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| For      the fiscal year ended December 31, 2008. |   | Commission      File Number 0-32637. |
|---------------------------------------------------|--------|--------------------------------------|

| IOWA                                                                | 42-1039071                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification No.) |

| 405      FIFTH STREET, AMES, IOWA             | 50010           |
|-----------------------------------------------|-----------------|
| (Address      of principal executive offices) | (Zip      Code) |

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| Item      1.  |   | Business                                                                                                                |
|---------------|--------|-------------------------------------------------------------------------------------------------------------------------|
| Item      1A. |   | Risk Factors                                                                                                            |
| Item      1B. |   | Unresolved Staff Comments                                                                                               |
| Item      2.  |   | Properties                                                                                                              |
| Item      3.  |   | Legal Proceedings                                                                                                       |
| Item      4.  |   | Submission of Matters to a Vote of      Shareholders                                                                    |
|          |   |                                                                                                                    |
| Part      II  |   |                                                                                                                    |
|          |   |                                                                                                                    |
| Item      5.  |   | Market for Registrant’s 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      7A. |   | Quantitative and Qualitative Disclosures about Market      Risk                                                         |
| Item      8.  |   | Financial Statements and Supplementary    Data                                                                          |
| Item      9.  |   | Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure                               |
|          |   |                                                                                                                    |
| Item      9A. |   | Controls and Procedures                                                                                                 |
| Item      9B. |   | Other Information                                                                                                       |
|          |   |                                                                                                                    |
| Part      III |   |                                                                                                                    |
|          |   |                                                                                                                    |
| 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 Accountant Fees and  Services                                                                                 |
|          |   |                                                                                                                    |
| Part      IV  |   |                                                                                                                    |
|          |   |                                                                                                                    |
| Item      15. |   | Exhibits and Financial Statement    Schedules                                                                           |

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BUSINESS

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|   | - | financing      guaranteed under Small Business Administration  programs |
|--------|---|-------------------------------------------------------------------------|

|   | - | operating      and working capital loans |
|--------|---|------------------------------------------|

|   | - | loans      to finance equipment and other capitalpurchases |
|--------|---|------------------------------------------------------------|

|   | - | commercial      real estate loans |
|--------|---|-----------------------------------|

|   | - | business      lines of credit |
|--------|---|-------------------------------|

|   | - | term      loans |
|--------|---|-----------------|

|   | - | loans      to professionals |
|--------|---|-----------------------------|

|   | - | letters      of credit |
|--------|---|------------------------|

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|   | - | automobiles      and trucks |
|--------|---|-----------------------------|

|   | - | boats      and recreational vehicles |
|--------|---|--------------------------------------|

|   | - | personal      loans and lines of credit |
|--------|---|-----------------------------------------|

|   | - | home      equity lines of credit |
|--------|---|----------------------------------|

|   | - | home      improvement and rehabilitationloans |
|--------|---|-----------------------------------------------|

|   | - | consumer      real estate loans |
|--------|---|---------------------------------|

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|   | · | Capital      Purchase Program (“CPP”).  Pursuant to this program, the US Treasury,      on behalf of the US government, will purchase up to $250 billion of      preferred stock, along with warrants to purchase common stock, from      certain financial institutions, including bank holding companies, savings      and loan holding companies and banks or savings associations not      controlled by a holding company.  On publically traded financial      institutions the investment will have a dividend rate of 5% per year,      until the fifth anniversary of the US Treasury’s investment and a dividend      of 9% thereafter.   The Company did not participate in the      CCP program. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Temporary      Liquidity Guarantee Program (“TLGP”).  This program contains both a      debt guarantee component, whereby the FDIC will guarantee until      June 30, 2012, the senior unsecured debt issued by eligible financial      institutions between October 14, 2008 and June 30, 2009, and an      account transaction guarantee component, whereby the FDIC will insure 100%      of non-interest bearing deposit transaction accounts held at eligible      financial institutions, such as payment processing accounts, payroll      accounts and working capital accounts, through December 31,      2009.  The Banks have opted out of the debt guarantee component      and opted into the transaction guarantee component of this      program. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Temporary      increase in deposit insurance coverage.  Pursuant to the EESA, the      FDIC temporarily raised the basic limit on federal deposit insurance      coverage from $100,000 to $250,000 per depositor, effective October 3,      2008.  The EESA provides that the basic deposit insurance limit is      currently scheduled to return to $100,000 after December 31,      2009. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Name                    |   | Age    |   | Position      with the Company or Bank and Principal Occupation and Employment During      the Past Five Years                                                                                                                                                                                                                                             |
|-------------------------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Kathy      L. Baker     |   | 62     |   | Named      President and Director of United Bank on  January 1,      2008.  Previously served as a Vice President in the lending      department of United Bank.                                                                                                                                                                       |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Scott      T. Bauer     |   | 46     |   | Named      President of First National Bank in 2007.  Previously served as      Executive Vice President and Senior Vice President of First National      Bank.                                                                                                                                                                                  |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Kevin      G. Deardorff |   | 54     |   | Vice      President & Technology Director of the Company.                                                                                                                                                                                                                                                                                              |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Daniel      L. Krieger  |   | 72     |   | Chairman      of the Company since 2003 and President of Company from 1997 to 2007. Also      serves as a Director of the Company, Chairman of the Board and Trust      Officer of First National and Chairman of the Board of Boone      Bank.  Previously served as President of First National and      Chairman of the Board of United Bank. |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Stephen      C. McGill  |   | 54     |   | President      of State Bank since 2003.  Previously served as Senior Vice      President of State Bank.  Director of State Bank & Trust      Co.                                                                                                                                                                                  |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| John      P. Nelson     |   | 42     |   | Vice      President, Secretary and Treasurer of Company. Also serves as Director of      Randall-Story Bank.                                                                                                                                                                                                                                               |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Thomas      H. Pohlman  |   | 58     |   | Named      President of the Company in 2007.  Previously served as Chief      Operating Officer of the Company in 2006 and President of First National      from 1999 to 2007. Director of the Company and First National Bank, State      Bank & Trust Co and United Bank.                                                                  |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Jeffrey      K. Putzier |   | 47     |   | President      of Boone Bank since 1999.   Director of Boone Bank &      Trust Co.                                                                                                                                                                                                                                                      |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Rick      J. Schreier   |   | 41     |   | Named      President of Randall Story Bank in May, 2008.  Also serves as a      director at Randall-Story State Bank.   Previously served      as Senior Vice President of lending at Randall-Story Bank and State      Bank.                                                                                                     |
|                    |   |   |   |                                                                                                                                                                                                                                                                                                                                                       |
| Terrill      L. Wycoff  |   | 65     |   | Executive      Vice President of First National since 2000. Director of First National      Bank.                                                                                                                                                                                                                                                          |

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ITEM 1A.

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|   | · | changes      in regulations; |
|--------|--------|------------------------------|

|   | · | changes      in technology and product delivery systems;and |
|--------|--------|-------------------------------------------------------------|

|   | · | the      accelerating pace of consolidation among financial services      providers. |
|--------|--------|--------------------------------------------------------------------------------------|

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|   | · | the      payment of dividends to the Company’s  shareholders; |
|--------|--------|---------------------------------------------------------------------|

|   | · | the      payment of dividends to the Company from the  Banks; |
|--------|--------|---------------------------------------------------------------|

|   | · | possible      mergers with or acquisitions of or by other  institutions; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | investment      policies; |
|--------|--------|---------------------------|

|   | · | loans      and interest rates on loans; |
|--------|--------|-----------------------------------------|

|   | · | interest      rates paid on deposits; |
|--------|--------|---------------------------------------|

|   | · | expansion      of branch offices; and/or |
|--------|--------|------------------------------------------|

|   | · | the      possibility to provide or expand securities or trust    services. |
|--------|--------|----------------------------------------------------------------------------|

ITEM 1B.

ITEM 2.  

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ITEM 3.

ITEM 4.  

ITEM 5. 

