------|---------|--------|------------------------|--------|--------|--------|--------|--------|------------------------|--------|--------|--------|--------|--------|------------------------|--------|---------|--------|--------|--------|------------------------|--------|--------|--------|---------|--------|------------------------|--------|
| (Dollars in thousands)                           |   | As of December 31, |    |
|                                             |   | 2010               |    |   | 2009                   |   |   | 2008   |   |   | 2007                   |   |   | 2006   |   |
| Type of Loan                                     |   | Amount             |    |   | Percent of Total Loans |   |   | Amount |   |   | Percent of Total Loans |   |   | Amount |   |   | Percent of Total Loans |   |    | Amount |   |   | Percent of Total Loans |   |   | Amount |    |   | Percent of Total Loans |   |
|                                             |   |               |    |   |                   |   |   |   |   |   |                   |   |   |   |   |   |                   |   |    |   |   |   |                   |   |   |   |    |   |                   |   |
| Construction and land development                |   | $                  | 8,972   |   |                   |   | 7.4    | %      |   | $      | 12,512                 |   |   |   | 9.2    | %      |                   | $      | 22,857  |   |   |   | 14.9                   | %      |   | $      | 22,513  |   |                   |   | 17.8 | % |   | $ | 31,639 |   |   |   | 25.8 | % |
| Other real estate loans (by type of collateral): |   |               |    |   |                   |   |   |   |   |   |                   |   |   |   |   |   |                   |   |    |   |   |   |                   |   |   |   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Non-farm, non-residential property:              |   |               |    |   |                   |   |   |   |   |   |                   |   |   |   |   |   |                   |   |    |   |   |   |                   |   |   |   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Owner-occupied                                   |   |               | 35,135  |   |                   |   | 29.2   | %      |   |   | 37,337                 |   |   |   | 27.4   | %      |                   |   | 36,208  |   |   |   | 23.6                   | %      |   |   | 27,433  |   |                   |   | 21.7 | % |   |   | 19,893 |   |   |   | 16.2 | % |
| Non-owner-occupied                               |   |               | 32,240  |   |                   |   | 26.8   | %      |   |   | 36,940                 |   |   |   | 27.1   | %      |                   |   | 37,375  |   |   |   | 24.4                   | %      |   |   | 27,364  |   |                   |   | 21.6 | % |   |   | 29,331 |   |   |   | 23.9 | % |
| 1 to 4 family residential:                       |   |               |    |   |                   |   |   |   |   |   |                   |   |   |   |   |   |                   |   |    |   |   |   |                   |   |   |   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| First liens                                      |   |               | 2,398   |   |                   |   | 2.0    | %      |   |   | 3,963                  |   |   |   | 2.9    | %      |                   |   | 5,464   |   |   |   | 3.6                    | %      |   |   | 4,091   |   |                   |   | 3.2 | % |   |   | 3,737 |   |   |   | 3.0 | % |
| Junior liens                                     |   |               | 10,541  |   |                   |   | 8.8    | %      |   |   | 12,678                 |   |   |   | 9.3    | %      |                   |   | 11,840  |   |   |   | 7.7                    | %      |   |   | 6,282   |   |                   |   | 4.9 | % |   |   | 6,249 |   |   |   | 5.1 | % |
| Multi-family residential                         |   |               | 3,702   |   |                   |   | 3.1    | %      |   |   | 2,757                  |   |   |   | 2.0    | %      |                   |   | 3,340   |   |   |   | 2.2                    | %      |   |   | 3,102   |   |                   |   | 2.5 | % |   |   | 4,972 |   |   |   | 4.0 | % |
| Farmland                                         |   |               | 2,989   |   |                   |   | 2.5    | %      |   |   | 3,281                  |   |   |   | 2.4    | %      |                   |   | 3,822   |   |   |   | 2.5                    | %      |   |   | 3,737   |   |                   |   | 3.0 | % |   |   | 2,409 |   |   |   | 2.0 | % |
| Total real estate-secured loans                  |   |               | 95,977  |   |                   |   | 79.8   | %      |   |   | 109,468                |   |   |   | 80.3   | %      |                   |   | 120,906 |   |   |   | 78.9                   | %      |   |   | 94,522  |   |                   |   | 74.7 | % |   |   | 98,230 |   |   |   | 80.0 | % |
| Commercial and industrial                        |   |               | 17,701  |   |                   |   | 14.7   | %      |   |   | 19,633                 |   |   |   | 14.4   | %      |                   |   | 24,454  |   |   |   | 15.9                   | %      |   |   | 25,653  |   |                   |   | 20.3 | % |   |   | 18,000 |   |   |   | 14.7 | % |
| Agricultural                                     |   |               | 1,022   |   |                   |   | 0.9    | %      |   |   | 750                    |   |   |   | 0.5    | %      |                   |   | -       |   |   |   | 0.0                    | %      |   |   | 122     |   |                   |   | 0.1 | % |   |   | 123 |   |   |   | 0.1 | % |
| Lease financing                                  |   |               | 1,047   |   |                   |   | 0.9    | %      |   |   | 1,335                  |   |   |   | 1.0    | %      |                   |   | 1,491   |   |   |   | 1.0                    | %      |   |   | 839     |   |                   |   | 0.7 | % |   |   | 1,041 |   |   |   | 0.8 | % |
| Municipal                                        |   |               | 2,987   |   |                   |   | 2.5    | %      |   |   | 3,476                  |   |   |   | 2.5    | %      |                   |   | 2,729   |   |   |   | 1.8                    | %      |   |   | 2,789   |   |                   |   | 2.2 | % |   |   | 2,903 |   |   |   | 2.4 | % |
| Consumer                                         |   |               | 1,491   |   |                   |   | 1.2    | %      |   |   | 1,748                  |   |   |   | 1.3    | %      |                   |   | 3,731   |   |   |   | 2.4                    | %      |   |   | 2,504   |   |                   |   | 2.0 | % |   |   | 2,502 |   |   |   | 2.0 | % |
| Total loans, including loans held for sale       |   | $                  | 120,225 |   |                   |   | 100.0  | %      |   | $      | 136,410                |   |   |   | 100.0  | %      |                   | $      | 153,311 |   |   |   | 100.0                  | %      |   | $      | 126,429 |   |                   |   | 100.0 | % |   | $ | 122,799 |   |   |   | 100.0 | % |

Table of Contents

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| Summary of Loan Loss Experience              |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (Dollars in thousands)                       |   | For the Year Ended December 31, |   |
|                                         |   | 2010                            |   |   | 2009   |   |   | 2008   |   |   | 2007   |   |   | 2006   |   |
| Allowance for loan and lease losses          |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at beginning of year                         |   | $                               | 5,537  |   |   | $      | 3,942  |   |   | $      | 1,150  |   |   | $      | 1,026  |   |   | $ | 1,141 |   |
| Loans charged off:                           |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction and  land development |   |                            | (2,755 | )      |   |   | (1,778 | )      |   |   | (547   | )      |   |   | -      |   |   |   | - |   |
| Other real estate loans                      |   |                            | (3,714 | )      |   |   | (911   | )      |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Commercial and industrial                    |   |                            | (1,583 | )      |   |   | (738   | )      |   |   | (880   | )      |   |   | (13    | ) |   |   | (102 | ) |
| Consumer                                     |   |                            | (134   | )      |   |   | (78    | )      |   |   | (52    | )      |   |   | (4     | ) |   |   | (19 | ) |
| Other                                        |   |                            | -      |   |   |   | -      |   |   |   | -      |   |   |   | (14    | ) |   |   | - |   |
| Total loans charged off                      |   |                            | (8,186 | )      |   |   | (3,505 | )      |   |   | (1,479 | )      |   |   | (31    | ) |   |   | (121 | ) |
| Recoveries:                                  |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction and  land development |   |                            | 19     |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Other real estate loans                      |   |                            | -      |   |   |   | 1      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Commercial and industrial                    |   |                            | 27     |   |   |   | 42     |   |   |   | 22     |   |   |   | 4      |   |   |   | 6 |   |
| Consumer                                     |   |                            | 1      |   |   |   | 1      |   |   |   | 3      |   |   |   | -      |   |   |   | - |   |
| Other                                        |   |                            | -      |   |   |   | -      |   |   |   | 1      |   |   |   | 1      |   |   |   | - |   |
| Total recoveries                             |   |                            | 47     |   |   |   | 44     |   |   |   | 26     |   |   |   | 5      |   |   |   | 6 |   |
| Net charge-offs                              |   |                            | (8,139 | )      |   |   | (3,461 | )      |   |   | (1,453 | )      |   |   | (26    | ) |   |   | (115 | ) |
| Provision charged to operations              |   |                            | 5,800  |   |   |   | 5,056  |   |   |   | 4,245  |   |   |   | 150    |   |   |   | - |   |
| Allowance for loan and lease losses          |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at end of year                               |   | $                               | 3,198  |   |   | $      | 5,537  |   |   | $      | 3,942  |   |   | $      | 1,150  |   |   | $ | 1,026 |   |
|                                         |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of net charge-offs to average loans    |   |                            | 6.33   | %      |   |   | 2.33   | %      |   |   | 1.02   | %      |   |   | 0.02   | % |   |   | 0.10 | % |
| Ratio of provision to average loans          |   |                            | 4.51   | %      |   |   | 3.40   | %      |   |   | 2.98   | %      |   |   | 0.12   | % |   |   | 0.00 | % |

Table of Contents

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|                      |   | December 31, 2010 |    |
|---------------------------|--------|-------------------|---------|
|                      |   |              |    |   | Percent of Total |   |   | Allowance |   |   | Percent of Total |   |
| (dollars in thousands)    |   | Loans             |    |   | Loans |   |   | Allocation |   |   | Allowance |   |
| Unclassified loans:       |   |              |    |   |   |   |   |   |   |   |   |   |
| Commercial                |   | $                 | 16,699  |   |   |   | 13.9 | % |   | $ | 881 |   |   |   | 27.5 | % |
| Agricultural              |   |              | 1,022   |   |   |   | 0.9 | % |   |   | 32 |   |   |   | 1.0 | % |
| Leases                    |   |              | 1,036   |   |   |   | 0.9 | % |   |   | 10 |   |   |   | 0.3 | % |
| Municipal loans           |   |              | 2,987   |   |   |   | 2.5 | % |   |   | 19 |   |   |   | 0.6 | % |
| Real estate               |   |              | 85,201  |   |   |   | 70.8 | % |   |   | 1,106 |   |   |   | 34.6 | % |
| Construction              |   |              | 7,648   |   |   |   | 6.4 | % |   |   | 80 |   |   |   | 2.5 | % |
| Consumer                  |   |              | 1,482   |   |   |   | 1.2 | % |   |   | 93 |   |   |   | 2.9 | % |
| Total unclassified loans  |   |              | 116,075 |   |   |   | 96.6 | % |   |   | 2,221 |   |   |   | 69.4 | % |
| Classified loans:         |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                |   |              | 1,002   |   |   |   | 0.8 | % |   |   | 108 |   |   |   | 3.4 | % |
| Agricultural              |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Leases                    |   |              | 11      |   |   |   | 0.0 | % |   |   | 2 |   |   |   | 0.1 | % |
| Municipal loans           |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Real estate               |   |              | 1,804   |   |   |   | 1.5 | % |   |   | 260 |   |   |   | 8.1 | % |
| Construction              |   |              | 1,324   |   |   |   | 1.1 | % |   |   | 450 |   |   |   | 14.1 | % |
| Consumer                  |   |              | 9       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Total classified loans    |   |              | 4,150   |   |   |   | 3.4 | % |   |   | 820 |   |   |   | 25.7 | % |
| Other economic factors    |   |              |    |   |   |   |   |   |   |   | 157 |   |   |   | 4.9 | % |
| Total loans and allowance |   | $                 | 120,225 |   |   |   | 100.0 | % |   | $ | 3,198 |   |   |   | 100.0 | % |

Table of Contents

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|                      |   | December 31, 2009 |    |
|---------------------------|--------|-------------------|---------|
|                      |   |              |    |   | Percent of Total |   |   | Allowance |   |   | Percent of Total |   |
| (dollars in thousands)    |   | Loans             |    |   | Loans |   |   | Allocation |   |   | Allowance |   |
| Unclassified loans:       |   |              |    |   |   |   |   |   |   |   |   |   |
| Commercial                |   | $                 | 16,073  |   |   |   | 11.8 | % |   | $ | 690 |   |   |   | 12.4 | % |
| Agricultural              |   |              | 750     |   |   |   | 0.5 | % |   |   | 24 |   |   |   | 0.4 | % |
| Leases                    |   |              | 1,335   |   |   |   | 1.0 | % |   |   | 4 |   |   |   | 0.1 | % |
| Municipal loans           |   |              | 3,476   |   |   |   | 2.5 | % |   |   | 27 |   |   |   | 0.5 | % |
| Real estate               |   |              | 76,568  |   |   |   | 56.1 | % |   |   | 374 |   |   |   | 6.7 | % |
| Construction              |   |              | 5,296   |   |   |   | 3.9 | % |   |   | 125 |   |   |   | 2.3 | % |
| Consumer                  |   |              | 1,604   |   |   |   | 1.2 | % |   |   | 93 |   |   |   | 1.7 | % |
| Total unclassified loans  |   |              | 105,102 |   |   |   | 77.0 | % |   |   | 1,337 |   |   |   | 24.1 | % |
| Classified loans:         |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                |   |              | 3,560   |   |   |   | 2.6 | % |   |   | 288 |   |   |   | 5.2 | % |
| Agricultural              |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Leases                    |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Municipal loans           |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Real estate               |   |              | 20,388  |   |   |   | 15.0 | % |   |   | 3,260 |   |   |   | 58.9 | % |
| Construction              |   |              | 7,216   |   |   |   | 5.3 | % |   |   | 122 |   |   |   | 2.2 | % |
| Consumer                  |   |              | 144     |   |   |   | 0.1 | % |   |   | 17 |   |   |   | 0.3 | % |
| Total classified loans    |   |              | 31,308  |   |   |   | 23.0 | % |   |   | 3,687 |   |   |   | 66.6 | % |
| Other economic factors    |   |              |    |   |   |   |   |   |   |   | 513 |   |   |   | 9.3 | % |
| Total loans and allowance |   | $                 | 136,410 |   |   |   | 100.0 | % |   | $ | 5,537 |   |   |   | 100.0 | % |

|                      |   | December 31, 2008 |    |
|---------------------------|--------|-------------------|---------|
|                      |   |              |    |   | Percent of Total |   |   | Allowance |   |   | Percent of Total |   |
| (dollars in thousands)    |   | Loans             |    |   | Loans |   |   | Allocation |   |   | Allowance |   |
| Unclassified loans:       |   |              |    |   |   |   |   |   |   |   |   |   |
| Commercial                |   | $                 | 22,252  |   |   |   | 14.5 | % |   | $ | 860 |   |   |   | 21.8 | % |
| Agricultural              |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Leases                    |   |              | 1,491   |   |   |   | 1.0 | % |   |   | 14 |   |   |   | 0.4 | % |
| Municipal loans           |   |              | 2,729   |   |   |   | 1.8 | % |   |   | 16 |   |   |   | 0.4 | % |
| Real estate               |   |              | 88,735  |   |   |   | 57.9 | % |   |   | 719 |   |   |   | 18.2 | % |
| Construction              |   |              | 15,430  |   |   |   | 10.1 | % |   |   | 200 |   |   |   | 5.1 | % |
| Consumer                  |   |              | 3,723   |   |   |   | 2.4 | % |   |   | 91 |   |   |   | 2.3 | % |
| Total unclassified loans  |   |              | 134,360 |   |   |   | 87.7 | % |   |   | 1,900 |   |   |   | 48.2 | % |
| Classified loans:         |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                |   |              | 2,202   |   |   |   | 1.4 | % |   |   | 454 |   |   |   | 11.5 | % |
| Agricultural              |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Leases                    |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Municipal loans           |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Real estate               |   |              | 9,314   |   |   |   | 6.1 | % |   |   | 337 |   |   |   | 8.5 | % |
| Construction              |   |              | 7,427   |   |   |   | 4.8 | % |   |   | 1,057 |   |   |   | 26.9 | % |
| Consumer                  |   |              | 8       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Total classified loans    |   |              | 18,951  |   |   |   | 12.3 | % |   |   | 1,848 |   |   |   | 46.9 | % |
| Other economic factors    |   |              |    |   |   |   |   |   |   |   | 194 |   |   |   | 4.9 | % |
| Total loans and allowance |   | $                 | 153,311 |   |   |   | 100.0 | % |   | $ | 3,942 |   |   |   | 100.0 | % |

Table of Contents

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|                      |   | December 31, 2007 |    |
|---------------------------|--------|-------------------|---------|
|                      |   |              |    |   | Percent of Total |   |   | Allowance |   |   | Percent of Total |   |
| (dollars in thousands)    |   | Loans             |    |   | Loans |   |   | Allocation |   |   | Allowance |   |
| Unclassified loans:       |   |              |    |   |   |   |   |   |   |   |   |   |
| Commercial                |   | $                 | 25,238  |   |   |   | 20.0 | % |   | $ | 390 |   |   |   | 33.9 | % |
| Agricultural              |   |              | 122     |   |   |   | 0.1 | % |   |   | 1 |   |   |   | 0.1 | % |
| Leases                    |   |              | 811     |   |   |   | 0.6 | % |   |   | 7 |   |   |   | 0.6 | % |
| Municipal loans           |   |              | 2,789   |   |   |   | 2.2 | % |   |   | 14 |   |   |   | 1.2 | % |
| Real estate               |   |              | 72,009  |   |   |   | 57.0 | % |   |   | 261 |   |   |   | 22.7 | % |
| Construction              |   |              | 18,433  |   |   |   | 14.6 | % |   |   | 192 |   |   |   | 16.7 | % |
| Consumer                  |   |              | 2,491   |   |   |   | 2.0 | % |   |   | 22 |   |   |   | 1.9 | % |
| Total unclassified loans  |   |              | 121,893 |   |   |   | 96.5 | % |   |   | 887 |   |   |   | 77.1 | % |
| Classified loans:         |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                |   |              | 415     |   |   |   | 0.3 | % |   |   | 76 |   |   |   | 6.6 | % |
| Agricultural              |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Leases                    |   |              | 28      |   |   |   | 0.0 | % |   |   | 2 |   |   |   | 0.2 | % |
| Municipal loans           |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Real estate               |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Construction              |   |              | 4,080   |   |   |   | 3.2 | % |   |   | 30 |   |   |   | 2.6 | % |
| Consumer                  |   |              | 13      |   |   |   | 0.0 | % |   |   | 1 |   |   |   | 0.1 | % |
| Total classified loans    |   |              | 4,536   |   |   |   | 3.5 | % |   |   | 109 |   |   |   | 9.5 | % |
| Other economic factors    |   |              |    |   |   |   |   |   |   |   | 154 |   |   |   | 13.4 | % |
| Total loans and allowance |   | $                 | 126,429 |   |   |   | 100.0 | % |   | $ | 1,150 |   |   |   | 100.0 | % |

|                      |   | December 31, 2006 |    |
|---------------------------|--------|-------------------|---------|
|                      |   |              |    |   | Percent of Total |   |   | Allowance |   |   | Percent of Total |   |
| (dollars in thousands)    |   | Loans             |    |   | Loans |   |   | Allocation |   |   | Allowance |   |
| Unclassified loans:       |   |              |    |   |   |   |   |   |   |   |   |   |
| Commercial                |   | $                 | 17,855  |   |   |   | 14.6 | % |   | $ | 234 |   |   |   | 22.8 | % |
| Agricultural              |   |              | 123     |   |   |   | 0.1 | % |   |   | 1 |   |   |   | 0.1 | % |
| Leases                    |   |              | 1,041   |   |   |   | 0.8 | % |   |   | 5 |   |   |   | 0.5 | % |
| Municipal loans           |   |              | 2,903   |   |   |   | 2.4 | % |   |   | 15 |   |   |   | 1.5 | % |
| Real estate               |   |              | 66,591  |   |   |   | 54.2 | % |   |   | 313 |   |   |   | 30.5 | % |
| Construction              |   |              | 29,710  |   |   |   | 24.2 | % |   |   | 135 |   |   |   | 13.2 | % |
| Consumer                  |   |              | 2,502   |   |   |   | 2.0 | % |   |   | 20 |   |   |   | 1.9 | % |
| Total unclassified loans  |   |              | 120,725 |   |   |   | 98.3 | % |   |   | 723 |   |   |   | 70.5 | % |
| Classified loans:         |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                |   |              | 145     |   |   |   | 0.1 | % |   |   | 30 |   |   |   | 2.9 | % |
| Agricultural              |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Leases                    |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Municipal loans           |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Real estate               |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Construction              |   |              | 1,929   |   |   |   | 1.6 | % |   |   | - |   |   |   | 0.0 | % |
| Consumer                  |   |              | -       |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Total classified loans    |   |              | 2,074   |   |   |   | 1.7 | % |   |   | 30 |   |   |   | 2.9 | % |
| Other economic factors    |   |              |    |   |   |   |   |   |   |   | 273 |   |   |   | 26.6 | % |
| Total loans and allowance |   | $                 | 122,799 |   |   |   | 100.0 | % |   | $ | 1,026 |   |   |   | 100.0 | % |

Table of Contents

----

| Maturities of Time Deposits of $100,000 or More |   |                   |   |
|-------------------------------------------------|--------|------------------------|--------|
|                                            |   | (Dollars in thousands) |   |
| Three months or less                            |   | $                      | 19,701 |   |
| Three months to six months                      |   |                   | 12,762 |   |
| Six months to one year                          |   |                   | 17,919 |   |
| Over one year                                   |   |                   | 9,541  |   |
| Total time deposits of $100,000 or more         |   | $                      | 59,923 |   |

| Long-Term Contractual Obligations |   |                   |   |   |     |   |   |     |   |   |      |   |   |
|-----------------------------------|--------|------------------------|--------|--------|----------|--------|--------|----------|--------|--------|-----------|--------|--------|
|                              |   |                   |   |   |     |   |   |     |   |   |      |   |   |   |   |
|                              |   | Less than              |   |   | 1 thru 3 |   |   | 3 thru 5 |   |   | More than |   |   |   |   |
|                              |   | 1 year                 |   |   | years    |   |   | years    |   |   | 5 years   |   |   | Total |   |
|                              |   | (Dollars in thousands) |   |
| Borrowed funds                    |   | $                      | 349    |   |     | $      | -      |     |   | $      | -         |   |   | $ | - |   |   | $ | 349 |   |
| Junior subordinated debentures    |   |                   | -      |   |     |   | -      |     |   |   | -         |   |   |   | 3,093 |   |   |   | 3,093 |   |
| Operating leases                  |   |                   | 815    |   |     |   | 1,439  |     |   |   | 1,134     |   |   |   | 4,869 |   |   |   | 8,257 |   |
| Capital leases                    |   |                   | -      |   |     |   | -      |     |   |   | -         |   |   |   | - |   |   |   | - |   |
| Purchase obligations              |   |                   | -      |   |     |   | -      |     |   |   | -         |   |   |   | - |   |   |   | - |   |
| Other long-term liabilities       |   |                   | 425    |   |     |   | -      |     |   |   | -         |   |   |   | - |   |   |   | 425 |   |
| Total contractual obligations     |   | $                      | 1,589  |   |     | $      | 1,439  |     |   | $      | 1,134     |   |   | $ | 7,962 |   |   | $ | 12,124 |   |

| Interest Sensitivity - Static Gap Analysis  |   |                             |   |   |   |    |    |   |   |   |   |   |   |      |      |   |   |   |
|---------------------------------------------|--------|----------------------------------|--------|--------|--------|---------|---------|--------|--------|--------|--------|--------|--------|-----------|-----------|--------|--------|--------|
| December 31, 2010                           |   | Sensitive to Rate Changes Within |   |   |   |    |    |   |   |
|                                        |   |                             | 3      |   |   | 4 to 12 |    |   | 1 to 5 |   |   | Over 5 |   |      | Non-Rate- |   |   |   |   |
|                                        |   | Months                           |   |   | Months |    |    | Years  |   |   | Years  |   |   | Sensitive |      |   | Total  |   |
|                                        |   | (Dollars in thousands)           |   |
| Earning Assets:                             |   |                             |   |   |   |    |    |   |   |   |   |   |   |      |      |   |   |   |   |
| Loans, net of unearned income               |   | $                                | 34,091 |   |   | $       | 19,049  |   |   | $      | 42,718 |   |   | $         | 24,367    |   |   | $      | - |   |   | $ | 120,225 |   |
| Investment securities                       |   |                             | 5,453  |   |   |    | 11,371  |   |   |   | 47,990 |   |   |      | 10,621    |   |   |   | - |   |   |   | 75,435 |   |
| Other earning assets                        |   |                             | 10,305 |   |   |    | 50      |   |   |   | -      |   |   |      | -         |   |   |   | - |   |   |   | 10,355 |   |
| Non-interest-earning assets                 |   |                             | -      |   |   |    | -       |   |   |   | -      |   |   |      | -         |   |   |   | 11,786 |   |   |   | 11,786 |   |
| Total assets                                |   |                             | 49,849 |   |   |    | 30,470  |   |   |   | 90,708 |   |   |      | 34,988    |   |   |   | 11,786 |   |   |   | 217,801 |   |
|                                        |   |                             |   |   |   |    |    |   |   |   |   |   |   |      |      |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Liabilities:               |   |                             |   |   |   |    |    |   |   |   |   |   |   |      |      |   |   |   |   |   |   |   |   |   |
| Non-maturity interest-bearing deposits      |   |                             | 23,819 |   |   |    | -       |   |   |   | 46,191 |   |   |      | -         |   |   |   | - |   |   |   | 70,010 |   |
| Certificates of deposit                     |   |                             | 25,007 |   |   |    | 39,681  |   |   |   | 15,632 |   |   |      | -         |   |   |   | - |   |   |   | 80,320 |   |
| Borrowed funds                              |   |                             | 349    |   |   |    | -       |   |   |   | -      |   |   |      | -         |   |   |   | - |   |   |   | 349 |   |
| Junior subordinated debentures              |   |                             | 3,093  |   |   |    | -       |   |   |   | -      |   |   |      | -         |   |   |   | - |   |   |   | 3,093 |   |
| Non-interest-bearing liabilities and equity |   |                             | -      |   |   |    | -       |   |   |   | -      |   |   |      | -         |   |   |   | 64,029 |   |   |   | 64,029 |   |
| Total liabilities and equity                |   |                             | 52,268 |   |   |    | 39,681  |   |   |   | 61,823 |   |   |      | -         |   |   |   | 64,029 |   |   |   | 217,801 |   |
|                                        |   |                             |   |   |   |    |    |   |   |   |   |   |   |      |      |   |   |   |   |   |   |   |   |   |
| Interest rate sensitivity gap               |   | $                                | (2,419 | )      |   | $       | (9,211  | )      |   | $      | 28,885 |   |   | $         | 34,988    |   |   | $      | (52,243 | ) |   | $ | - |   |
|                                        |   |                             |   |   |   |    |    |   |   |   |   |   |   |      |      |   |   |   |   |   |   |   |   |   |
| Cumulative interest rate sensitivity gap    |   | $                                | (2,419 | )      |   | $       | (11,630 | )      |   | $      | 17,255 |   |   | $         | 52,243    |   |   | $      | - |   |   |   |   |   |
|                                        |   |                             |   |   |   |    |    |   |   |   |   |   |   |      |      |   |   |   |   |   |   |   |   |   |
| Cumulative gap to total earning assets      |   |                             | -1     | %      |   |    | -5      | %      |   |   | 8      | %      |   |      | 24        | %      |   |   |   |   |   |   |   |   |

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|                            |   | 2010   |   |   | 2009   |   |   | 2008 |   |   | 2007   |   |   | 2006   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|--------|--------|--------|--------|--------|
| Return (Loss) on Average Assets |   |   | (3.26  | )%     |   |   | (3.19  | )%   |   |   | (2.02  | )%     |   |   | 0.48   | % |   |   | 0.58 | % |
| Return (Loss) on Average Equity |   |   | (21.62 | )%     |   |   | (27.94 | )%   |   |   | (20.86 | )%     |   |   | 6.07   | % |   |   | 7.53 | % |