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|    |   | 2008                   |   |   |   |   |    |   | 2007                   |   |   |   |   |
|---------|--------|------------------------|--------|--------|--------|--------|---------|--------|------------------------|--------|--------|--------|--------|
| Quarter |   | Market      Price High |   |   | Low    |   | Quarter |   | Market      Price High |   |   | Low    |   |
| 1st     |   | $                      | 20.95  |   |   | $      | 18.26   |   | 1st                    |   | $      | 22.44  |   |   | $ | 20.56 |   |
| 2nd     |   | $                      | 22.94  |   |   | $      | 15.12   |   | 2nd                    |   | $      | 23.19  |   |   | $ | 21.00 |   |
| 3rd     |   | $                      | 42.11  |   |   | $      | 15.60   |   | 3rd                    |   | $      | 21.70  |   |   | $ | 19.06 |   |
| 4th     |   | $                      | 26.98  |   |   | $      | 20.58   |   | 4th                    |   | $      | 21.75  |   |   | $ | 17.64 |   |

|    |   | 2008                                   |   |   | 2007                                   |   |
|---------|--------|----------------------------------------|--------|--------|----------------------------------------|--------|
| Quarter |   | Cash      dividends declared per share |   |   | Cash      dividends declared per share |   |
| 1st     |   | $                                      | 0.28   |   |                                   | $      | 0.27 |   |
| 2nd     |   | $                                      | 0.28   |   |                                   | $      | 0.27 |   |
| 3rd     |   | $                                      | 0.28   |   |                                   | $      | 0.27 |   |
| 4th     |   | $                                      | 0.28   |   |                                   | $      | 0.27 |   |

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|                           | Period      Ending |
|--------------------------------|--------------------|
| Index                          | 12/31/03           | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 |
| Ames      National Corporation | 100.00             | 143.31 | 141.45 | 120.92 | 118.20 | 169.50 |
| NASDAQ      Composite          | 100.00             | 108.59 | 110.08 | 120.56 | 132.39 | 78.72 |
| SNL      NASDAQ Bank           | 100.00             | 114.61 | 111.12 | 124.75 | 97.94 | 71.13 |
| Midwest      OTC Bank Index    | 100.00             | 119.15 | 124.05 | 130.64 | 127.52 | 95.04 |

ITEM6.  
SELECTED 

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|                                                  |   | Year      Ended December 31, |      |
|-------------------------------------------------------|--------|------------------------------|-----------|
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| (dollars      in thousands, except per share amounts) |   | 2008                         |      |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| STATEMENT      OF INCOME DATA                         |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                                  |   | $                            | 45,514    |   |   | $ | 47,562 |   |   | $ | 44,296 |   |   | $ | 41,306 |   |   | $ | 37,354 |   |
| Interest      expense                                 |   |                         | 16,402    |   |   |   | 23,537 |   |   |   | 21,306 |   |   |   | 15,933 |   |   |   | 10,564 |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                              |   |                         | 29,112    |   |   |   | 24,025 |   |   |   | 22,990 |   |   |   | 25,373 |   |   |   | 26,790 |   |
| Provision      (credit) for loan losses               |   |                         | 1,313     |   |   |   | (94 | ) |   |   | (183 | ) |   |   | 331 |   |   |   | 479 |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income after provision (credit) for |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loan      losses                                      |   |                         | 27,799    |   |   |   | 24,119 |   |   |   | 23,173 |   |   |   | 25,042 |   |   |   | 26,311 |   |
| Noninterest      income (loss)                        |   |                         | (3,008    | ) |   |   | 7,208 |   |   |   | 6,674 |   |   |   | 5,613 |   |   |   | 5,269 |   |
| Noninterest      expense                              |   |                         | 17,594    |   |   |   | 16,776 |   |   |   | 15,504 |   |   |   | 15,210 |   |   |   | 14,935 |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      before provision for income tax           |   |                         | 7,197     |   |   |   | 14,551 |   |   |   | 14,343 |   |   |   | 15,445 |   |   |   | 16,645 |   |
| Provision      for income tax                         |   |                         | 845       |   |   |   | 3,542 |   |   |   | 3,399 |   |   |   | 3,836 |   |   |   | 4,255 |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income                                       |   | $                            | 6,352     |   |   | $ | 11,009 |   |   | $ | 10,944 |   |   | $ | 11,609 |   |   | $ | 12,390 |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DIVIDENDS      AND EARNINGS PER SHARE DATA            |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      dividends declared                          |   | $                            | 10,564    |   |   | $ | 10,183 |   |   | $ | 9,801 |   |   | $ | 9,417 |   |   | $ | 7,590 |   |
| Cash      dividends declared per share                |   | $                            | 1.12      |   |   | $ | 1.08 |   |   | $ | 1.04 |   |   | $ | 1.00 |   |   | $ | 0.81 |   |
| Basic      and diluted earnings per share             |   | $                            | 0.67      |   |   | $ | 1.17 |   |   | $ | 1.16 |   |   | $ | 1.23 |   |   | $ | 1.32 |   |
| Weighted      average shares outstanding              |   |                         | 9,431,393 |   |   |   | 9,427,503 |   |   |   | 9,422,402 |   |   |   | 9,415,599 |   |   |   | 9,405,705 |   |
|                                                  |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE      SHEET DATA                               |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      assets                                     |   | $                            | 858,141   |   |   | $ | 861,591 |   |   | $ | 838,853 |   |   | $ | 819,384 |   |   | $ | 839,753 |   |
| Net      loans                                        |   |                         | 452,880   |   |   |   | 463,651 |   |   |   | 429,123 |   |   |   | 440,318 |   |   |   | 411,639 |   |
| Deposits                                              |   |                         | 664,795   |   |   |   | 690,119 |   |   |   | 680,356 |   |   |   | 668,342 |   |   |   | 658,176 |   |
| Stockholders'      equity                             |   |                         | 103,837   |   |   |   | 110,021 |   |   |   | 112,923 |   |   |   | 109,227 |   |   |   | 110,924 |   |
| Equity      to assets ratio                           |   |                         | 12.10     | % |   |   | 12.77 | % |   |   | 13.46 | % |   |   | 13.33 | % |   |   | 13.21 | % |

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|                                                                                                    |   | Year      Ended December 31, |    |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                                                    |   | 2008                         |    |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
|                                                                                                    |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
| FIVE      YEAR FINANCIAL PERFORMANCE                                                                    |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                         |   | $                            | 6,352   |   |   | $ | 11,009 |   |   | $ | 10,944 |   |   | $ | 11,609 |   |   | $ | 12,390 |   |
| Average      assets                                                                                     |   |                         | 857,705 |   |   |   | 843,788 |   |   |   | 818,450 |   |   |   | 831,198 |   |   |   | 793,076 |   |
| Average      stockholders' equity                                                                       |   |                         | 107,794 |   |   |   | 111,371 |   |   |   | 109,508 |   |   |   | 109,802 |   |   |   | 108,004 |   |
|                                                                                                    |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return      on assets (net income divided by average assets)                                            |   |                         | 0.74    | % |   |   | 1.30 | % |   |   | 1.34 | % |   |   | 1.40 | % |   |   | 1.56 | % |
| Return      on equity  (net income divided by averageequity)                                  |   |                         | 5.89    | % |   |   | 9.89 | % |   |   | 9.99 | % |   |   | 10.57 | % |   |   | 11.47 | % |
| Net      interest margin (net interest income divided by average earning      assets)                   |   |                         | 3.94    | % |   |   | 3.39 | % |   |   | 3.29 | % |   |   | 3.56 | % |   |   | 3.97 | % |
| Efficiency      ratio (noninterest expense divided by noninterest income plus net interest      income) |   |                         | 67.40   | % |   |   | 53.71 | % |   |   | 52.27 | % |   |   | 49.09 | % |   |   | 46.59 | % |
| Dividend      payout ratio (dividends per share divided by net income per      share)                   |   |                         | 167.16  | % |   |   | 92.31 | % |   |   | 89.66 | % |   |   | 81.30 | % |   |   | 61.27 | % |
| Dividend      yield (dividends per share divided by closing year-end market      price)                 |   |                         | 4.22    | % |   |   | 5.54 | % |   |   | 4.95 | % |   |   | 3.89 | % |   |   | 3.01 | % |
| Equity      to assets ratio (average equity divided by average assets)                                  |   |                         | 12.57   | % |   |   | 13.20 | % |   |   | 13.38 | % |   |   | 13.21 | % |   |   | 13.62 | % |