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|   | Item 8.  Financial Statements |
|--------|-----------------------------------------|

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RE

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MIS

|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2010   |        |   | 2009   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|  ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |        |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |        |   |   |   |
|  Cash and Due from Banks                                                                                                                                                                                                                                                                                                                                                                                                           |   | $      | 10,816,850  |   |   | $      | 8,595,410 |   |
|  Federal Funds Sold                                                                                                                                                                                                                                                                                                                                                                                                                |   |   | -           |   |   |   | - |   |
|                                  TOTAL CASH AND CASH EQUIVALENTS                                                                                                                                                                                                   |   |   | 10,816,850  |   |   |   | 8,595,410 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |        |   |   |   |   |   |
|  Certificates of Deposit in Other Banks                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 550,000     |   |   |   | 425,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |        |   |   |   |   |   |
|  Investment Securities Available for Sale                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 75,434,942  |   |   |   | 40,142,412 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |        |   |   |   |   |   |
|  Loans Held For Sale                                                                                                                                                                                                                                                                                                                                                                                                               |   |   | 15,114,520  |   |   |   | 903,680 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |        |   |   |   |   |   |
|  Loans:                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |        |   |   |   |   |   |
|    Commercial and Industrial                                                                                                                                                                                                                                                                                                                                                                                             |   |   | 20,655,933  |   |   |   | 22,200,974 |   |
|    Agricultural                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 1,022,394   |   |   |   | 749,721 |   |
|    Leases, Net of Unearned Income                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 1,047,412   |   |   |   | 1,334,740 |   |
|    Construction and Land Development                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 4,434,674   |   |   |   | 12,511,994 |   |
|    Real Estate                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 76,459,659  |   |   |   | 96,954,983 |   |
|    Consumer                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | 1,490,631   |   |   |   | 1,754,054 |   |
|                                                                    TOTAL LOANS           |   |   | 105,110,703 |   |   |   | 135,506,466 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |        |   |   |   |   |   |
|  Allowance for Loan and Lease Losses                                                                                                                                                                                                                                                                                                                                                                                               |   |   | (3,197,636  | )      |   |   | (5,536,929 | ) |
|                                                                      NET LOANS |   |   | 101,913,067 |   |   |   | 129,969,537 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |        |   |   |   |   |   |
|  Federal Home Loan Bank Stock and Other Stock, at Cost                                                                                                                                                                                                                                                                                                                                                                             |   |   | 2,682,146   |   |   |   | 3,002,575 |   |
|  Premises and Equipment                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 3,199,228   |   |   |   | 3,254,511 |   |
|  Other Real Estate Owned                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 3,136,879   |   |   |   | 2,205,882 |   |
|  Company-Owned Life Insurance                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 2,979,429   |   |   |   | 2,885,659 |   |
|  Accrued Interest and Other Assets                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | 1,973,854   |   |   |   | 1,720,799 |   |
|  TOTAL ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $      | 217,800,915 |   |   | $      | 193,105,465 |   |

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|                                                                                                            |   | 2010   |        |   | 2009   |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|  LIABILITIES AND SHAREHOLDERS' EQUITY                                                                      |   |   |        |   |   |   |
|                                                                                                            |   |   |        |   |   |   |
|  Deposits:                                                                                                 |   |   |        |   |   |   |
|     Noninterest-Bearing Demand                                                              |   | $      | 22,910,002  |   |   | $      | 24,615,530 |   |
|     Money Market, NOW and Savings                                                           |   |   | 70,010,249  |   |   |   | 54,144,513 |   |
|     Time Deposits Under $100,000                                                            |   |   | 20,396,708  |   |   |   | 32,064,624 |   |
|     Time Deposits $100,000 and Over                                                         |   |   | 59,922,872  |   |   |   | 52,945,030 |   |
|  TOTAL DEPOSITS                                                                                            |   |   | 173,239,831 |   |   |   | 163,769,697 |   |
|                                                                                                            |   |   |        |   |   |   |   |   |
|  Other Borrowings                                                                                          |   |   | 349,458     |   |   |   | 6,000,000 |   |
|  Junior Subordinated Debt Securities                                                                       |   |   | 3,093,000   |   |   |   | 3,093,000 |   |
|  Accrued Interest and Other Liabilities                                                                    |   |   | 1,975,138   |   |   |   | 1,605,053 |   |
|  TOTAL LIABILITIES                                                                                         |   |   | 178,657,427 |   |   |   | 174,467,750 |   |
|                                                                                                            |   |   |        |   |   |   |   |   |
|  Commitments and Contingencies - Notes E and N                                                             |   |   |        |   |   |   |   |   |
|                                                                                                            |   |   |        |   |   |   |   |   |
|  Shareholders' Equity:                                                                                     |   |   |        |   |   |   |   |   |
|     Preferred Stock - Authorized 10,000,000 Shares:                                         |   |   |        |   |   |   |   |   |
|        Series A - $5 Stated Value; 100,000 Issued and Outstanding            |   |   |        |   |   |   |   |   |
|           Liquidation Value of $500,000                       |   |   | 392,194     |   |   |   | 392,194 |   |
|        Series B - $10 Stated Value; 20,500 Issued and Outstanding            |   |   |        |   |   |   |   |   |
|           Liquidation Value of $205,000                       |   |   | 191,606     |   |   |   | 191,606 |   |
|        Series C - $10 Stated Value; 50,000 Issued and Outstanding            |   |   |        |   |   |   |   |   |
|           Liquidation Value of $500,000                       |   |   | 500,000     |   |   |   | 500,000 |   |
|        Series D - $1,000 Par Value; 5,116 shares Issued and Outstanding      |   |   |        |   |   |   |   |   |
|           Liquidation Value of $5,116,000                     |   |   | 5,067,722   |   |   |   | 5,067,722 |   |
|     Common Stock - Authorized 50,000,000 Shares;                                            |   |   |        |   |   |   |   |   |
|         Issued and Outstanding: 7,094,274 in 2010 and 1,345,602 in 2009 |   |   | 46,426,603  |   |   |   | 18,041,851 |   |
|     Additional Paid-In Capital                                                              |   |   | 327,500     |   |   |   | 242,210 |   |
|     Retained Deficit                                                                        |   |   | (13,219,986 | )      |   |   | (6,280,239 | ) |
|     Accumulated Other Comprehensive (Loss) Income - Unrealized                              |   |   |        |   |   |   |   |   |
|         (Depreciation) Appreciation on Available-for-Sale Securities    |   |   | (542,151    | )      |   |   | 482,371 |   |
|  TOTAL SHAREHOLDERS' EQUITY                                                                                |   |   | 39,143,488  |   |   |   | 18,637,715 |   |
|  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                |   | $      | 217,800,915 |   |   | $      | 193,105,465 |   |

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MISS

|                                                                |   | 2010   |       |   | 2009   |   |
|---------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|  INTEREST INCOME                                               |   |   |       |   |   |   |
|  Interest and Fees on Loans                                    |   | $      | 7,538,488  |   |   | $      | 8,889,166 |   |
|  Interest on Investment Securities                             |   |   | 1,296,418  |   |   |   | 1,259,017 |   |
|  Other Interest Income                                         |   |   | 46,792     |   |   |   | 134,476 |   |
|  TOTAL INTEREST INCOME                                         |   |   | 8,881,698  |   |   |   | 10,282,659 |   |
|  INTEREST EXPENSE                                              |   |   |       |   |   |   |   |   |
|  Interest on Money Market, NOW and Savings Deposits            |   |   | 482,769    |   |   |   | 514,393 |   |
|  Interest on Time Deposits                                     |   |   | 1,192,354  |   |   |   | 2,150,036 |   |
|  Other Interest Expense                                        |   |   | 316,161    |   |   |   | 1,212,181 |   |
|  TOTAL INTEREST EXPENSE                                        |   |   | 1,991,284  |   |   |   | 3,876,610 |   |
|  NET INTEREST INCOME                                           |   |   | 6,890,414  |   |   |   | 6,406,049 |   |
|  Provision for Loan and Lease Losses                           |   |   | 5,800,000  |   |   |   | 5,055,722 |   |
|  NET INTEREST INCOME AFTER PROVISION                           |   |   |       |   |   |   |   |   |
|  FOR LOAN AND LEASE LOSSES                                     |   |   | 1,090,414  |   |   |   | 1,350,327 |   |
|  NON-INTEREST INCOME                                           |   |   |       |   |   |   |   |   |
|  Service Charges on Deposit Accounts                           |   |   | 353,676    |   |   |   | 333,583 |   |
|  Gain on Sale of Loans                                         |   |   | 430,317    |   |   |   | 379,186 |   |
|  Loan Servicing Fees, Net of Amortization                      |   |   | 134,747    |   |   |   | 114,049 |   |
|  Grants and Awards                                             |   |   | 600,000    |   |   |   | 80,948 |   |
|  Loss or Writedown of Fixed Assets and Other Real Estate Owned |   |   | (486,422   | )      |   |   | (474,565 | ) |
|  Gain on Sale of Available-For-Sale Securities                 |   |   | 497,224    |   |   |   | 246,982 |   |
|  Other Income and Fees                                         |   |   | 182,032    |   |   |   | 153,084 |   |
|  TOTAL NON-INTEREST INCOME                                     |   |   | 1,711,574  |   |   |   | 833,267 |   |
|  NON-INTEREST EXPENSE                                          |   |   |       |   |   |   |   |   |
|  Salaries and Employee Benefits                                |   |   | 4,034,552  |   |   |   | 3,816,574 |   |
|  Occupancy Expenses                                            |   |   | 1,269,807  |   |   |   | 1,002,440 |   |
|  Furniture and Equipment                                       |   |   | 460,007    |   |   |   | 456,878 |   |
|  Data Processing                                               |   |   | 743,786    |   |   |   | 740,870 |   |
|  Professional Fees                                             |   |   | 588,984    |   |   |   | 478,353 |   |
|  Marketing and Business Development                            |   |   | 144,726    |   |   |   | 176,758 |   |
|  Office Supplies and Expenses                                  |   |   | 238,135    |   |   |   | 255,609 |   |
|  Insurance and Regulatory Assessments                          |   |   | 702,327    |   |   |   | 634,657 |   |
|  Loan and Lease Expenses                                       |   |   | 192,867    |   |   |   | 142,636 |   |
|  Other Real Estate Expenses                                    |   |   | 190,750    |   |   |   | 36,264 |   |
|  Fees Paid on Prepayment of Borrowed Funds                     |   |   | 377,966    |   |   |   | - |   |
|  Other Expenses                                                |   |   | 542,028    |   |   |   | 534,163 |   |
|  TOTAL NON-INTEREST EXPENSE                                    |   |   | 9,485,935  |   |   |   | 8,275,202 |   |
|  LOSS BEFORE INCOME TAXES                                      |   |   | (6,683,947 | )      |   |   | (6,091,608 | ) |
|  Income Tax Expense                                            |   |   | -          |   |   |   | 834,951 |   |
|  NET LOSS                                                      |   | $      | (6,683,947 | )      |   | $      | (6,926,559 | ) |
|                                                                |   |   |       |   |   |   |   |   |
|  Per Share Data (Note O):                                      |   |   |       |   |   |   |   |   |
|     Net Loss - Basic                            |   | $      | (1.54      | )      |   | $      | (4.87 | ) |

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|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       | Accumulated   |   |     |        |   |
|--------------------------------------------|--------|-----------|-----------|--------|--------------|--------|-----------|---------|--------|--------|---------------|--------|--------|----------|---------|--------|---------------|--------|------------|---------------|--------|----------|-------------|--------|
|                                       |   |      |      |   |         |   |      |    |   |   | Additional    |   |   |     |    |   | Retained      |   |       | Other         |   |     |        |   |
|                                       |   | Preferred |      |   | Common Stock |   |      | Paid-In |   |   | Comprehensive |   |   | Earnings |    |   | Comprehensive |   |       |          |   |
|                                       |   | Stock     |      |   | Shares       |   |      | Amount  |   |   | Capital       |   |   | Loss     |    |   | (Deficit)     |   |       | Income (Loss) |   |     | Total       |   |
|  Balance at                           |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |
|     January 1, 2009    |   | $         | 1,083,800 |   |         |   | 1,345,602 |    |   | $      | 18,041,851    |   |   | $        | 172,285 |   |          |   |       |          | $      | 863,750  |        |   | $ | 355,137 |   |   | $ | 20,516,823 |   |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |
|  Issuance of Series D preferred stock |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |
|  to U.S. Treasury under TARP,         |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |
|  net of issuance costs of $48,278     |   | $         | 5,067,722 |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   | $ | 5,067,722 |   |
|  TARP dividends paid                  |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          | $      | (217,430 | )           |   |   |   |   |   |   | (217,430 | ) |
|  Stock-based compensation             |   |      |      |   |         |   |      |    |   |   |          |   |   | $        | 69,925  |   |          |   |       |          |   |     |        |   |   |   |   |   |   | 69,925 |   |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |
|  Comprehensive Loss:                  |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |
|  Net loss                             |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          | $      | (6,926,559 | )             |   |     | (6,926,559  | )      |   |   |   |   |   |   | (6,926,559 | ) |
|  Less beginning of year unrealized    |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  gain on securities sold during       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  the period, net of taxes of $-0-     |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   | (271,447   | )             |   |     |        |   |   | $ | (271,447 | ) |   |   | (271,447 | ) |
|  Plus net unrealized gain on          |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  available-for-sale securities,       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  net of taxes of $-0-                 |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   | 398,681    |          |   |     |        |   |   |   | 398,681 |   |   |   | 398,681 |   |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|    Total Comprehensive Loss |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          | $      | (6,799,325 | )             |   |     |        |   |   |   |   |   |   |   |   |   |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  Balance at                           |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|     December 31, 2009  |   | $         | 6,151,522 |   |         |   | 1,345,602 |    |   | $      | 18,041,851    |   |   | $        | 242,210 |   |          |   |       |          |   | $        | (6,280,239  | )      |   | $ | 482,371 |   |   | $ | 18,637,715 |   |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock             |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  in private placement, net            |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  of offering expenses of $181,728     |   |      |      |   |         |   | 5,000,000 |    |   | $      | 24,818,272    |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   | $ | 24,818,272 |   |
|  Issuance of common stock             |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  in shareholder rights offering, net  |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  of offering expenses of $176,880     |   |      |      |   |         |   | 748,672   |    |   |   | 3,566,480     |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   | 3,566,480 |   |
|  TARP dividends paid                  |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   | $        | (255,800    | )      |   |   |   |   |   |   | (255,800 | ) |
|  Stock-based compensation             |   |      |      |   |         |   |      |    |   |   |          |   |   | $        | 85,290  |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   | 85,290 |   |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  Comprehensive Loss:                  |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  Net loss                             |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          | $      | (6,683,947 | )             |   |     | (6,683,947  | )      |   |   |   |   |   |   | (6,683,947 | ) |
|  Less beginning of year unrealized    |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  gain on securities sold during       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  the period, net of taxes of $-0-     |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   | (173,478   | )             |   |     |        |   |   | $ | (173,478 | ) |   |   | (173,478 | ) |
|  Net unrealized (loss) on             |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  available-for-sale securities,       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  net of taxes of $-0-                 |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   | (851,044   | )             |   |     |        |   |   |   | (851,044 | ) |   |   | (851,044 | ) |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|    Total Comprehensive Loss |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          | $      | (7,708,469 | )             |   |     |        |   |   |   |   |   |   |   |   |   |
|                                       |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|  Balance at                           |   |      |      |   |         |   |      |    |   |   |          |   |   |     |    |   |          |   |       |          |   |     |        |   |   |   |   |   |   |   |   |   |
|     December 31, 2010  |   | $         | 6,151,522 |   |         |   | 7,094,274 |    |   | $      | 46,426,603    |   |   | $        | 327,500 |   |          |   |       |          |   | $        | (13,219,986 | )      |   | $ | (542,151 | ) |   | $ | 39,143,488 |   |

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MIS

|                                                                                |   | 2010   |        |   | 2009   |   |
|-------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|  OPERATING ACTIVITIES                                                          |   |   |        |   |   |   |
|  Net loss                                                                      |   | $      | (6,683,947  | )      |   | $      | (6,926,559 | ) |
|  Adjustments to reconcile net loss                                             |   |   |        |   |   |   |   |   |
|  to net cash provided by (used in) operating activities:                       |   |   |        |   |   |   |   |   |
|  Provision for deferred income taxes                                           |   |   | -           |   |   |   | 832,551 |   |
|  Depreciation                                                                  |   |   | 508,011     |   |   |   | 440,940 |   |
|  Amortization of premium (accretion of discount) on securities and loans, net  |   |   | 479,010     |   |   |   | (136,294 | ) |
|  Provision for loan losses                                                     |   |   | 5,800,000   |   |   |   | 5,055,722 |   |
|  Provision for losses on unfunded loan commitments                             |   |   | -           |   |   |   | 35,000 |   |
|  Stock-based compensation                                                      |   |   | 85,290      |   |   |   | 69,925 |   |
|  (Gain) on sale of securities                                                  |   |   | (497,224    | )      |   |   | (246,982 | ) |
|  Write-downs on other real estate                                              |   |   | 486,422     |   |   |   | 472,019 |   |
|  Loss on disposal or abandonment of fixed assets                               |   |   | -           |   |   |   | 2,545 |   |
|  Gain on loan sales                                                            |   |   | (430,317    | )      |   |   | (379,186 | ) |
|  Proceeds from loan sales                                                      |   |   | 6,366,634   |   |   |   | 6,250,455 |   |
|  Loans originated for sale                                                     |   |   | (4,787,727  | )      |   |   | (5,780,076 | ) |
|  Increase in company owned life insurance                                      |   |   | (93,770     | )      |   |   | (96,293 | ) |
|  (Increase) decrease in accrued taxes receivable                               |   |   | (2,400      | )      |   |   | 617,932 |   |
|  Other, net                                                                    |   |   | 23,704      |   |   |   | (308,972 | ) |
|  NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                           |   |   | 1,253,686   |   |   |   | (97,273 | ) |
|                                                                                |   |   |        |   |   |   |   |   |
|  INVESTING ACTIVITIES                                                          |   |   |        |   |   |   |   |   |
|  Net decrease (increase) in Federal Home Loan Bank and other stock             |   |   | 312,100     |   |   |   | (246,050 | ) |
|  Maturity (placement) of time deposits in other banks                          |   |   | (125,000    | )      |   |   | 11,285,000 |   |
|  Purchase of available-for-sale securities                                     |   |   | (78,811,493 | )      |   |   | (34,441,942 | ) |
|  Proceeds from maturities, calls and paydowns of available-for-sale securities |   |   | 18,411,337  |   |   |   | 10,399,966 |   |
|  Proceeds from sales of available-for-sale securities                          |   |   | 24,012,103  |   |   |   | 9,135,234 |   |
|  Net decrease in loans                                                         |   |   | 4,729,528   |   |   |   | 11,819,537 |   |
|  Additional investments in other real estate owned                             |   |   | (80,948     | )      |   |   | - |   |
|  Proceeds from sale of other real estate owned                                 |   |   | 1,024,311   |   |   |   | - |   |
|  Purchases of premises and equipment                                           |   |   | (452,728    | )      |   |   | (1,099,299 | ) |
|  NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                           |   |   | (30,980,790 | )      |   |   | 6,852,446 |   |
|                                                                                |   |   |        |   |   |   |   |   |
|  FINANCING ACTIVITIES                                                          |   |   |        |   |   |   |   |   |
|  Net increase in demand deposits and savings accounts                          |   |   | 14,160,208  |   |   |   | 23,289,704 |   |
|  Net decrease in time deposits                                                 |   |   | (4,690,074  | )      |   |   | (4,324,065 | ) |
|  Net decrease in other borrowings                                              |   |   | (5,650,542  | )      |   |   | (39,700,000 | ) |
|  Proceeds from issuance of common stock, net of issuance costs                 |   |   | 28,384,752  |   |   |   | - |   |
|  Proceeds from issuance of preferred stock, net of issuance costs              |   |   | -           |   |   |   | 5,067,722 |   |
|  Payment of dividends                                                          |   |   | (255,800    | )      |   |   | (217,430 | ) |
|  NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                           |   |   | 31,948,544  |   |   |   | (15,884,069 | ) |
|                                                                                |   |   |        |   |   |   |   |   |
|  NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          |   |   | 2,221,440   |   |   |   | (9,128,896 | ) |
|  Cash and cash equivalents at beginning of year                                |   |   | 8,595,410   |   |   |   | 17,724,306 |   |
|  CASH AND CASH EQUIVALENTS AT END OF YEAR                                      |   | $      | 10,816,850  |   |   | $      | 8,595,410 |   |
|                                                                                |   |   |        |   |   |   |   |   |
|  Supplemental disclosures of cash flow information:                            |   |   |        |   |   |   |   |   |
|  Interest paid                                                                 |   | $      | 2,063,988   |   |   | $      | 4,039,470 |   |
|  Taxes paid (refunds received)                                                 |   |   | 2,400       |   |   |   | (615,532 | ) |
|  Supplemental schedule of non-cash investing activities:                       |   |   |        |   |   |   |   |   |
|  Unrealized (loss) gain on available-for-sale securities                       |   | $      | (1,024,522  | )      |   | $      | 127,234 |   |
|  Real estate acquired by foreclosure                                           |   |   | 2,360,782   |   |   |   | 1,694,801 |   |
|  Loans transferred from held for investment to held for sale                   |   |   | 16,924,504  |   |   |   | - |   |

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|                         |   | 2010   |    |   | 2009   |   |
|------------------------------|--------|--------|---------|--------|--------|--------|
|                         |   |   |    |   |   |   |
| Balance at Beginning of Year |   | $      | 197,096 |   |   | $      | 187,388 |   |
| Additions to the Asset       |   |   | 92,341  |   |   |   | 104,979 |   |
| Less amortization            |   |   | (87,975 | )      |   |   | (95,271 | ) |
| Balance at End of Year       |   | $      | 201,462 |   |   | $      | 197,096 |   |
|                         |   |   |    |   |   |   |   |   |

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| Level 1: | Quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date. |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Level 2: | Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data. |
|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Level 3: | Model based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Bank’s estimate of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management judgment and estimation which may be significant. |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                           |   |      |       |   | Gross      |   |    | Gross      |   |   | Estimated |   |
|--------------------------------|--------|-----------|------------|--------|------------|--------|---------|------------|--------|--------|-----------|--------|
|                           |   | Amortized |       |   | Unrealized |   |    | Unrealized |   |   | Market    |   |
|                           |   | Cost      |       |   | Gains      |   |    | Losses     |   |   | Value     |   |
| Securities Available-for-Sale: |   |      |       |   |       |   |    |       |   |   |      |   |
| December 31, 2010:             |   |      |       |   |       |   |    |       |   |   |      |   |
| U.S. Government agencies       |   | $         | 21,083,113 |   |       | $      | 47,330  |       |   | $      | (269,708  | )      |   | $ | 20,860,735 |   |
| Mortgage-backed securities     |   |      | 49,831,343 |   |       |   | 214,719 |       |   |   | (566,253  | )      |   |   | 49,479,809 |   |
| Municipal securities           |   |      | 2,917,460  |   |       |   | 19,946  |       |   |   | (15,157   | )      |   |   | 2,922,249 |   |
| Corporate debt securities      |   |      | 1,980,033  |   |       |   | 20,417  |       |   |   | -         |   |   |   | 2,000,450 |   |
| Asset-backed securities        |   |      | 165,144    |   |       |   | 6,555   |       |   |   | -         |   |   |   | 171,699 |   |
|                           |   | $         | 75,977,093 |   |       | $      | 308,967 |       |   | $      | (851,118  | )      |   | $ | 75,434,942 |   |
|                           |   |      |       |   |       |   |    |       |   |   |      |   |   |   |   |   |
| December 31, 2009:             |   |      |       |   |       |   |    |       |   |   |      |   |   |   |   |   |
| U.S. Government agencies       |   | $         | 15,442,231 |   |       | $      | 40,425  |       |   | $      | (14,139   | )      |   | $ | 15,468,517 |   |
| Mortgage-backed securities     |   |      | 16,631,325 |   |       |   | 243,491 |       |   |   | (40,158   | )      |   |   | 16,834,658 |   |
| Municipal securities           |   |      | 2,917,693  |   |       |   | 61,066  |       |   |   | (5,235    | )      |   |   | 2,973,524 |   |
| Corporate debt securities      |   |      | 2,840,493  |   |       |   | 147,297 |       |   |   | -         |   |   |   | 2,987,790 |   |
| Asset-backed securities        |   |      | 1,828,299  |   |       |   | 49,624  |       |   |   | -         |   |   |   | 1,877,923 |   |
|                           |   | $         | 39,660,041 |   |       | $      | 541,903 |       |   | $      | (59,532   | )      |   | $ | 40,142,412 |   |

|                           |   | Available-for-Sale Securities |       |
|--------------------------------|--------|-------------------------------|------------|
|                           |   | Amortized                     |       |   | Fair |   |
|                           |   | Cost                          |       |   | Value |   |
|                           |   |                          |       |   |   |   |
| Within one year                |   | $                             | 1,982,038  |   |   | $ | 2,002,469 |   |
| Due in one year to five years  |   |                          | 20,099,986 |   |   |   | 19,877,424 |   |
| Due in five years to ten years |   |                          | 15,676,003 |   |   |   | 15,675,043 |   |
| Due in greater than ten years  |   |                          | 38,219,066 |   |   |   | 37,880,006 |   |
|                           |   | $                             | 75,977,093 |   |   | $ | 75,434,942 |   |

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|                       |   | Less than 12 Months |       |   | 12 Months or Longer |   |    | Total  |   |
|----------------------------|--------|---------------------|------------|--------|---------------------|--------|---------|--------|--------|
|                       |   | Fair                |       |   | Unrealized          |   |    | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                       |   | Value               |       |   | Losses              |   |    | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| December 31, 2010:         |   |                |       |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies   |   | $                   | 15,984,370 |   |                | $      | 269,708 |   |   | $ | - |   |   | $ | - |   |   | $ | 15,984,370 |   |   | $ | 269,708 |   |
| Mortgage-backed securities |   |                | 37,274,270 |   |                |   | 566,253 |   |   |   | - |   |   |   | - |   |   |   | 37,274,270 |   |   |   | 566,253 |   |
| Municipal securities       |   |                | 1,169,107  |   |                |   | 15,157  |   |   |   | - |   |   |   | - |   |   |   | 1,169,107 |   |   |   | 15,157 |   |
|                       |   | $                   | 54,427,747 |   |                | $      | 851,118 |   |   | $ | - |   |   | $ | - |   |   | $ | 54,427,747 |   |   | $ | 851,118 |   |
|                       |   |                |       |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009:         |   |                |       |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies   |   | $                   | 4,420,862  |   |                | $      | 14,139  |   |   | $ | - |   |   | $ | - |   |   | $ | 4,420,862 |   |   | $ | 14,139 |   |
| Mortgage-backed securities |   |                | 5,712,226  |   |                |   | 40,158  |   |   |   | - |   |   |   | - |   |   |   | 5,712,226 |   |   |   | 40,158 |   |
| Municipal securities       |   |                | 875,414    |   |                |   | 5,235   |   |   |   | - |   |   |   | - |   |   |   | 875,414 |   |   |   | 5,235 |   |
|                       |   | $                   | 11,008,502 |   |                | $      | 59,532  |   |   | $ | - |   |   | $ | - |   |   | $ | 11,008,502 |   |   | $ | 59,532 |   |

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|                                                          |   | 2010   |       |   | 2009   |   |
|---------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                          |   |   |       |   |   |   |
| Balance at Beginning of Year                                  |   | $      | 5,536,929  |   |   | $      | 3,942,219 |   |
| Provision for Loan and Lease Losses Charged to Expense        |   |   | 5,800,000  |   |   |   | 5,055,722 |   |
| Loans Charged Off:                                            |   |   |       |   |   |   |   |   |
| Loans Held for Investment                                     |   |   | (2,697,683 | )      |   |   | (3,504,435 | ) |
| Fair Value Adjustments Upon Reclassification to Held for Sale |   |   | (5,488,275 | )      |   |   | - |   |
| Recoveries on Loans Previously Charged Off                    |   |   | 46,665     |   |   |   | 43,423 |   |
| Balance at End of Year                                        |   | $      | 3,197,636  |   |   | $      | 5,536,929 |   |