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|   | · | Challenges |
|--------|--------|------------|

|   | · | Key      Performance Indicators |
|--------|--------|---------------------------------|

|   | · | Industry      Results |
|--------|--------|-----------------------|

|   | · | Critical      Accounting Policy |
|--------|--------|---------------------------------|

|   | · | Income      Statement Review |
|--------|--------|------------------------------|

|   | · | Balance      Sheet Review |
|--------|--------|---------------------------|

|   | · | Asset      Quality Review and Credit RiskManagement |
|--------|--------|-----------------------------------------------------|

|   | · | Liquidity      and Capital Resources |
|--------|--------|--------------------------------------|

|   | · | Interest      Rate Risk |
|--------|--------|-------------------------|

|   | · | Inflation |
|--------|--------|-----------|

|   | · | Forward-Looking      Statements |
|--------|--------|---------------------------------|

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|   | · | On      July 16, 2008, the Company’s lead bank, First National, entered into an      informal Memorandum of Understanding with the Office of the Comptroller of      the Currency (the “OCC”) regarding First National’s commercial real estate      loan portfolio, including specific actions to be taken with respect to      commercial real estate risk management procedures, credit underwriting and      administration, appraisal and evaluation processes, problem loan      management, credit risk ratings recognition and loan review      procedures. Since entering into the Memorandum, management has been      actively pursuing the corrective actions required by the Memorandum in an      effort to address the deficiencies noted in administration of its      commercial real estate loan portfolio.  In the event the OCC      determines, through future examination of First National, that the      specific actions required by the Memorandum have not been successfully      implemented a more formal enforcement action may be initiated by the      OCC. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Company and the Banks have invested in various corporate bonds      issued by companies whose financial condition may further      deteriorate, thus requiring additional impairment      charges.  Management believes that impairments in the investment      portfolio at December 31, 2008 are temporary; however, it is reasonably      possible that additional impairment charges may be necessary on investment      securities in future periods if financial and economic conditions do not      improve or deteriorate further. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Banks      have historically earned higher levels of net interest income by investing      in longer term loans and securities at higher yields and paying lower      deposit expense rates on shorter maturity deposits.  However,      the difference between the yields on short term and long term investments      was very low for much of 2007 and 2008, making it more difficult to manage      net interest margins. If the yield curve was to flatten or invert in 2009,      the Company’s net interest margin may compress and net interest income may      be negatively impacted.  Historically, management has been able      to position the Company’s assets and liabilities to earn a satisfactory      net interest margin during periods when the yield curve is flat or      inverted by appropriately managing credit spreads on loans and maintaining      adequate liquidity to provide flexibility in an effort to hold down      funding costs.  Management would seek to follow a similar      approach in dealing with this challenge in2009. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | While      interest rates declined in the latter part of 2008 and may continue to      remain historically low during 2009, interest rates may eventually      increase and may present a challenge to the Company.  Increases      in interest rates may negatively impact the Company’s net interest margin      if interest expense increases more quickly than interest      income.  The Company’s earning assets (primarily its loan and      investment portfolio) have longer maturities than its interest bearing      liabilities (primarily deposits and other borrowings); therefore, in a      rising interest rate environment, interest expense may increase more      quickly than interest income as the interest bearing liabilities reprice      more quickly than earning assets.  In response to this      challenge, the Banks model quarterly the changes in income that would      result from various changes in interest rates.  Management      believes Bank earning assets have the appropriate maturity and repricing      characteristics to optimize earnings and the Banks’ interest rate risk      positions. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | The      Company’s market in central Iowa has numerous banks, credit unions, and      investment and insurance companies competing for similar business      opportunities.  This competitive environment will continue to      put downward pressure on the Banks’ net interest margins and thus affect      profitability.  Strategic planning efforts at the Company and      Banks continue to focus on capitalizing on the Banks’ strengths in local      markets while working to identify opportunities for improvement to gain      competitive advantages. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      substandard performance in the Company’s equity portfolio could lead to a      reduction in the historical level of realized security gains or potential      impairments, thereby negatively impacting the Company’s      earnings.  The Company invests capital that may be utilized for      future expansion in a portfolio of primarily financial and utility stocks      with an estimated fair market value of approximately $8 million as of      December 31, 2008.  The Company focuses on stocks that have      historically paid dividends in an effort to lessen the negative effects of      a bear market.  However, this strategy did not prove successful      in 2008 as problems in the residential mortgage industry caused a      significant decline in the market value of the Company’s financial      stocks. Unrealized losses in the Company’s equity portfolio totaled      $1.0 million (at the holding company level on an unconsolidated basis) as      of December 31, 2008 after recognizing realized gains of $3.2 in the      portfolio during the year.  This compares to unrealized gains of      $3.3 million (at the holding company level on an unconsolidated basis) as      of December 31, 2007 after recognizing realized gains of $1.4 million      during 2007.  Due to economic conditions and uncertainty, the      Company’s financial stocks have continued to lose value during early      2009.  Management believes that there are no      other-than-temporary impairments in the Company’s equity portfolio at      December 31, 2008; however, it is reasonably possible that the Company may      incur impairment losses in 2009. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      economic conditions for commercial real estate developers in the Des      Moines metropolitan area deteriorated in 2008 and 2007 and contributed to      the Company’s increased level of non-performing loans and other real      estate owned.  During the year ended December 31, 2008, the      Company foreclosed on two real estate properties (other real estate owned)      totaling $10.5 million in the Des Moines market.  Presently, the      Company has $3.3 million in impaired loans with seven Des Moines      development companies with specific reserves totaling      $139,000.  The Company has additional customer relationships      with real estate developers in the Des Moines area that may become      impaired in the future if economic conditions do not improve or become      worse.  The Company has a limited number of such credits and is      actively engaged with the customers to minimize credit    risk. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other real estate owned at      December 31, 2008 amounted to $13.3 million.  Management      performs valuations to determine that these properties are carried at the      lower of the new cost basis or fair value less cost to sell.  It      is at least reasonably possible that changes in fair values will occur in      the near term and that such changes could materially affect the amounts      reported in the Company’s financial  statements. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | During      2009, management will be focusing its efforts, in part, on steps necessary      to improve the Company’s capital position given the ongoing negative      developments in the national and local economies and the uncertainty of      the timing and improvement of economic conditions.  An increased      level of capital will enable the Company to better accommodate any      impairment losses in the investment portfolio that may be recorded during      the year and any provision expenses related to the allowance for loan      losses due to uncertainties with respect to the asset quality of the      Company’s commercial real estate loan portfolio.  To this end,      the Company announced on February 13, 2009 that the quarterly dividend to      be paid on May 15, 2009 to shareholders of record as of May 1, 2009 will      be reduced to $0.10 per share from the previous dividend of $0.28 per      share declared in the fourth quarter of 2008.  Management      believes that maintaining an increased level of capital is prudent given      the unstable economic conditions that are expected to continue during      2009. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      effect of changes in laws and regulations pertaining to the Company and      the Banks may impact the Company’s profitability.  The FDIC      assessment rates have not been finalized, but will be increasing      significantly in 2009. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                     |   | Year      Ended December 31, |   |
|--------------------------|--------|------------------------------|--------|
|                     |   | 2008                         |   |   | 2007 |   |   | 2006 |   |   |   |   |
|                     |   | Company                      |   |   | Industry |   |   | Company |   |   | Industry |   |   | Company |   |   | Industry |   |
|                     |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return      on assets    |   |                         | 0.74   | % |   |   | 0.12 | % |   |   | 1.30 | % |   |   | 0.81 | % |   |   | 1.34 | % |   |   | 1.28 | % |
|                     |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return      on equity    |   |                         | 5.89   | % |   |   | 1.24 | % |   |   | 9.89 | % |   |   | 7.75 | % |   |   | 9.99 | % |   |   | 12.30 | % |
|                     |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest margin |   |                         | 3.94   | % |   |   | 3.18 | % |   |   | 3.39 | % |   |   | 3.29 | % |   |   | 3.29 | % |   |   | 3.31 | %  |
|                     |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Efficiency      ratio    |   |                         | 67.40  | % |   |   | 59.02 | % |   |   | 53.71 | % |   |   | 59.37 | % |   |   | 52.27 | % |   |   | 56.79 | %  |
|                     |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      ratio       |   |                         | 12.57  | % |   |   | 7.49 | % |   |   | 13.20 | % |   |   | 7.98 | % |   |   | 13.38 | % |   |   | 8.23 | %  |