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|                                             |   | Risk Ratings |       |   |    |   |
|--------------------------------------------------|--------|--------------|------------|--------|---------|--------|
|                                             |   |         |       |   | Special |   |   |   |   |   |   |   |   | Total |   |
|                                             |   | Pass         |       |   | Mention |   |   | Substandard |   |   | Doubtful |   |   | Loans |   |
| As of December 31, 2010:                         |   |         |       |   |    |   |   |   |   |   |   |   |   |   |   |
| Construction and land development                |   | $            | 2,931,755  |   |    | $      | 178,859 |   |   | $ | 1,324,060 |   |   | $ | - |   |   | $ | 4,434,674 |   |
| Commercial real estate - owner-occupied          |   |         | 29,589,847 |   |    |   | - |   |   |   | 1,023,112 |   |   |   | - |   |   |   | 30,612,959 |   |
| Commercial real estate - non-owner-occupied      |   |         | 22,476,929 |   |    |   | 6,076,667 |   |   |   | 781,182 |   |   |   | - |   |   |   | 29,334,778 |   |
| Residential real estate                          |   |         | 15,322,355 |   |    |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,322,355 |   |
| All other real estate                            |   |         | 1,315,552  |   |    |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,315,552 |   |
| Commercial and industrial                        |   |         | 14,872,858 |   |    |   | 149,744 |   |   |   | 876,629 |   |   |   | 13,161 |   |   |   | 15,912,392 |   |
| Consumer and all other loans and lease financing |   |         | 8,045,670  |   |    |   |   |   |   |   | 132,323 |   |   |   | - |   |   |   | 8,177,993 |   |
| Total Loans                                      |   | $            | 94,554,966 |   |    | $      | 6,405,270 |   |   | $ | 4,137,306 |   |   | $ | 13,161 |   |   | $ | 105,110,703 |   |
|                                             |   |         |       |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2009:                         |   |         |       |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction and land development                |   | $            | 3,080,538  |   |    | $      | 2,214,971 |   |   | $ | 6,864,638 |   |   | $ | 351,847 |   |   | $ | 12,511,994 |   |
| Commercial real estate - owner-occupied          |   |         | 26,941,215 |   |    |   | 1,031,158 |   |   |   | 9,516,471 |   |   |   | 228,440 |   |   |   | 37,717,284 |   |
| Commercial real estate - non-owner-occupied      |   |         | 29,305,237 |   |    |   | 666,052 |   |   |   | 6,935,698 |   |   |   | - |   |   |   | 36,906,987 |   |
| Residential real estate                          |   |         | 17,321,125 |   |    |   | 323,266 |   |   |   | 1,753,235 |   |   |   | - |   |   |   | 19,397,626 |   |
| All other real estate                            |   |         | 1,327,005  |   |    |   | - |   |   |   | 1,953,695 |   |   |   | - |   |   |   | 3,280,700 |   |
| Commercial and industrial                        |   |         | 12,425,343 |   |    |   | 325,034 |   |   |   | 2,722,300 |   |   |   | 13,209 |   |   |   | 15,485,886 |   |
| Consumer and all other loans and lease financing |   |         | 9,237,181  |   |    |   | - |   |   |   | 968,808 |   |   |   | - |   |   |   | 10,205,989 |   |
| Total Loans                                      |   | $            | 99,637,644 |   |    | $      | 4,560,481 |   |   | $ | 30,714,845 |   |   | $ | 593,496 |   |   | $ | 135,506,466 |   |

Table of Contents

----

|                                                                |   |                    |        |   |              |   |        |      |   |   | For the Year Ended |   |
|---------------------------------------------------------------------|--------|-------------------------|-------------|--------|-------------------|--------|-------------|-----------|--------|--------|--------------------|--------|
|                                                                |   | As of December 31, 2010 |        |   | December 31, 2010 |   |
|                                                                |   |                    |        |   | Unpaid            |   |        |      |   |   | Average            |   |   | Interest Income |   |
|                                                                |   | Recorded                |        |   | Principal         |   |        | Related   |   |   | Recorded           |   |   | Recognized |   |
|                                                                |   | Investment              |        |   | Balance           |   |        | Allowance |   |   | Investment         |   |   | While Impaired |   |
| Impaired Loans With a Related Allowance for Loan and Lease Losses:  |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |
| Construction and land development                                   |   | $                       | -           |   |              | $      | -           |      |   | $      | -                  |   |   | $ | 1,817,286 |   |   | $ | - |   |
| Commercial real estate - owner-occupied                             |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 2,052,618 |   |   |   | - |   |
| Commercial real estate - non-owner-occupied                         |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 1,392,994 |   |   |   | - |   |
| Residential real estate                                             |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 94,452 |   |   |   | - |   |
| All other real estate                                               |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                                           |   |                    | 1,010,361   |   |              |   | 1,424,431   |      |   |   | 9,025              |   |   |   | 1,193,407 |   |   |   | - |   |
| Consumer and all other loans and lease financing                    |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 225,686 |   |   |   | - |   |
| Total Impaired Loans With An Allowance Recorded                     |   |                    | 1,010,361   |   |              |   | 1,424,431   |      |   |   | 9,025              |   |   |   | 6,776,443 |   |   |   | - |   |
|                                                                |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Impaired Loans With No Related Allowance for Loan and Lease Losses: |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Construction and land development                                   |   |                    | 355,899     |   |              |   | 374,935     |      |   |   | -                  |   |   |   | 307,199 |   |   |   | - |   |
| Commercial real estate - owner-occupied                             |   |                    | 325,504     |   |              |   | 396,450     |      |   |   | -                  |   |   |   | 46,169 |   |   |   | - |   |
| Commercial real estate - non-owner-occupied                         |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 958,361 |   |   |   | - |   |
| Residential real estate                                             |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | - |   |   |   | - |   |
| All other real estate                                               |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                                           |   |                    | 300,951     |   |              |   | 321,892     |      |   |   | -                  |   |   |   | 298,712 |   |   |   | 27,296 |   |
| Consumer and all other loans and lease financing                    |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | - |   |   |   | - |   |
| Total Impaired Loans With No Allowance Recorded                     |   |                    | 982,354     |   |              |   | 1,093,277   |      |   |   | -                  |   |   |   | 1,610,441 |   |   |   | 27,296 |   |
|                                                                |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Total Loans Individually Evaluated for Impairment:                  |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Construction and land development                                   |   |                    | 355,899     |   |              |   | 374,935     |      |   |   | -                  |   |   |   | 2,124,485 |   |   |   | - |   |
| Commercial real estate - owner-occupied                             |   |                    | 325,504     |   |              |   | 396,450     |      |   |   | -                  |   |   |   | 2,098,787 |   |   |   | - |   |
| Commercial real estate - non-owner-occupied                         |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 2,351,355 |   |   |   | - |   |
| Residential real estate                                             |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 94,452 |   |   |   | - |   |
| All other real estate                                               |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                                           |   |                    | 1,311,312   |   |              |   | 1,746,323   |      |   |   | 9,025              |   |   |   | 1,492,119 |   |   |   | 27,296 |   |
| Consumer and all other loans and lease financing                    |   |                    | -           |   |              |   | -           |      |   |   | -                  |   |   |   | 225,686 |   |   |   | - |   |
| Total Loans Individually Evaluated For Impairment                   |   | $                       | 1,992,715   |   |              | $      | 2,517,708   |      |   | $      | 9,025              |   |   | $ | 8,386,884 |   |   | $ | 27,296 |   |
|                                                                |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Loans Collectively Evaluated for Impairment:                        |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Construction and land development                                   |   | $                       | 4,078,775   |   |              | $      | 4,078,775   |      |   | $      | 530,473            |   |   |   |   |   |   |   |   |   |
| Commercial real estate - owner-occupied                             |   |                    | 30,287,455  |   |              |   | 30,287,455  |      |   |   | 165,181            |   |   |   |   |   |   |   |   |   |
| Commercial real estate - non-owner-occupied                         |   |                    | 29,334,778  |   |              |   | 29,334,778  |      |   |   | 696,239            |   |   |   |   |   |   |   |   |   |
| Residential real estate                                             |   |                    | 15,322,355  |   |              |   | 15,322,355  |      |   |   | 501,008            |   |   |   |   |   |   |   |   |   |
| All other real estate                                               |   |                    | 1,315,552   |   |              |   | 1,315,552   |      |   |   | 3,289              |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                           |   |                    | 14,601,080  |   |              |   | 14,601,080  |      |   |   | 1,012,215          |   |   |   |   |   |   |   |   |   |
| Consumer and all other loans and lease financing                    |   |                    | 8,177,993   |   |              |   | 8,177,993   |      |   |   | 123,727            |   |   |   |   |   |   |   |   |   |
| Unallocated                                                         |   |                    | -           |   |              |   | -           |      |   |   | 156,479            |   |   |   |   |   |   |   |   |   |
| Total Loans Collectively Evaluated For Impairment                   |   | $                       | 103,117,988 |   |              | $      | 103,117,988 |      |   | $      | 3,188,611          |   |   |   |   |   |   |   |   |   |
|                                                                |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Total Loans:                                                        |   |                    |        |   |              |   |        |      |   |   |               |   |   |   |   |   |   |   |   |   |
| Construction and land development                                   |   | $                       | 4,434,674   |   |              | $      | 4,453,710   |      |   | $      | 530,473            |   |   |   |   |   |   |   |   |   |
| Commercial real estate - owner-occupied                             |   |                    | 30,612,959  |   |              |   | 30,683,905  |      |   |   | 165,181            |   |   |   |   |   |   |   |   |   |
| Commercial real estate - non-owner-occupied                         |   |                    | 29,334,778  |   |              |   | 29,334,778  |      |   |   | 696,239            |   |   |   |   |   |   |   |   |   |
| Residential real estate                                             |   |                    | 15,322,355  |   |              |   | 15,322,355  |      |   |   | 501,008            |   |   |   |   |   |   |   |   |   |
| All other real estate                                               |   |                    | 1,315,552   |   |              |   | 1,315,552   |      |   |   | 3,289              |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                           |   |                    | 15,912,392  |   |              |   | 16,347,403  |      |   |   | 1,021,240          |   |   |   |   |   |   |   |   |   |
| Consumer and all other loans and lease financing                    |   |                    | 8,177,993   |   |              |   | 8,177,993   |      |   |   | 123,727            |   |   |   |   |   |   |   |   |   |
| Unallocated                                                         |   |                    | -           |   |              |   | -           |      |   |   | 156,479            |   |   |   |   |   |   |   |   |   |
| Total Loans                                                         |   | $                       | 105,110,703 |   |              | $      | 105,635,696 |      |   | $      | 3,197,636          |   |   |   |   |   |   |   |   |   |

Table of Contents

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|                                                        |   | 2009   |      |
|-------------------------------------------------------------|--------|--------|-----------|
| Impaired Loans:                                             |   |   |      |
| Impaired Loans With a Related Allowance for Loan Losses     |   | $      | 672,355   |   |
| Impaired Loans With No Related Allowance for Loan Losses    |   |   | 5,721,257 |   |
| Total impaired loans                                        |   | $      | 6,393,612 |   |
| Related Allowance for Loan Losses                           |   | $      | 66,821    |   |
| Average Recorded Investment in Impaired Loans               |   |   | 6,312,843 |   |
| Interest Income Recognized for Cash Payments While Impaired |   |   | 184,492   |   |
| Total Loans on Non-accrual                                  |   |   | 5,891,045 |   |
| Total Loans Past Due 90 Days or More and Still Accruing     |   |   | -         |   |

|                                             |   |                               |    |   |   |   |      |   |   |   |      |   |   |     |      |   |        |   |        | Loans 90+ |   |   |        |   |
|--------------------------------------------------|--------|------------------------------------|---------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|----------|-----------|--------|-------------|--------|-------------|-----------|--------|--------|-------------|--------|
|                                             |   | Recorded Balance of Loans Past Due |    |   |   |   |      |   |   |   | Days Past |   |   | Loans in |      |
|                                             |   |                               | 30-59   |   |   |   | 60-89     |   |   |   | 90+       |   |   | Total    |      |   |        |   |        |      |   |   | Due and     |   |   | Non-Accrual |   |
|                                             |   | Days                               |    |   | Days   |   |      | Days   |   |   | Past Due  |   |   | Current  |      |   | Total Loans |   |        | Accruing  |   |   | Status      |   |
| As of December 31, 2010:                         |   |                               |    |   |   |   |      |   |   |   |      |   |   |     |      |   |        |   |        |      |   |   |        |   |   |   |   |
| Construction and land development                |   | $                                  | -       |   |   | $      | -         |   |   | $      | -         |   |   | $        | -         |   |        | $      | 4,434,674   |      |   | $      | 4,434,674   |   |   | $ | - |   |   | $ | - |   |
| Commercial real estate - owner-occupied          |   |                               | -       |   |   |   | 681,402   |   |   |   | -         |   |   |     | 681,402   |   |        |   | 29,931,557  |      |   |   | 30,612,959  |   |   |   | - |   |   |   | 640,890 |   |
| Commercial real estate - non-owner-occupied      |   |                               | -       |   |   |   | -         |   |   |   | -         |   |   |     | -         |   |        |   | 29,334,778  |      |   |   | 29,334,778  |   |   |   | - |   |   |   | - |   |
| Residential real estate                          |   |                               | -       |   |   |   | -         |   |   |   | -         |   |   |     | -         |   |        |   | 15,322,355  |      |   |   | 15,322,355  |   |   |   | - |   |   |   | - |   |
| All other real estate                            |   |                               | -       |   |   |   | -         |   |   |   | -         |   |   |     | -         |   |        |   | 1,315,552   |      |   |   | 1,315,552   |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                        |   |                               | 237,088 |   |   |   | 165,120   |   |   |   | 821,334   |   |   |     | 1,223,542 |   |        |   | 14,688,850  |      |   |   | 15,912,392  |   |   |   | - |   |   |   | 1,351,825 |   |
| Consumer and all other loans and lease financing |   |                               | 37,996  |   |   |   | -         |   |   |   | -         |   |   |     | 37,996    |   |        |   | 8,139,997   |      |   |   | 8,177,993   |   |   |   | - |   |   |   | - |   |
| Total Loans                                      |   | $                                  | 275,084 |   |   | $      | 846,522   |   |   | $      | 821,334   |   |   | $        | 1,942,940 |   |        | $      | 103,167,763 |      |   | $      | 105,110,703 |   |   | $ | - |   |   | $ | 1,992,715 |   |
|                                             |   |                               |    |   |   |   |      |   |   |   |      |   |   |     |      |   |        |   |        |      |   |   |        |   |   |   |   |   |   |   |   |   |
| As of December 31, 2009:                         |   |                               |    |   |   |   |      |   |   |   |      |   |   |     |      |   |        |   |        |      |   |   |        |   |   |   |   |   |   |   |   |   |
| Construction and land development                |   | $                                  | -       |   |   | $      | 1,738,385 |   |   | $      | 633,638   |   |   | $        | 2,372,023 |   |        | $      | 10,139,971  |      |   | $      | 12,511,994  |   |   | $ | - |   |   | $ | 2,028,085 |   |
| Commercial real estate - owner-occupied          |   |                               | -       |   |   |   | -         |   |   |   | 596,655   |   |   |     | 596,655   |   |        |   | 37,120,629  |      |   |   | 37,717,284  |   |   |   | - |   |   |   | 1,074,713 |   |
| Commercial real estate - non-owner-occupied      |   |                               | -       |   |   |   | 846,604   |   |   |   | 1,648,808 |   |   |     | 2,495,412 |   |        |   | 34,411,575  |      |   |   | 36,906,987  |   |   |   | - |   |   |   | 1,648,808 |   |
| Residential real estate                          |   |                               | -       |   |   |   | -         |   |   |   | -         |   |   |     | -         |   |        |   | 19,397,626  |      |   |   | 19,397,626  |   |   |   | - |   |   |   | - |   |
| All other real estate                            |   |                               | -       |   |   |   | -         |   |   |   | -         |   |   |     | -         |   |        |   | 3,280,700   |      |   |   | 3,280,700   |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                        |   |                               | 352,078 |   |   |   | 231,659   |   |   |   | 889,285   |   |   |     | 1,473,022 |   |        |   | 14,012,864  |      |   |   | 15,485,886  |   |   |   | - |   |   |   | 1,139,439 |   |
| Consumer and all other loans and lease financing |   |                               | -       |   |   |   | -         |   |   |   | -         |   |   |     | -         |   |        |   | 10,205,989  |      |   |   | 10,205,989  |   |   |   | - |   |   |   | - |   |
| Total Loans                                      |   | $                                  | 352,078 |   |   | $      | 2,816,648 |   |   | $      | 3,768,386 |   |   | $        | 6,937,112 |   |        | $      | 128,569,354 |      |   | $      | 135,506,466 |   |   | $ | - |   |   | $ | 5,891,045 |   |

Table of Contents

----

|                                            |   | 2010   |       |   | 2009   |   |
|-------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                            |   |   |       |   |   |   |
|  Land                                      |   | $      | 976,498    |   |   | $      | 976,498 |   |
|  Buildings                                 |   |   | 766,943    |   |   |   | 766,943 |   |
|  Leasehold Improvements                    |   |   | 1,353,254  |   |   |   | 1,312,691 |   |
|  Furniture, Fixtures, and Equipment        |   |   | 3,325,217  |   |   |   | 2,942,724 |   |
|                                            |   |   | 6,421,912  |   |   |   | 5,998,856 |   |
|  Accumulated Depreciation and Amortization |   |   | (3,222,684 | )      |   |   | (2,744,345 | ) |
|  Net Premises and Equipment                |   | $      | 3,199,228  |   |   | $      | 3,254,511 |   |

| 2011        |   | $      | 814,969   |   |
|-------------|--------|--------|-----------|--------|
| 2012        |   |   | 806,619   |   |
| 2013        |   |   | 632,195   |   |
| 2014        |   |   | 567,247   |   |
| 2015        |   |   | 567,247   |   |
| Later years |   |   | 4,868,872 |   |
|        |   | $      | 8,257,149 |   |

|                                        |   | 2010   |       |   | 2009   |   |
|---------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                        |   |   |       |   |   |   |
| Balance at Beginning of Year                |   | $      | 2,205,882  |   |   | $      | 983,100 |   |
| Real Estate Acquired by Foreclosure         |   |   | 2,360,782  |   |   |   | 1,694,801 |   |
| Additional Investments in Other Real Estate |   |   | 80,948     |   |   |   | - |   |
| Sales of Other Real Estate                  |   |   | (1,050,542 | )      |   |   | - |   |
| Write-downs of Other Real Estate            |   |   | (460,191   | )      |   |   | (472,019 | ) |
| Balance at End of Year                      |   | $      | 3,136,879  |   |   | $      | 2,205,882 |   |

Table of Contents

----

| Due in One Year           |   | $      | 62,831,374 |   |
|---------------------------|--------|--------|------------|--------|
| Due in One to Two Years   |   |   | 16,791,078 |   |
| Due in Two to Three Years |   |   | 697,128    |   |
|                      |   | $      | 80,319,580 |   |

Table of Contents

----

|                          |   | 2010   |       |   | 2009   |   |
|-------------------------------|--------|--------|------------|--------|--------|--------|
| Current Taxes:                |   |   |       |   |   |   |
|    Federal     |   | $      | -          |   |   | $      | - |   |
|    State       |   |   | -          |   |   |   | 2,400 |   |
|                          |   |   | -          |   |   |   | 2,400 |   |
| Deferred                      |   |   | (2,835,105 | )      |   |   | (2,615,033 | ) |
| Change in Valuation Allowance |   |   | 2,835,105  |   |   |   | 3,447,584 |   |
| Income Tax Expense            |   | $      | -          |   |   | $      | 834,951 |   |

|                                              |   | 2010   |       |   | 2009   |   |
|---------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                              |   | Amount |       |   | Rate   |   |   | Amount |   |   | Rate |   |
|                                              |   |   |       |   |   |   |   |   |   |   |   |   |
| Federal Tax Rate                                  |   | $      | (2,272,542 | )      |   |   | 34.0 | % |   | $ | (2,071,147 | ) |   |   | 34.0 | % |
| California Franchise Taxes, Net                   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    of Federal Tax Benefit          |   |   | (483,493   | )      |   |   | 7.2 | % |   |   | (439,100 | ) |   |   | 9.2 | % |
| Allowance for Deferred Tax Assets                 |   |   | 2,835,105  |   |   |   | (42.4 | )% |   |   | 3,447,584 |   |   |   | (72.2 | )% |
| Interest on Municipal Securities and Loans        |   |   | (93,152    | )      |   |   | 1.4 | % |   |   | (90,654 | ) |   |   | 1.9 | % |
| Increase in Cash Surrender Value                  |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    of Company-Owned Life Insurance |   |   | (31,882    | )      |   |   | 0.5 | % |   |   | (32,740 | ) |   |   | 0.7 | % |
| Other Items - Net                                 |   |   | 45,964     |   |   |   | (0.7 | )% |   |   | 21,008 |   |   |   | (0.4 | )% |
| Income Tax Expense                                |   | $      | -          |   |   |   | 0.0 | % |   | $ | 834,951 |   |   |   | (26.8 | )% |

Table of Contents

----

|                                                   |   | 2010   |       |   | 2009   |   |
|--------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|  Deferred Tax Assets:                             |   |   |       |   |   |   |
|  Allowance for Loan Losses Due to Tax Limitations |   | $      | 374,332    |   |   | $      | 1,904,860 |   |
|  Reserve for Impaired Security                    |   |   | 118,370    |   |   |   | 120,100 |   |
|  Other Real Estate Owned                          |   |   | 499,764    |   |   |   | 388,514 |   |
|  Interest on Non-Accrual Loans                    |   |   | 78,831     |   |   |   | 1,705 |   |
|  Net Operating Loss Carryforwards                 |   |   | 6,652,809  |   |   |   | 2,311,916 |   |
|  Charitable Contribution Carryforwards            |   |   | 91,726     |   |   |   | 86,161 |   |
|  Other                                            |   |   | 171,432    |   |   |   | 179,674 |   |
|  Deferred Tax Assets Before Valuation Allowance   |   |   | 7,987,264  |   |   |   | 4,992,930 |   |
|                                                   |   |   |       |   |   |   |   |   |
|  Deferred Tax Valuation Allowance                 |   |   | (7,408,574 | )      |   |   | (4,573,469 | ) |
|  Total Deferred Tax Assets                        |   |   | 578,690    |   |   |   | 419,461 |   |
|                                                   |   |   |       |   |   |   |   |   |
|  Deferred Tax Liabilities:                        |   |   |       |   |   |   |   |   |
|  Deferred Loan Costs                              |   |   | (196,377   | )      |   |   | (210,697 | ) |
|  Depreciation Differences                         |   |   | (82,682    | )      |   |   | (125,645 | ) |
|  BEA Award Deferred for Tax Purposes              |   |   | (225,757   | )      |   |   | - |   |
|  Other                                            |   |   | (73,874    | )      |   |   | (83,119 | ) |
|  Total Deferred Tax Liabilities                   |   |   | (578,690   | )      |   |   | (419,461 | ) |
|                                                   |   |   |       |   |   |   |   |   |
|  Net Deferred Tax Assets                          |   | $      | -          |   |   | $      | - |   |

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|                                              |   |   |    |   |      |   |   | Weighted-   |   | Aggregate    |   |
|---------------------------------------------------|--------|--------|---------|--------|-----------|--------|--------|-------------|--------|--------------|--------|
|                                              |   |   |    |   | Weighted- |   |   | Average     |   | Intrinsic    |   |
|                                              |   |   |    |   | Average   |   |   | Remaining   |   | Value of     |   |
|                                              |   |   |    |   | Exercise  |   |   | Contractual |   | In-the-Money |   |
|                                              |   | Shares |    |   | Price     |   |   | Term        |   | Options      |   |
| Outstanding at Beginning of Year                  |   |   | 87,564  |   |      | $      | 16.44  |        |   |         |   |   |   |   |   |
| Granted                                           |   |   | 100,368 |   |      |   | 5.00   |        |   |         |   |   |   |   |   |
| Exercised                                         |   |   | -       |   |      |   |   |        |   |         |   |   |   |   |   |
| Forfeited/Expired                                 |   |   | (4,500  | )      |      |   |   |        |   |         |   |   |   |   |   |
| Outstanding at End of Year                        |   |   | 183,432 |   |      | $      | 10.39  |        |   |         | 7.4    |   | Years |   | $ | - |   |
|                                              |   |   |    |   |      |   |   |        |   |         |   |   |   |   |   |   |   |
| Options Vested at Year-End                        |   |   | 58,426  |   |      | $      | 16.44  |        |   |         | 3.7    |   | Years |   | $ | - |   |
|                                              |   |   |    |   |      |   |   |        |   |         |   |   |   |   |   |   |   |
| Options Vested or Expected to Vest                |   |   | 183,432 |   |      | $      | 10.39  |        |   |         | 7.4    |   | Years |   | $ | - |   |
|                                              |   |   |    |   |      |   |   |        |   |         |   |   |   |   |   |   |   |
| Weighted-Average Fair Value of                    |   |   |    |   |      |   |   |        |   |         |   |   |   |   |   |   |   |
|    Options Granted During the Year |   |   |    |   |      | $      | 2.85   |        |   |         |   |   |   |   |   |   |   |

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|                                                                   |   | 2010   |    |   | 2009   |   |
|------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                   |   |   |    |   |   |   |
|  Balance at the beginning of the year                             |   | $      | 205,247 |   |   | $      | 4,986,295 |   |
|  New loans and advances                                           |   |   | 13,047  |   |   |   | 112,254 |   |
|  Repayments                                                       |   |   | (3,075  | )      |   |   | (1,938 | ) |
|  Reclassifications (persons no longer considered related parties) |   |   | (13,406 | )      |   |   | (4,891,364 | ) |
|  Balance at the end of the year                                   |   | $      | 201,813 |   |   | $      | 205,247 |   |

|                               |   | 2010   |       |   | 2009   |   |
|------------------------------------|--------|--------|------------|--------|--------|--------|
|                               |   |   |       |   |   |   |
|  Commitments to Extend Credit |   | $      | 19,832,000 |   |   | $      | 18,219,000 |   |
|  Standby Letters of Credit    |   |   | 901,000    |   |   |   | 301,000 |   |
|                               |   | $      | 20,733,000 |   |   | $      | 18,520,000 |   |

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|                                                        |   | 2010   |       |   | 2009   |   |
|-------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|  Average common shares outstanding                     |   |   |       |   |   |   |
|  during the year (used for basic EPS)                  |   |   | 4,388,691  |   |   |   | 1,345,602 |   |
|                                                        |   |   |       |   |   |   |   |   |
|  Net loss                                              |   | $      | (6,683,947 | )      |   | $      | (6,926,559 | ) |
|  Less loss and dividends allocated to preferred stock: |   |   |       |   |   |   |   |   |
|  Convertible preferred (Series A and C)                |   |   | (153,902   | )      |   |   | (487,278 | ) |
|  Non-convertible preferred (Series B)                  |   |   | (31,550    | )      |   |   | (99,892 | ) |
|  Non-convertible TARP preferred (Series D)             |   |   | 255,800    |   |   |   | 217,430 |   |
|  Total income (loss) allocated to preferred stock      |   |   | 70,348     |   |   |   | (369,740 | ) |
|  Net loss allocated to common stock                    |   | $      | (6,754,295 | )      |   | $      | (6,556,819 | ) |
|                                                        |   |   |       |   |   |   |   |   |
|  Basic loss per common share                           |   | $      | (1.54      | )      |   | $      | (4.87 | ) |