|   | · | Return      on Assets |
|--------|--------|-----------------------|

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|   | · | Return      on Equity |
|--------|--------|-----------------------|

|   | · | Net      Interest Margin |
|--------|--------|--------------------------|

|   | · | Efficiency      Ratio |
|--------|--------|-----------------------|

|   | · | Capital      Ratio |
|--------|--------|--------------------|

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| ASSETS                                     |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |
|--------------------------------------------|--------|----------------------|---------|--------|---------|--------|--------|--------|--------|--------|----------------------|--------|--------|---------|---------|--------|--------|--------|--------|----------------------|--------|--------|---------|--------|--------|--------|---------|
|                                       |   | 2008                 |    |   | 2007    |   |   | 2006   |   |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |
|                                       |   | Average      balance |    |   | Revenue |   |   | Yield  |   |   | Average      balance |   |   | Revenue |    |   | Yield  |   |   | Average      balance |   |   | Revenue |   |   | Yield  |    |
| (dollars      in thousands)                |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |
| Interest-earning      assets               |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |
| Loans  1                         |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |
| Commercial                                 |   | $                    | 82,448  |   |    | $      | 4,915  |   |   |   | 5.96                 | %      |   | $       | 78,241  |   |   | $      | 6,201  |                 |   |   | 7.93    | %      |   | $      | 70,581  |   |   | $ | 5,490 |   |   |   | 7.78 | % |
| Agricultural                               |   |                 | 32,230  |   |    |   | 2,227  |   |   |   | 6.91                 | %      |   |    | 31,964  |   |   |   | 2,696  |                 |   |   | 8.43    | %      |   |   | 33,054  |   |   |   | 2,758 |   |   |   | 8.34 | % |
| Real      estate                           |   |                 | 324,863 |   |    |   | 20,754 |   |   |   | 6.39                 | %      |   |    | 321,225 |   |   |   | 21,209 |                 |   |   | 6.60    | %      |   |   | 306,991 |   |   |   | 19,655 |   |   |   | 6.40 | % |
| Consumer      and other                    |   |                 | 24,241  |   |    |   | 1,562  |   |   |   | 6.44                 | %      |   |    | 22,658  |   |   |   | 1,523  |                 |   |   | 6.72    | %      |   |   | 27,540  |   |   |   | 1,691 |   |   |   | 6.14 | % |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Total      loans (including fees)          |   | $                    | 463,782 |   |    | $      | 29,458 |   |   |   | 6.35                 | %      |   | $       | 454,088 |   |   | $      | 31,629 |                 |   |   | 6.97    | %      |   | $      | 438,166 |   |   | $ | 29,594 |   |   |   | 6.75 | % |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Investment      securities                 |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   | $                    | 200,580 |   |    | $      | 10,093 |   |   |   | 5.03                 | %      |   | $       | 205,203 |   |   | $      | 9,858  |                 |   |   | 4.80    | %      |   | $      | 212,897 |   |   | $ | 9,195 |   |   |   | 4.32 | % |
| Tax-exempt  2                    |   |                 | 136,464 |   |    |   | 8,614  |   |   |   | 6.31                 | %      |   |    | 137,109 |   |   |   | 8,930  |                 |   |   | 6.51    | %      |   |   | 123,427 |   |   |   | 7,913 |   |   |   | 6.41 | % |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Total      investment securities           |   | $                    | 337,044 |   |    | $      | 18,707 |   |   |   | 5.55                 | %      |   | $       | 342,312 |   |   | $      | 18,788 |                 |   |   | 5.49    | %      |   | $      | 336,324 |   |   | $ | 17,108 |   |   |   | 5.09 | % |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits with banks  |   | $                    | 5,053   |   |    | $      | 193    |   |   |   | 3.82                 | %      |   | $       | 864     |   |   | $      | 37     |                 |   |   | 4.28    | %      |   | $      | 4,114   |   |   | $ | 139 |   |   |   | 3.38 | % |
| Federal      funds sold                    |   |                 | 8,918   |   |    |   | 171    |   |   |   | 1.92                 | %      |   |    | 4,630   |   |   |   | 233    |                 |   |   | 5.03    | %      |   |   | 4,229   |   |   |   | 224 |   |   |   | 5.30 | % |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Total      interest-earning assets         |   | $                    | 814,797 |   |    | $      | 48,529 |   |   |   | 5.96                 | %      |   | $       | 801,894 |   |   | $      | 50,687 |                 |   |   | 6.32    | %      |   | $      | 782,833 |   |   | $ | 47,065 |   |   |   | 6.01 | % |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Noninterest-earning      assets            |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Cash      and due from banks               |   | $                    | 19,581  |   |    |   |   |   |   |   |                 |   |   | $       | 18,086  |   |   |   |   |                 |   |   |    |   |   | $      | 17,056  |   |   |   |   |   |   |   |   |   |
| Premises      and equipment, net           |   |                 | 13,007  |   |    |   |   |   |   |   |                 |   |   |    | 13,618  |   |   |   |   |                 |   |   |    |   |   |   | 11,005  |   |   |   |   |   |   |   |   |   |
| Other,      less allowance for loan losses |   |                 | 10,320  |   |    |   |   |   |   |   |                 |   |   |    | 10,190  |   |   |   |   |                 |   |   |    |   |   |   | 7,556   |   |   |   |   |   |   |   |   |   |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Total      noninterest-earning assets      |   | $                    | 42,908  |   |    |   |   |   |   |   |                 |   |   | $       | 41,894  |   |   |   |   |                 |   |   |    |   |   | $      | 35,617  |   |   |   |   |   |   |   |   |   |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
|                                       |   |                 |    |   |    |   |   |   |   |   |                 |   |   |    |    |   |   |   |   |                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| TOTAL      ASSETS                          |   | $                    | 857,705 |   |    |   |   |   |   |   |                 |   |   | $       | 843,788 |   |   |   |   |                 |   |   |    |   |   | $      | 818,450 |   |   |   |   |   |   |   |   |   |