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|                                                             |   |   |   |   |             |   |   | Amount of Capital Required |   |
|------------------------------------------------------------------|--------|--------|--------|--------|------------------|--------|--------|----------------------------|--------|
|                                                             |   |   |   |   |             |   |   | To Be                      |   |   | To Be Adequately |   |
|                                                             |   | Actual |   |   | Well-Capitalized |   |   | Capitalized                |   |
|                                                             |   | Amount |   |   | Ratio            |   |   | Amount                     |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|  As of December 31, 2010:                                   |   |   |   |   |             |   |   |                       |   |   |   |   |   |   |   |   |   |   |
|     Total Capital (to Risk-Weighted Assets)  |   | $      | 21,649 |   |             |   | 17.20  | %                          |   | $ | 12,587 |   |   |   | 10.0 | % |   | $ | 10,069 |   |   |   | 8.0 | % |
|     Tier 1 Capital (to Risk-Weighted Assets) |   | $      | 20,054 |   |             |   | 15.93  | %                          |   | $ | 7,552 |   |   |   | 6.0 | % |   | $ | 5,035 |   |   |   | 4.0 | % |
|     Tier 1 Capital (to Average Assets)       |   | $      | 20,054 |   |             |   | 10.18  | %                          |   | $ | 9,852 |   |   |   | 5.0 | % |   | $ | 7,881 |   |   |   | 4.0 | % |
|                                                             |   |   |   |   |             |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  As of December 31, 2009:                                   |   |   |   |   |             |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total Capital (to Risk-Weighted Assets)  |   | $      | 22,053 |   |             |   | 14.22  | %                          |   | $ | 15,509 |   |   |   | 10.0 | % |   | $ | 12,407 |   |   |   | 8.0 | % |
|     Tier 1 Capital (to Risk-Weighted Assets) |   | $      | 20,069 |   |             |   | 12.94  | %                          |   | $ | 9,306 |   |   |   | 6.0 | % |   | $ | 6,204 |   |   |   | 4.0 | % |
|     Tier 1 Capital (to Average Assets)       |   | $      | 20,069 |   |             |   | 9.59   | %                          |   | $ | 10,462 |   |   |   | 5.0 | % |   | $ | 8,369 |   |   |   | 4.0 | % |

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| Mission Community Bancorp (Parent Company Only)                                                                                                                                                                                                                    |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                               |   |   |   |   |   |   |
| CONDENSED BALANCE SHEETS                                                                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                                                               |   | 2010 |   |   | 2009 |   |
|  ASSETS                                                                                                                                                                                                                                                       |   |   |   |   |   |   |
|  Cash                                                                                                                                                                                                                                                         |   | $ | 4,067,105 |   |   | $ | 842,766 |   |
|  Time deposits in other banks                                                                                                                                                                                                                                 |   |   | 50,000 |   |   |   | 75,000 |   |
|  Investment in subsidiary bank                                                                                                                                                                                                                                |   |   | 19,533,493 |   |   |   | 20,570,694 |   |
|  Investment in non-bank subsidiary                                                                                                                                                                                                                            |   |   | 17,969,083 |   |   |   | - |   |
|  Other real estate owned                                                                                                                                                                                                                                      |   |   | 565,000 |   |   |   | 565,000 |   |
|  Other assets                                                                                                                                                                                                                                                 |   |   | 97,005 |   |   |   | 104,628 |   |
|                                          TOTAL ASSETS |   | $ | 42,281,686 |   |   | $ | 22,158,088 |   |
|  LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |
|  Junior subordinated debt securities                                                                                                                                                                                                                          |   | $ | 3,093,000 |   |   | $ | 3,093,000 |   |
|  Due to Mission Community Bank                                                                                                                                                                                                                                |   |   | 9,019 |   |   |   | 377,433 |   |
|  Other liabilities                                                                                                                                                                                                                                            |   |   | 36,179 |   |   |   | 49,940 |   |
|  TOTAL LIABILITIES                                                                                                                                                                                                                                            |   |   | 3,138,198 |   |   |   | 3,520,373 |   |
|  TOTAL SHAREHOLDERS' EQUITY                                                                                                                                                                                                                                   |   |   | 39,143,488 |   |   |   | 18,637,715 |   |
|                                                                                                                                                                                                                                                               |   | $ | 42,281,686 |   |   | $ | 22,158,088 |   |

| CONDENSED STATEMENTS OF OPERATIONS                             |   |
|----------------------------------------------------------------|--------|
|                                                           |   | 2010 |   |   | 2009 |   |
|  Interest income                                          |   | $ | 26,877 |   |   | $ | 22,604 |   |
|  Interest expense                                         |   |   | 103,263 |   |   |   | 116,092 |   |
|  Net interest expense                                     |   |   | (76,386 | ) |   |   | (93,488 | ) |
|  Less salaries and benefits                               |   |   | 464,441 |   |   |   | 202,006 |   |
|  Less other expenses                                      |   |   | 311,909 |   |   |   | 356,636 |   |
|  Loss before equity in undistributed income of subsidiary |   |   | (852,736 | ) |   |   | (652,130 | ) |
|  Equity in undistributed loss of subsidiaries             |   |   | (5,831,211 | ) |   |   | (6,274,429 | ) |
|  Net loss                                                 |   | $ | (6,683,947 | ) |   | $ | (6,926,559 | ) |

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| CONDENSED STATEMENTS OF CASH FLOWS                                     |   |
|------------------------------------------------------------------------|--------|
|                                                                   |   | 2010 |   |   | 2009 |   |
|  Operating activities:                                            |   |   |   |   |   |   |
|  Net loss                                                         |   | $ | (6,683,947 | ) |   | $ | (6,926,559 | ) |
|  Adjustments to reconcile net loss                                |   |   |   |   |   |   |   |   |
|  to net cash provided by (used in) operating activities:          |   |   |   |   |   |   |   |   |
|  Loss of subsidiaries                                             |   |   | 5,831,211 |   |   |   | 6,274,429 |   |
|  Stock-based compensation                                         |   |   | 47,675 |   |   |   | - |   |
|  Write-downs on other real estate                                 |   |   | - |   |   |   | 250,000 |   |
|  Income tax refunds received                                      |   |   | - |   |   |   | 615,532 |   |
|  Other, net                                                       |   |   | (374,552 | ) |   |   | 241,483 |   |
|  Net cash provided by (used in) operating activities              |   |   | (1,179,613 | ) |   |   | 454,885 |   |
|  Investing activities:                                            |   |   |   |   |   |   |   |   |
|  Maturity of time deposits in other banks                         |   |   | 25,000 |   |   |   | - |   |
|  Purchase of other real estate from subsidiary                    |   |   | - |   |   |   | (815,000 | ) |
|  Investment in bank subsidiary                                    |   |   | (5,500,000 | ) |   |   | (5,116,000 | ) |
|  Investment in non-bank subsidiary                                |   |   | (18,250,000 | ) |   |   | - |   |
|  Net cash (used in) investing activities                          |   |   | (23,725,000 | ) |   |   | (5,931,000 | ) |
|  Financing activities:                                            |   |   |   |   |   |   |   |   |
|  Proceeds from issuance of common stock, net of issuance costs    |   |   | 28,384,752 |   |   |   | - |   |
|  Proceeds from issuance of preferred stock, net of issuance costs |   |   | - |   |   |   | 5,067,722 |   |
|  Cash dividends paid                                              |   |   | (255,800 | ) |   |   | (217,430 | ) |
|  Net cash provided by financing activities                        |   |   | 28,128,952 |   |   |   | 4,850,292 |   |
|  Net increase (decrease) in cash                                  |   |   | 3,224,339 |   |   |   | (625,823 | ) |
|  Cash at beginning of year                                        |   |   | 842,766 |   |   |   | 1,468,589 |   |
|  Cash at end of year                                              |   | $ | 4,067,105 |   |   | $ | 842,766 |   |

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| (in thousands)                                                 |   | Fair Value Measurements Using |   |   |    |   |
|----------------------------------------------------------------|--------|-------------------------------|--------|--------|---------|--------|
| December 31, 2010                                              |   | Level 1                       |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|  Available for sale securities:                           |   |                          |   |   |    |   |   |   |   |   |   |   |
| U.S. Government agencies                                       |   | $                             | -      |   |    | $      | 20,861 |   |   | $ | - |   |   | $ | 20,861 |   |
| Mortgage-backed securities                                     |   |                          | -      |   |    |   | 49,480 |   |   |   | - |   |   |   | 49,480 |   |
| Municipal securities                                           |   |                          | -      |   |    |   | 2,922 |   |   |   | - |   |   |   | 2,922 |   |
| Corporate debt securities                                      |   |                          | -      |   |    |   | 2,000 |   |   |   | - |   |   |   | 2,000 |   |
| Asset-backed securities                                        |   |                          | -      |   |    |   | 172 |   |   |   | - |   |   |   | 172 |   |
|  Total available-for-sale securities                      |   |                          | -      |   |    |   | 75,435 |   |   |   | - |   |   |   | 75,435 |   |
|  Loans held for sale                                      |   |                          | -      |   |    |   | - |   |   |   | 15,115 |   |   |   | 15,115 |   |
|  Total assets measured at fair value on a recurring basis |   | $                             | -      |   |    | $      | 75,435 |   |   | $ | 15,115 |   |   | $ | 90,550 |   |
| December 31, 2009                                              |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
|  Available for sale securities:                           |   |                          |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                                       |   | $                             | -      |   |    | $      | 15,468 |   |   | $ | - |   |   | $ | 15,468 |   |
| Mortgage-backed securities                                     |   |                          | -      |   |    |   | 16,835 |   |   |   | - |   |   |   | 16,835 |   |
| Municipal securities                                           |   |                          | -      |   |    |   | 2,974 |   |   |   | - |   |   |   | 2,974 |   |
| Corporate debt securities                                      |   |                          | -      |   |    |   | 2,987 |   |   |   | - |   |   |   | 2,987 |   |
| Asset-backed securities                                        |   |                          | -      |   |    |   | 1,869 |   |   |   | 9 |   |   |   | 1,878 |   |
|  Total available-for-sale securities                      |   |                          | -      |   |    |   | 40,133 |   |   |   | 9 |   |   |   | 40,142 |   |
|  Loans held for sale                                      |   |                          | -      |   |    |   | - |   |   |   | 904 |   |   |   | 904 |   |
|  Total assets measured at fair value on a recurring basis |   | $                             | -      |   |    | $      | 40,133 |   |   | $ | 913 |   |   | $ | 41,046 |   |

| (in thousands)                                                        |   | Fair Value Measurements Using |   |   |    |   |   | Full Year |   |
|-----------------------------------------------------------------------|--------|-------------------------------|--------|--------|---------|--------|--------|-----------|--------|
|  December 31, 2010:                                              |   | Level 1                       |   |   | Level 2 |   |   | Level 3   |   |   | Total |   |   | Gains (Losses) |   |
| Financial assets measured at fair value on a non-recurring basis:     |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |
| Impaired loans, net of specific reserves--                            |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |
| Commercial and industrial                                             |   | $                             | -      |   |    | $      | -      |      |   | $ | 1,010 |   |   | $ | 1,010 |   |   | $ | (648 | ) |
| Commercial real estate - owner-occupied                               |   |                          | -      |   |    |   | -      |      |   |   | 326 |   |   |   | 326 |   |   |   | (97 | ) |
| Construction and land development                                     |   |                          | -      |   |    |   | -      |      |   |   | 356 |   |   |   | 356 |   |   |   | (10 | ) |
| Total impaired loans, net of specific reserves                        |   | $                             | -      |   |    | $      | -      |      |   | $ | 1,692 |   |   | $ | 1,692 |   |   | $ | (755 | ) |
| Non-financial assets measured at fair value on a non-recurring basis: |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Other real estate owned                                               |   | $                             | -      |   |    | $      | -      |      |   |   | 3,137 |   |   | $ | 3,137 |   |   | $ | (486 | ) |
|                                                                  |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |
|  December 31, 2009:                                              |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial assets measured at fair value on a non-recurring basis:     |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans, net of specific reserves--                            |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                             |   | $                             | -      |   |    | $      | -      |      |   | $ | 606 |   |   | $ | 606 |   |   | $ | (153 | ) |
| Commercial real estate - owner-occupied                               |   |                          | -      |   |    |   | -      |      |   |   | 63 |   |   |   | 63 |   |   |   | (9 | ) |
| Commercial real estate - non-owner-occupied                           |   |                          | -      |   |    |   | -      |      |   |   | 1,649 |   |   |   | 1,649 |   |   |   | (576 | ) |
| Construction and land development                                     |   |                          | -      |   |    |   | -      |      |   |   | 2,028 |   |   |   | 2,028 |   |   |   | (564 | ) |
| Total impaired loans, net of specific reserves                        |   | $                             | -      |   |    | $      | -      |      |   | $ | 4,346 |   |   | $ | 4,346 |   |   | $ | (1,302 | ) |
| Non-financial assets measured at fair value on a non-recurring basis: |   |                          |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Other real estate owned                                               |   | $                             | -      |   |    | $      | -      |      |   |   | 2,206 |   |   | $ | 2,206 |   |   | $ | (472 | ) |

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| (in thousands)                                                  |   |   | Level 3 Securities Available for Sale and Loans Held for Sale |
|-----------------------------------------------------------------|--------|--------|---------------------------------------------------------------|
|                                                            |   |   | 2010                                                          | 2009 |
|  Balance at beginning of year                              |   | $      | 913                                                           |  $1,297 |
|  Securities transfered into Level 3                        |   |   |  -                                                       |  92 |
|  Net decrease in SBA loans held for sale                   |   |   |  (904)                                                   |  (361) |
|  Loans held for sale transfered into Level 3               |   |   |  16,925                                                  |  - |
|  Settlements - principal reductions in loans held for sale |   |   |  (1,749)                                                 |  - |
|  Securities valuation reserve                              |   |   |  (9)                                                     |  (115) |
|  Loans held for sale valuation reserve                     |   |   |  (61)                                                    |  - |
|  Balance at end of year                                    |   | $      | 15,115                                                        |  $913 |

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|   | Financial Assets |
|--------|------------------|

|   | Financial Liabilities |
|--------|-----------------------|

|   | Off-Balance Sheet Financial Instruments |
|--------|-----------------------------------------|

|                                                       |   | December 31, |        |
|------------------------------------------------------------|--------|--------------|-------------|
|                                                       |   | 2010         |        |   | 2009 |   |
|                                                       |   | Carrying     |        |   | Fair |   |   | Carrying |   |   | Fair |   |
|                                                       |   | Value        |        |   | Value |   |   | Value |   |   | Value |   |
| Financial Assets:                                          |   |         |        |   |   |   |   |   |   |   |   |   |
|    Cash and due from banks                  |   | $            | 10,817,000  |   |   | $ | 10,817,000 |   |   | $ | 8,595,000 |   |   | $ | 8,595,000 |   |
|    Interest-bearing deposits in other banks |   |         | 550,000     |   |   |   | 550,000 |   |   |   | 425,000 |   |   |   | 425,000 |   |
|    Investment securities                    |   |         | 75,435,000  |   |   |   | 75,435,000 |   |   |   | 40,142,000 |   |   |   | 40,142,000 |   |
|    Loans held for sale                      |   |         | 15,115,000  |   |   |   | 15,115,000 |   |   |   | 904,000 |   |   |   | 904,000 |   |
|    Loans, net                               |   |         | 101,913,000 |   |   |   | 102,926,000 |   |   |   | 129,970,000 |   |   |   | 131,859,000 |   |
|    Federal Home Loan Bank and other stocks  |   |         | 2,682,000   |   |   |   | 2,682,000 |   |   |   | 3,003,000 |   |   |   | 3,003,000 |   |
|    Company-owned life insurance             |   |         | 2,979,000   |   |   |   | 2,979,000 |   |   |   | 2,886,000 |   |   |   | 2,886,000 |   |
|    Accrued interest receivable              |   |         | 697,000     |   |   |   | 697,000 |   |   |   | 730,000 |   |   |   | 730,000 |   |
|                                                       |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:                                     |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Deposits                                 |   |         | 173,240,000 |   |   |   | 173,590,000 |   |   |   | 163,770,000 |   |   |   | 164,174,000 |   |
|    Other borrowings                         |   |         | 349,000     |   |   |   | 349,000 |   |   |   | 6,000,000 |   |   |   | 6,087,000 |   |
|    Junior subordinated debt securities      |   |         | 3,093,000   |   |   |   | 1,333,000 |   |   |   | 3,093,000 |   |   |   | 3,090,000 |   |
|    Accrued interest payable                 |   |         | 180,000     |   |   |   | 180,000 |   |   |   | 253,000 |   |   |   | 253,000 |   |

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PAR

|   | Item 10.  Directors, Executive Officers, and Corporate Governance. |
|--------|------------------------------------------------------------------------------|

| Item 12. |   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
|----------|------------------------------------------------------------------------------------------------------------|

|   | Item 13.  Certain Relationships and Related Transactions, and Director Independence |
|--------|-----------------------------------------------------------------------------------------------|

Table of Contents

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PA

|   | Item 15.  Exhibits |
|--------|------------------------------|

| Exhibit #                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 2.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Plan of Reorganization and Agreement of Merger dated as of October 4, 2000 (A)                                                                                                                                                                                                          |   |
| 3.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Restated Articles of Incorporation (I)                                                                                                                                                                                                                                                  |   |
| 3.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Certificate of Amendment to Articles of Incorporation (Y)                                                                                                                                                                                                                               |   |
| 3.3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Bylaws (B)(S)                                                                                                                                                                                                                                                                           |   |
| 4.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Certificate of Determination for Series A Non-Voting Preferred Stock (B)                                                                                                                                                                                                                |   |
| 4.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Certificate of Determination for Series B Non-Voting Preferred Stock (B)                                                                                                                                                                                                                |   |
| 4.3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Certificate of Determination for Series C Non-Voting Preferred Stock (D)                                                                                                                                                                                                                |   |
| 4.4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Purchase Agreement dated October 10, 2003, by and among Registrant, Mission Community Capital Trust I, and Bear Stearns & Co., Inc. (E)                                                                                                                                             |   |
| 4.5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Indenture dated as of October 14, 2003 by and between Registrant and Wells Fargo Bank, National Association, as trustee (E)                                                                                                                                                             |   |
| 4.6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Declaration of Trust Mission Community Capital Trust I dated  October 10, 2003 (E)                                                                                                                                                                                            |   |
| 4.7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Amended and Restated Declaration of Trust of Mission Community Capital Trust I dated October 14, 2003 by and among the Registrant, Wells Fargo Delaware Trust Company, as Trustee, and Anita M. Robinson and William C. Demmin, as Administrators (E)                                   |   |
| 4.8                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Guarantee Agreement dated October 14, 2003 between Registrant, as Guarantor, and Wells Fargo Bank, National Association, as Guarantee Trustee (E)                                                                                                                                       |   |
| 4.9                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Fee Agreement dated October 14, 2003 by and among the Registrant, Wells Fargo Delaware Trust Co., Bear Stearns & Co., Inc. and Mission Community Capital Trust I (E)                                                                                                                |   |
| 4.10                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Certificate of Determination for Series D Preferred Stock (R)                                                                                                                                                                                                                           |   |
| 4.11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Form of Common Stock Purchase Warrant (Z)                                                                                                                                                                                                                                               |   |
| 4.12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Form of Warrant Agreement for warrants issued pursuant to subscription rights (AA)                                                                                                                                                                                                      |   |
| 10.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Purchase and Sale Agreement and Lease dated January, 1997, as amended (B)                                                                                                                                                                                                               |   |
| 10.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Intentionally omitted                                                                                                                                                                                                                                                                   |   |
| 10.3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Lease Agreement – Paso Robles (B)                                                                                                                                                                                                                                                 |   |
| 10.4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Lease Agreement – San Luis Obispo (B)                                                                                                                                                                                                                                             |   |
| 10.5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Lease Agreement – Arroyo Grande (B)                                                                                                                                                                                                                                               |   |
| 10.6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 1998 Stock Option Plan, as amended (B)                                                                                                                                                                                                                                                  |   |
| 10.7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Lease Agreement – 569 Higuera, San Luis Obispo (D)                                                                                                                                                                                                                                |   |
| 10.8                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Lease Agreement – 671 Tefft Street, Nipomo (C)                                                                                                                                                                                                                                    |   |
| 10.9                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Intentionally omitted                                                                                                                                                                                                                                                                   |   |
| 10.10                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Lease Agreement – 3480  S. Higuera, San Luis Obispo (F)                                                                                                                                                                                                                 |   |
| 10.11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Salary Protection Agreement — Mr. Pigeon (G)                                                                                                                                                                                                                                      |   |
| 10.12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Intentionally omitted                                                                                                                                                                                                                                                                   |   |
| 10.13                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Second Amended and Restated Employment Agreement dated August 28, 2006 between Anita M. Robinson and Mission Community Bank (J)                                                                                                                                                         |   |
| 10.14                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Employment Agreement dated June 3, 2007 between Brooks Wise and Mission Community Bank (J)                                                                                                                                                                                              |   |
| 10.15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Financial Advisory Services Agreement dated January 4, 2007 between the Company and Seapower Carpenter Capital, Inc. (K)                                                                                                                                                                |   |
| 10.16                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Common Stock Repurchase Agreement dated August 10, 2007 between Fannie Mae and the Company (M)                                                                                                                                                                                          |   |
| 10.17                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Build-to-Suit Lease Agreement between Walter Bros. Construction Co., Inc. and Mission Community Bank for property at South Higuera Street and Prado Road in San Luis Obispo, California (N)                                                                                             |   |
| 10.18                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Lease Agreement – 1670 South Broadway, Santa Maria (O)                                                                                                                                                                                                                            |   |
| 10.19                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Mission Community Bancorp 2008 Stock Incentive Plan (P)                                                                                                                                                                                                                                 |   |
| 10.20                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Amendment No. 1 to Second Amended and Restated Employment Agreement dated December 29, 2008 by and among Mission Community Bancorp, Mission Community Bank, and Anita M. Robinson (Q)                                                                                                   |   |
| 10.21                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Amendment No. 1 to Employment Agreement dated December 29, 2008 by and among Mission Community Bancorp, Mission Community Bank, and Brooks W. Wise (Q)                                                                                                                                  |   |
| 10.22                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Amended and Restated Salary Protection Agreement dated December 29, 2008 by and between Mission Community Bank and Ronald B. Pigeon (Q)                                                                                                                                                 |   |
| 10.23                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Letter Agreement dated January 9, 2009 between Mission Community Bancorp and the United States Department of Treasury, which include the Securities Purchase Agreement—Standard Term attached thereto, with respect to the issuance and sale of the Series D. Preferred Stock (R) |   |
| 10.24                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Side Letter Agreement dated January 9, 2009 amendment the Stock Purchase Agreement between Mission Community Bancorp and the Department of the Treasury (R)                                                                                                                             |   |
| 10.25                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Side Letter Agreement dated January 9, 2009 between Mission Community Bancorp and The Department of the Treasury regarding maintenance of two open seats on the Board of Directors (R)                                                                                                  |   |
| 10.26                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Side Letter Agreement dated January 9, 2009 between Mission Community Bancorp and The Department of the Treasury regarding CDFI status (R)                                                                                                                                              |   |
| 10.27                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Securities Purchase Agreement dated December 22, 2009 between the Company and Carpenter Fund Manager GP, LLC (“Securities Purchase Agreement”) (U)                                                                                                                          |   |
| 10.28                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Form of Warrant issued in connection with the Securities Purchase Agreement (U)                                                                                                                                                                                                         |   |
| 10.29                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Amendment No. 1 to Securities Purchase Agreement dated March 17, 2010 (V)                                                                                                                                                                                                               |   |
| 10.30                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Amendment No. 2 to Employment Agreement of Brooks Wise dated March 22, 2010 (W)                                                                                                                                                                                                         |   |
| 10.31                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Amendment No. 2 to Securities Purchase Agreement dated March 17, 2010 (X)                                                                                                                                                                                                               |   |
| 10.32                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Employment Agreement dated July 1, 2010 between James W. Lokey and Mission Community Bancorp (Y)                                                                                                                                                                                        |   |
| 14                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Code of Ethics                                                                                                                                                                                                                                                                          |   |
| 21                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Subsidiaries of the registrant                                                                                                                                                                                                                                                          |   |
| 23.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Consent of Independent Registered Public Accounting Firm – Perry-Smith LLP                                                                                                                                                                                                        |   |
| 23.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Consent of Independent Registered Public Accounting Firm – Vavrinek, Trine, Day & Co.  LLP                                                                                                                                                                          |   |
| 31.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Certification of CEO pursuant to Section 302 of Sarbanes Oxley Act                                                                                                                                                                                                                      |   |
| 31.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Certification of CFO pursuant to Section 302 of Sarbanes Oxley Act                                                                                                                                                                                                                      |   |
| 32.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Certification of CEO pursuant to Section 906 of Sarbanes Oxley Act                                                                                                                                                                                                                      |   |
| 32.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Certification of CFO pursuant to Section 906 of Sarbanes Oxley Act                                                                                                                                                                                                                      |   |
| (A)Included in the Company’s Form 8-K filed on December 18, 2000(B)Included in the Company’s Form 10-KSB filed on April 2, 2001(C)Included in the Company’s Form 10-QSB filed August 12, 2002(D)Included in the Company’s Form 10-QSB filed on November 12, 2002(E)Included in the Company’s Form 8-K filed on October 21, 2003(F)Included in the Company’s Form 10-QSB filed on August 10, 2004(G)Included in the Company’s Form 8-K filed on January 19, 2005(H)Intentionally omitted(I)Included in the Company’s Form 10-QSB filed on August 14, 2006(J)Included in the Company’s Form 8-K filed on June 13, 2007(K)Included in the Company’s Form SB-2 Registration Statement filed on June 13, 2007(L)Included in the Company’s Pre-Effective Amendment No. 1 to the Form SB-2 Registration Statement filed on July 24, 2007(M)Included in the Company’s Form 8-K filed on August 14, 2007(N)Included in the Company’s Form 8-K filed on October 23, 2007(O)Included in the Company’s Form 10-KSB filed on March 28, 2008(P)Included in the Company’s Form 10-Q filed on May 15, 2008(Q)Included in the Company’s Form 8-K filed on December 30, 2008(R)Included in the Company’s Form 8-K filed on January 14, 2009(S)Included in the Company’s Form 10-Q filed on August 14, 2009(T)Included in the Company’s Form 10-K filed on March 16, 2009(U)Included in the Company’s From 8-K filed on December 24, 2009(V)Included in the Company’s Form 8-K filed on March 22, 2010(W)Included in the Company’s Form 8-K filed on March 26, 2010(X)Included in the Company’s Form 8-K filed on June 1, 2010(Y)Included in the Company’s Form 8-K filed on August 2, 2010(Z)Included in the Company’s Form S-1 Registration Statement filed on August 31, 2010(AA)Included in Amendment No. 1 to the Company’s Form S-1 Registration Statement filed on October 1, 2010 |                                                                                                                                                                                                                                                                                    |

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| /s/ George H. Andrews  | Director                                                                                         | March 22, 2011 |
|------------------------|--------------------------------------------------------------------------------------------------|----------------|
| GEORGE. H. ANDREWS     |                                                                                             |           |
| /s/ Bruce M. Breault   | Director                                                                                         | March 25, 2011 |
| BRUCE M. BREAULT       |
| /s/ William B. Coy     | Vice Chairman of the Board                                                                       | March 22, 2011 |
| WILLIAM B. COY         |
| /s/ Howard N. Gould    | Director                                                                                         | March 22, 2011 |
| HOWARD N. GOULD        |
| /s/ Richard Korsgaard  | Director                                                                                         | March 22, 2011 |
| RICHARD KORSGAARD      |
| /s/ James W. Lokey     | Chairman of the Board and Chief Executive Officer (Principal Executive Officer)                  | March 31, 2011 |
| JAMES W. LOKEY         |
| /s/ Ronald B. Pigeon   | Executive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer) | March 31, 2011 |
| RONALD B. PIGEON       |
| /s/ Anita M. Robinson  | Director and President                                                                           | March 31, 2011 |
| ANITA M. ROBINSON      |
| /s/ Harry H. Sackrider | Director                                                                                         | March 22, 2011 |
| HARRY H. SACKRIDER     |                                                                                             |           |
| /s/ Gary E. Stemper    | Director                                                                                         | March 22, 2011 |
| GARY E. STEMPER        |
| /s/ Brooks W. Wise     | Director                                                                                         | March 31, 2011 |
| BROOKS W. WISE         |                                                                                             |           |
| /s/ Stephen P. Yost    | Director                                                                                         | March 22, 2011 |
| STEPHEN P. YOST        |                                                                                             |           |

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