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|                                            |   | 2008                 |    |   | 2007            |   |   | 2006       |   |
|-------------------------------------------------|--------|----------------------|---------|--------|-----------------|--------|--------|------------|--------|
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   | Average      balance |    |   | Revenue/expense |   |   | Yield/rate |   |   | Average      balance |   |   | Revenue/expense |   |   | Yield/rate |   |   | Average      balance |   |   | Revenue/expense |   |   | Yield/rate |   |
| (dollars      in thousands)                     |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities               |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                        |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings,      NOW accounts, and money markets   |   | $                    | 317,346 |   |            | $      | 3,658  |       |   |   | 1.15 | % |   | $ | 309,787 |   |   | $ | 7,734 |   |   |   | 2.50 | % |   | $ | 314,567 |   |   | $ | 8,250 |   |   |   | 2.62 | % |
| Time      deposits < $100,000                |   |                 | 170,223 |   |            |   | 6,603  |       |   |   | 3.88 | % |   |   | 179,740 |   |   |   | 7,996 |   |   |   | 4.45 | % |   |   | 182,241 |   |   |   | 7,071 |   |   |   | 3.88 | % |
| Time      deposits > $100,000                |   |                 | 97,193  |   |            |   | 3,947  |       |   |   | 4.06 | % |   |   | 107,600 |   |   |   | 5,325 |   |   |   | 4.95 | % |   |   | 99,123 |   |   |   | 4,422 |   |   |   | 4.46 | % |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      deposits                             |   | $                    | 584,762 |   |            | $      | 14,208 |       |   |   | 2.43 | % |   | $ | 597,127 |   |   | $ | 21,055 |   |   |   | 3.53 | % |   | $ | 595,931 |   |   | $ | 19,743 |   |   |   | 3.31 | % |
| Other      borrowed funds                       |   |                 | 78,764  |   |            |   | 2,194  |       |   |   | 2.79 | % |   |   | 57,047 |   |   |   | 2,482 |   |   |   | 4.35 | % |   |   | 36,388 |   |   |   | 1,563 |   |   |   | 4.30 | % |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Interest-bearing liabilities         |   | $                    | 663,526 |   |            | $      | 16,402 |       |   |   | 2.47 | % |   | $ | 654,174 |   |   | $ | 23,537 |   |   |   | 3.60 | % |   | $ | 632,319 |   |   | $ | 21,306 |   |   |   | 3.37 | % |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing      liabilities            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand      deposits                            |   |                 | 78,033  |   |            |   |   |       |   |   |   |   |   |   | 70,459 |   |   |   |   |   |   |   |   |   |   |   | 70,095 |   |   |   |   |   |   |   |   |   |
| Other      liabilities                          |   |                 | 8,352   |   |            |   |   |       |   |   |   |   |   |   | 7,784 |   |   |   |   |   |   |   |   |   |   |   | 6,528 |   |   |   |   |   |   |   |   |   |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders'      equity                       |   |                 | 107,794 |   |            |   |   |       |   |   |   |   |   |   | 111,371 |   |   |   |   |   |   |   |   |   |   |   | 109,508 |   |   |   |   |   |   |   |   |   |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS' EQUITY |   | $                    | 857,705 |   |            |   |   |       |   |   |   |   |   | $ | 843,788 |   |   |   |   |   |   |   |   |   |   | $ | 818,450 |   |   |   |   |   |   |   |   |   |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                        |   |                 |    |   |            | $      | 32,127 |       |   |   | 3.94 | % |   |   |   |   |   | $ | 27,150 |   |   |   | 3.39 | % |   |   |   |   |   | $ | 25,759 |   |   |   | 3.29 | % |
|                                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Spread      Analysis                            |   |                 |    |   |            |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income/average assets             |   |                 |    |   |            | $      | 48,529 |       |   |   | 5.66 | % |   |   |   |   |   | $ | 50,687 |   |   |   | 6.01 | % |   |   |   |   |   | $ | 47,065 |   |   |   | 5.75 | % |
| Interest      expense/average assets            |   |                 |    |   |            |   | 16,402 |       |   |   | 1.91 | % |   |   |   |   |   |   | 23,537 |   |   |   | 2.79 | % |   |   |   |   |   |   | 21,306 |   |   |   | 2.60 | % |
| Net      interest income/average assets         |   |                 |    |   |            |   | 32,127 |       |   |   | 3.75 | % |   |   |   |   |   |   | 27,150 |   |   |   | 3.22 | % |   |   |   |   |   |   | 25,759 |   |   |   | 3.15 | % |

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|                                          |   | 2008      Compared to 2007 |   |   | 2007      Compared to 2006 |   |
|-----------------------------------------------|--------|----------------------------|--------|--------|----------------------------|--------|
| (dollars      in thousands)                   |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                          |   | Volume                     |   |   | Rate                       |   |   | Total 1 |   |   | Volume |   |   | Rate |   |   | Total 1 |   |
| Interest      income                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                         |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                    |   | $                          | 320    |   |                       | $      | (1,606 | ) |   | $ | (1,286 | ) |   | $ | 604 |   |   | $ | 107 |   |   | $ | 711 |   |
| Agricultural                                  |   |                       | 22     |   |                       |   | (491 | ) |   |   | (469 | ) |   |   | (92 | ) |   |   | 30 |   |   |   | (62 | ) |
| Real      estate                              |   |                       | 235    |   |                       |   | (690 | ) |   |   | (455 | ) |   |   | 928 |   |   |   | 626 |   |   |   | 1,554 |   |
| Consumer      and other                       |   |                       | 103    |   |                       |   | (64 | ) |   |   | 39 |   |   |   | (318 | ) |   |   | 150 |   |   |   | (168 | ) |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans (including fees)             |   |                       | 680    |   |                       |   | (2,851 | ) |   |   | (2,171 | ) |   |   | 1,122 |   |   |   | 913 |   |   |   | 2,035 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment      securities                    |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                       |   |                       | (227   | )      |                       |   | 462 |   |   |   | 235 |   |   |   | (339 | ) |   |   | 1,002 |   |   |   | 663 |   |
| Tax-exempt                                    |   |                       | (42    | )      |                       |   | (274 | ) |   |   | (316 | ) |   |   | 891 |   |   |   | 126 |   |   |   | 1,017 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      investment securities              |   |                       | (269   | )      |                       |   | 188 |   |   |   | (81 | ) |   |   | 552 |   |   |   | 1,128 |   |   |   | 1,680 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits with banks     |   |                       | 160    |   |                       |   | (4 | ) |   |   | 156 |   |   |   | (154 | ) |   |   | 53 |   |   |   | (101 | ) |
| Federal      funds sold                       |   |                       | 136    |   |                       |   | (198 | ) |   |   | (62 | ) |   |   | 21 |   |   |   | (13 | ) |   |   | 8 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest-earning assets            |   |                       | 707    |   |                       |   | (2,865 | ) |   |   | (2,158 | ) |   |   | 1,541 |   |   |   | 2,081 |   |   |   | 3,622 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities             |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                      |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings,      NOW accounts, and money markets |   |                       | 185    |   |                       |   | (4,261 | ) |   |   | (4,076 | ) |   |   | (156 | ) |   |   | (360 | ) |   |   | (516 | ) |
| Time      deposits < $100,000              |   |                       | (408   | )      |                       |   | (985 | ) |   |   | (1,393 | ) |   |   | (98 | ) |   |   | 1,023 |   |   |   | 925 |   |
| Time      deposits > $100,000              |   |                       | (482   | )      |                       |   | (896 | ) |   |   | (1,378 | ) |   |   | 395 |   |   |   | 508 |   |   |   | 903 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      deposits                           |   |                       | (705   | )      |                       |   | (6,142 | ) |   |   | (6,847 | ) |   |   | 141 |   |   |   | 1,171 |   |   |   | 1,312 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      borrowed funds                     |   |                       | 768    |   |                       |   | (1,056 | ) |   |   | (288 | ) |   |   | 901 |   |   |   | 18 |   |   |   | 919 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest-bearing liabilities       |   |                       | 63     |   |                       |   | (7,198 | ) |   |   | (7,135 | ) |   |   | 1,042 |   |   |   | 1,189 |   |   |   | 2,231 |   |
|                                          |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income-earning assets       |   | $                          | 644    |   |                       | $      | 4,333 |   |   | $ | 4,977 |   |   | $ | 499 |   |   | $ | 892 |   |   | $ | 1,391 |   |

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|                                  |   | 2008   |    |   | 2007   |   |    | 2006   |   |   | 2005    |   |   | 2004   |    |
|---------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| (dollars      in thousands)           |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |
| Real      Estate                      |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |
| Construction                          |   | $      | 35,326  |   |   | $      | 46,568  |   |   | $      | 30,600  |   |   | $      | 23,973  |   |   | $ | 21,042 |   |
| 1-4      family residential           |   |   | 95,988  |   |   |   | 104,762 |   |   |   | 103,620 |   |   |   | 102,043 |   |   |   | 97,612 |   |
| Commercial                            |   |   | 153,366 |   |   |   | 147,023 |   |   |   | 139,149 |   |   |   | 153,920 |   |   |   | 160,176 |   |
| Agricultural                          |   |   | 33,547  |   |   |   | 33,684  |   |   |   | 31,092  |   |   |   | 30,606  |   |   |   | 27,443 |   |
| Commercial                            |   |   | 76,653  |   |   |   | 78,616  |   |   |   | 73,760  |   |   |   | 71,430  |   |   |   | 57,189 |   |
| Agricultural                          |   |   | 40,324  |   |   |   | 36,133  |   |   |   | 33,434  |   |   |   | 32,216  |   |   |   | 30,713 |   |
| Consumer      and other               |   |   | 24,528  |   |   |   | 22,782  |   |   |   | 24,276  |   |   |   | 33,340  |   |   |   | 24,584 |   |
|                                  |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Total      loans                      |   |   | 459,732 |   |   |   | 469,568 |   |   |   | 435,931 |   |   |   | 447,528 |   |   |   | 418,759 |   |
| Deferred      loan fees, net          |   |   | 72      |   |   |   | 137     |   |   |   | 276     |   |   |   | 445     |   |   |   | 644 |   |
|                                  |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Total      loans net of deferred fees |   | $      | 459,660 |   |   | $      | 469,431 |   |   | $      | 435,655 |   |   | $      | 447,083 |   |   | $ | 418,115 |   |

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|                        |   | Within      one year |    |   | After      one year but within five years |   |    | After      five years |   |   | Total  |   |
|-----------------------------|--------|----------------------|---------|--------|-------------------------------------------|--------|---------|-----------------------|--------|--------|--------|--------|
| (dollars      in thousands) |   |                 |    |   |                                      |   |    |                  |   |   |   |   |
|                        |   |                 |    |   |                                      |   |    |                  |   |   |   |   |
| Real      Estate            |   |                 |    |   |                                      |   |    |                  |   |   |   |   |
| Construction                |   | $                    | 26,845  |   |                                      | $      | 8,419   |                  |   | $      | 62     |   |   | $ | 35,326 |   |
| 1-4      family residential |   |                 | 30,328  |   |                                      |   | 55,574  |                  |   |   | 10,086 |   |   |   | 95,988 |   |
| Commercial                  |   |                 | 32,791  |   |                                      |   | 111,080 |                  |   |   | 9,495  |   |   |   | 153,366 |   |
| Agricultural                |   |                 | 8,894   |   |                                      |   | 21,165  |                  |   |   | 3,488  |   |   |   | 33,547 |   |
| Commercial                  |   |                 | 36,971  |   |                                      |   | 38,784  |                  |   |   | 898    |   |   |   | 76,653 |   |
| Agricultural                |   |                 | 25,366  |   |                                      |   | 14,415  |                  |   |   | 543    |   |   |   | 40,324 |   |
| Consumer      and other     |   |                 | 3,544   |   |                                      |   | 17,219  |                  |   |   | 3,765  |   |   |   | 24,528 |   |
|                        |   |                 |    |   |                                      |   |    |                  |   |   |   |   |   |   |   |   |
| Total      loans            |   | $                    | 164,739 |   |                                      | $      | 266,656 |                  |   | $      | 28,337 |   |   | $ | 459,732 |   |

|                                      |   | After      one year but within five years |    |   | After      five years |   |
|-------------------------------------------|--------|-------------------------------------------|---------|--------|-----------------------|--------|
|                                      |   |                                      |    |   |                  |   |
| Loan      maturities after one year with: |   |                                      |    |   |                  |   |
| Fixed      rates                          |   | $                                         | 178,995 |   |                  | $      | 23,726 |   |
| Variable      rates                       |   |                                      | 87,661  |   |                  |   | 4,611 |   |
|                                      |   |                                      |    |   |                  |   |   |   |
|                                      |   | $                                         | 266,656 |   |                  | $      | 28,337 |   |

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|                                            |   | 2008   |    |   | 2007   |   |    | 2006   |   |
|-------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| (dollars      in thousands)                     |   |   |    |   |   |   |    |   |   |
|                                            |   |   |    |   |   |   |    |   |   |
| U.S.      treasury securities                   |   | $      | 546     |   |   | $      | 524     |   |   | $ | 509 |   |
| U.S.      government agencies                   |   |   | 49,695  |   |   |   | 95,597  |   |   |   | 123,192 |   |
| U.S.      government mortgage-backed securities |   |   | 67,516  |   |   |   | 26,877  |   |   |   | 16,553 |   |
| State      and political subdivisions           |   |   | 128,741 |   |   |   | 133,283 |   |   |   | 119,908 |   |
| Corporate      bonds                            |   |   | 55,237  |   |   |   | 64,953  |   |   |   | 60,624 |   |
| Equity      securities                          |   |   | 11,279  |   |   |   | 18,708  |   |   |   | 33,786 |   |
|                                            |   |   |    |   |   |   |    |   |   |   |   |   |
| Total                                           |   | $      | 313,014 |   |   | $      | 339,942 |   |   | $ | 354,572 |   |

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|                                            |   | Within      one year |   |   | After      one year but within five years |   |    | After      five years but within ten years |   |   | After      ten years |   |   | Total  |   |
|-------------------------------------------------|--------|----------------------|--------|--------|-------------------------------------------|--------|---------|--------------------------------------------|--------|--------|----------------------|--------|--------|--------|--------|
| (dollars      in thousands)                     |   |                 |   |   |                                      |   |    |                                       |   |   |                 |   |   |   |   |
|                                            |   |                 |   |   |                                      |   |    |                                       |   |   |                 |   |   |   |   |
| U.S.      treasury securities                   |   | $                    | -      |   |                                      | $      | 546     |                                       |   | $      | -                    |   |   | $      | -      |   |   | $ | 546 |   |
| U.S.      government agencies                   |   |                 | 9,399  |   |                                      |   | 20,792  |                                       |   |   | 16,091               |   |   |   | 3,413  |   |   |   | 49,695 |   |
| U.S.      government mortgage-backed securities |   |                 | 1,129  |   |                                      |   | 39,687  |                                       |   |   | 24,715               |   |   |   | 1,985  |   |   |   | 67,516 |   |
| States      and political subdivisions          |   |                 | 9,821  |   |                                      |   | 58,161  |                                       |   |   | 46,264               |   |   |   | 14,495 |   |   |   | 128,741 |   |
| Corporate      bonds                            |   |                 | 8,927  |   |                                      |   | 21,932  |                                       |   |   | 24,328               |   |   |   | 50     |   |   |   | 55,237 |   |
|                                            |   |                 |   |   |                                      |   |    |                                       |   |   |                 |   |   |   |   |   |   |   |   |   |
| Total                                           |   | $                    | 29,276 |   |                                      | $      | 141,118 |                                       |   | $      | 111,398              |   |   | $      | 19,943 |   |   | $ | 301,735 |   |
|                                            |   |                 |   |   |                                      |   |    |                                       |   |   |                 |   |   |   |   |   |   |   |   |   |
| Weighted      average yield                     |   |                 |   |   |                                      |   |    |                                       |   |   |                 |   |   |   |   |   |   |   |   |   |
| U.S.      treasury                              |   |                 | 0.00   | %      |                                      |   | 5.20    | %                                          |   |   | 0.00                 | %      |   |   | 0.00   | % |   |   | 5.20 | % |
| U.S.      government agencies                   |   |                 | 4.25   | %      |                                      |   | 4.58    | %                                          |   |   | 4.93                 | %      |   |   | 5.05   | % |   |   | 4.66 | % |
| U.S      government mortgage-backed securitites |   |                 | 3.86   | %      |                                      |   | 4.58    | %                                          |   |   | 5.20                 | %      |   |   | 5.26   | % |   |   | 4.81 | % |
| States      and political subdivisions*         |   |                 | 5.83   | %      |                                      |   | 5.75    | %                                          |   |   | 6.41                 | %      |   |   | 6.27   | % |   |   | 6.05 | % |
| Corporate      bonds                            |   |                 | 5.99   | %      |                                      |   | 4.78    | %                                          |   |   | 5.81                 | %      |   |   | 0.00   | % |   |   | 5.41 | % |
|                                            |   |                 |   |   |                                      |   |    |                                       |   |   |                 |   |   |   |   |   |   |   |   |   |
| Total                                           |   |                 | 5.30   | %      |                                      |   | 5.10    | %                                          |   |   | 5.80                 | %      |   |   | 5.97   | % |   |   | 5.43 | % |

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|                                     |   | 2008   |    |   | 2007   |   |   | 2006   |   |
|------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
|                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   | Amount |    |   | Rate   |   |   | Amount |   |   | Rate |   |   | Amount |   |   | Rate |   |
| (dollars      in thousands)              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest      bearing demand deposits |   | $      | 78,033  |   |   |   | 0.00   | %      |   | $ | 70,459 |   |   |   | 0.00 | % |   | $ | 70,095 |   |   |   | 0.00 | % |
| Interest      bearing demand deposits    |   |   | 155,689 |   |   |   | 0.96   | %      |   |   | 152,898 |   |   |   | 2.29 | % |   |   | 153,619 |   |   |   | 2.44 | % |
| Money      market deposits               |   |   | 134,295 |   |   |   | 1.53   | %      |   |   | 130,548 |   |   |   | 3.06 | % |   |   | 134,078 |   |   |   | 3.16 | % |
| Savings      deposits                    |   |   | 27,362  |   |   |   | 0.40   | %      |   |   | 26,341 |   |   |   | 0.86 | % |   |   | 26,870 |   |   |   | 0.99 | % |
| Time      certificates < $100,000     |   |   | 170,223 |   |   |   | 3.88   | %      |   |   | 179,740 |   |   |   | 4.45 | % |   |   | 182,241 |   |   |   | 3.88 | % |
| Time      certificates > $100,000     |   |   | 97,193  |   |   |   | 4.06   | %      |   |   | 107,600 |   |   |   | 4.95 | % |   |   | 99,123 |   |   |   | 4.46 | % |
|                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   | $      | 662,795 |   |   |   |   |   |   | $ | 667,586 |   |   |   |   |   |   | $ | 666,026 |   |   |   |   |   |

|                           |   | 2008   |   |   | 2007   |   |    | 2006   |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| (dollars      in thousands)    |   |   |   |   |   |   |    |   |   |
| 3      months or less          |   | $      | 18,808 |   |   | $      | 31,926  |   |   | $ | 33,393 |   |
| Over      3 through 12 months  |   |   | 38,589 |   |   |   | 50,646  |   |   |   | 45,898 |   |
| Over      12 through 36 months |   |   | 20,987 |   |   |   | 23,723  |   |   |   | 20,047 |   |
| Over      36 months            |   |   | 2,995  |   |   |   | 2,894   |   |   |   | 2,893 |   |
|                           |   |   |   |   |   |   |    |   |   |   |   |   |
| Total                          |   | $      | 81,379 |   |   | $      | 109,189 |   |   | $ | 102,231 |   |

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|                                                   |   | 2008    |   |   | 2007              |   |   | 2006    |   |
|--------------------------------------------------------|--------|---------|--------|--------|-------------------|--------|--------|---------|--------|
|                                                   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | Balance |   |   | Average      Rate |   |   | Balance |   |   | Average      Rate |   |   | Balance |   |   | Average      Rate |   |
| (dollars      in thousands)                            |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Federal      funds purchased and repurchase agreements |   | $       | 38,510 |   |              |   | 1.30   | %       |   | $ | 30,033 |   |   |   | 3.39 | % |   | $ | 34,728 |   |   |   | 4.42 | % |
|                                                   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      short-term borrowings                       |   |    | 1,064  |   |              |   | 0.00   | %       |   |   | 737 |   |   |   | 4.94 | % |   |   | 1,470 |   |   |   | 4.92 | % |
|                                                   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FHLB      term advances                                |   |    | 23,500 |   |              |   | 2.90   | %       |   |   | 4,000 |   |   |   | 4.67 | % |   |   | 2,000 |   |   |   | 5.03 | % |
|                                                   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Term      repurchase agreements                        |   |    | 20,000 |   |              |   | 3.77   | %       |   |   | 20,000 |   |   |   | 4.24 | % |   |   | - |   |   |   | 0.00 | % |
|                                                   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |    |   |   |              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                  |   | $       | 83,074 |   |              |   | 2.33   | %       |   | $ | 54,770 |   |   |   | 3.81 | % |   | $ | 38,198 |   |   |   | 4.47 | % |

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|                                                     |   | 2008                 |   |   | 2007              |   |   | 2006                 |   |
|----------------------------------------------------------|--------|----------------------|--------|--------|-------------------|--------|--------|----------------------|--------|
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |
|                                                     |   | Average      Balance |   |   | Average      Rate |   |   | Average      Balance |   |   | Average      Rate |   |   | Average      Balance |   |   | Average      Rate |   |
| (dollars      in thousands)                              |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |
| Federal      funds purchased & repurchase agreements |   | $                    | 40,340 |   |              |   | 2.11   | %                    |   | $ | 46,447 |   |   |   | 4.28 | % |   | $ | 34,692 |   |   |   | 4.24 | % |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      short-term borrowings                         |   |                 | 689    |   |              |   | 1.89   | %                    |   |   | 967 |   |   |   | 5.86 | % |   |   | 1,029 |   |   |   | 5.73 | % |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FHLB      term advances                                  |   |                 | 17,735 |   |              |   | 3.34   | %                    |   |   | 2,414 |   |   |   | 4.97 | % |   |   | 667 |   |   |   | 5.03 | % |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Term      repurchase agreements                          |   |                 | 20,000 |   |              |   | 3.69   | %                    |   |   | 7,219 |   |   |   | 4.42 | % |   |   | - |   |   |   | 0.00 | % |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                    |   | $                    | 78,764 |   |              |   | 2.79   | %                    |   | $ | 57,047 |   |   |   | 4.35 | % |   | $ | 36,388 |   |   |   | 4.30 | % |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Maximum      Amount Outstanding during the year          |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal      funds purchased and repurchase agreements   |   | $                    | 48,699 |   |              |   |   |                 |   | $ | 58,457 |   |   |   |   |   |   | $ | 44,928 |   |   |   |   |   |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      short-term borrowings                         |   | $                    | 1,351  |   |              |   |   |                 |   | $ | 1,684 |   |   |   |   |   |   | $ | 2,415 |   |   |   |   |   |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FHLB      term advances                                  |   | $                    | 23,500 |   |              |   |   |                 |   | $ | 4,000 |   |   |   |   |   |   | $ | 2,000 |   |   |   |   |   |
|                                                     |   |                 |   |   |              |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Term      repurchase agreements                          |   | $                    | 20,000 |   |              |   |   |                 |   | $ | 24,000 |   |   |   |   |   |   | $ | - |   |   |   |   |   |

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|                                                                                 |   |   |    |   | Payments      due by period |   |
|--------------------------------------------------------------------------------------|--------|--------|---------|--------|-----------------------------|--------|
| Contractual      Obligations                                                         |   | Total  |    |   | Less      than 1 year       |   |   | 1-3      years |   |   | 3-5      years |   |   | More      than 5 years |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                             |   | $      | 664,795 |   |                        | $      | 581,400 |   |   | $ | 72,509 |   |   | $ | 10,886 |   |   | $ | - |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds      purchased and securities sold under      agreements to repurchase |   |   | 38,510  |   |                        |   | 38,510 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      short-term borrowings                                                     |   |   | 1,064   |   |                        |   | 1,064 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term      borrowings                                                            |   |   | 43,500  |   |                        |   | 8,500 |   |   |   | 2,500 |   |   |   | 8,000 |   |   |   | 24,500 |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      lease obligation                                                      |   |   | 42      |   |                        |   | 21 |   |   |   | 21 |   |   |   | - |   |   |   | - |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase      obligations                                                            |   |   | 880     |   |                        |   | 758 |   |   |   | 122 |   |   |   | - |   |   |   | - |   |
|                                                                                 |   |   |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                                                |   | $      | 748,791 |   |                        | $      | 630,253 |   |   | $ | 75,152 |   |   | $ | 18,886 |   |   | $ | 24,500 |   |

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|                                |   | 2008   |   |   | 2007   |   |   | 2006   |   |   | 2005   |   |   | 2004   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (dollars      in thousands)         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-performing      assets:         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonaccrual      loans               |   | $      | 6,339  |   |   | $      | 3,249  |   |   | $      | 291    |   |   | $      | 606    |   |   | $ | 1,896 |   |
| Loans      90 days or more past due |   |   | 469    |   |   |   | 1,300  |   |   |   | 758    |   |   |   | 83     |   |   |   | 80 |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans                    |   |   | 6,808  |   |   |   | 4,549  |   |   |   | 1,049  |   |   |   | 689    |   |   |   | 1,976 |   |
| Securities      available-for-sale  |   |   | 358    |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Other      real estate owned        |   |   | 13,334 |   |   |   | 2,846  |   |   |   | 2,808  |   |   |   | 1,742  |   |   |   | 772 |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      non-performing assets    |   | $      | 20,500 |   |   | $      | 7,395  |   |   | $      | 3,857  |   |   | $      | 2,431  |   |   | $ | 2,748 |   |

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|                                                                              |   | 2008   |    |   | 2007   |   |    | 2006   |   |   | 2005    |   |   | 2004   |    |
|-----------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| (dollars      in thousands)                                                       |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |
| Balance      at beginning of period                                               |   | $      | 5,781   |   |   | $      | 6,533   |   |   | $      | 6,765   |   |   | $      | 6,476   |   |   | $ | 6,051 |   |
| Charge-offs:                                                                      |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Real      Estate                                                                  |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Construction                                                                      |   |   | 76      |   |   |   | 402     |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| 1-4      Family Residential                                                       |   |   | 89      |   |   |   | 1       |   |   |   | 6       |   |   |   | -       |   |   |   | 19 |   |
| Commercial                                                                        |   |   | 70      |   |   |   | 25      |   |   |   | -       |   |   |   | 28      |   |   |   | 93 |   |
| Agricultural                                                                      |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Commercial                                                                        |   |   | 77      |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | 3 |   |
| Agricultural                                                                      |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Consumer      and other                                                           |   |   | 115     |   |   |   | 299     |   |   |   | 99      |   |   |   | 119     |   |   |   | 115 |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Total      Charge-offs                                                            |   |   | 427     |   |   |   | 727     |   |   |   | 105     |   |   |   | 147     |   |   |   | 230 |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Recoveries:                                                                       |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Real      Estate                                                                  |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Construction                                                                      |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| 1-4      Family Residential                                                       |   |   | 3       |   |   |   | 1       |   |   |   | 1       |   |   |   | -       |   |   |   | - |   |
| Commercial                                                                        |   |   | 1       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Agricultural                                                                      |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Commercial                                                                        |   |   | 35      |   |   |   | 21      |   |   |   | 6       |   |   |   | 33      |   |   |   | 13 |   |
| Agricultural                                                                      |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Consumer      and other                                                           |   |   | 73      |   |   |   | 47      |   |   |   | 49      |   |   |   | 72      |   |   |   | 163 |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Total      Recoveries                                                             |   |   | 112     |   |   |   | 69      |   |   |   | 56      |   |   |   | 105     |   |   |   | 176 |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      charge-offs                                                              |   |   | 315     |   |   |   | 658     |   |   |   | 49      |   |   |   | 42      |   |   |   | 54 |   |
| Additions      (deductions) charged (credited) to operations                      |   |   | 1,313   |   |   |   | (94     | )      |   |   | (183    | )      |   |   | 331     |   |   |   | 479 |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Balance      at end of period                                                     |   | $      | 6,779   |   |   | $      | 5,781   |   |   | $      | 6,533   |   |   | $      | 6,765   |   |   | $ | 6,476 |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Average      Loans Outstanding                                                    |   | $      | 463,782 |   |   | $      | 454,088 |   |   | $      | 438,166 |   |   | $      | 435,997 |   |   | $ | 385,347 |   |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Ratio      of net charge-offs during the period to average loans      outstanding |   |   | 0.07    | %      |   |   | 0.14    | %      |   |   | 0.01    | %      |   |   | 0.01    | % |   |   | 0.01 | % |
|                                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Ratio      of allowance for loan losses                                           |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| to      total loans net of deferred fees                                          |   |   | 1.47    | %      |   |   | 1.23    | %      |   |   | 1.50    | %      |   |   | 1.51    | % |   |   | 1.55 | % |

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|                                         |   | 2008   |   |   | 2007   |   |   | 2006   |   |   | 2005   |   |   | 2004   |   |
|----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (dollars      in thousands)                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   | Amount |   |   |   | %      | *      |   | Amount |   |   |   | %      | *      |   | Amount |   |   |   | % | * |   | Amount |   |   |   | % | * |   | Amount |   |   |   | % | * |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at end of period applicable to: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real      Estate                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction                                 |   | $      | 472    |   |   |   | 7.68   | %      |   | $      | 733    |   |   |   | 9.92   | % |   | $ | 372 |   |   |   | 7.02 | % |   | $ | 258 |   |   |   | 5.36 | % |   | $ | 429 |   |   |   | 5.02 | % |
| 1-4      family residential                  |   |   | 1,001  |   |   |   | 20.88  | %      |   |   | 1,061  |   |   |   | 22.31  | % |   |   | 1,231 |   |   |   | 23.77 | % |   |   | 1,127 |   |   |   | 22.80 | % |   |   | 1,021 |   |   |   | 23.31 | % |
| Commercial                                   |   |   | 3,566  |   |   |   | 33.36  | %      |   |   | 1,964  |   |   |   | 31.31  | % |   |   | 2,396 |   |   |   | 31.92 | % |   |   | 2,534 |   |   |   | 34.39 | % |   |   | 2,676 |   |   |   | 38.25 | % |
| Agricultural                                 |   |   | 395    |   |   |   | 7.30   | %      |   |   | 407    |   |   |   | 7.17   | % |   |   | 428 |   |   |   | 7.13 | % |   |   | 421 |   |   |   | 6.84 | % |   |   | 486 |   |   |   | 6.55 | % |
| Commercial                                   |   |   | 683    |   |   |   | 16.67  | %      |   |   | 943    |   |   |   | 16.74  | % |   |   | 983 |   |   |   | 16.92 | % |   |   | 1,158 |   |   |   | 15.96 | % |   |   | 809 |   |   |   | 13.66 | % |
| Agricultural                                 |   |   | 469    |   |   |   | 8.77   | %      |   |   | 466    |   |   |   | 7.69   | % |   |   | 499 |   |   |   | 7.67 | % |   |   | 511 |   |   |   | 7.20 | % |   |   | 360 |   |   |   | 7.33 | % |
| Consumer      and other                      |   |   | 193    |   |   |   | 5.34   | %      |   |   | 207    |   |   |   | 4.85   | % |   |   | 276 |   |   |   | 5.57 | % |   |   | 390 |   |   |   | 7.45 | % |   |   | 302 |   |   |   | 5.87 | % |
| Unallocated                                  |   |   | -      |   |   |   |   |   |   |   | -      |   |   |   |   |   |   |   | 348 |   |   |   |   |   |   |   | 366 |   |   |   |   |   |   |   | 393 |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   | $      | 6,779  |   |   |   | 100    | %      |   | $      | 5,781  |   |   |   | 100    | % |   | $ | 6,533 |   |   |   | 100 | % |   | $ | 6,765 |   |   |   | 100 | % |   | $ | 6,476 |   |   |   | 100 | % |

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|   | · | Review      of the Company’s Current LiquiditySources |
|--------|--------|-------------------------------------------------------------|

|   | · | Review      of the Consolidated Statements of CashFlows |
|--------|--------|---------------------------------------------------------|

|   | · | Review      of Company Only Cash Flows |
|--------|--------|----------------------------------------|

|   | · | Review      of Commitments for Capital Expenditures, Cash Flow Uncertainties and Known      Trends in Liquidity and Cash FlowsNeeds |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Capital      Resources |
|--------|--------|------------------------|

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|   | · | Local,      regional and national economic conditions and the impact they may have on      us and our customers, and our assessment of that impact on our estimates      including, but not limited to, the allowance for loan losses and fair      value of other real estate owned.  Of particular relevance are      the economic conditions in the concentrated geographic area in central      Iowa in which the Banks conduct their  operations. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Changes      in the level of nonperforming assets and  charge-offs. |
|--------|--------|---------------------------------------------------------------------|

|   | · | Changes      in the fair value of securities available-for-sale and management’s      assessments of other-than-temporarily impairment of such      securities. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      effects of and changes in trade and monetary and fiscal policies and laws,      including the changes in assessment rates established by the Federal      Deposit Insurance Corporation for its Deposit Insurance Fund, interest      rate policies of the Federal Open Market Committee of the Federal Reserve      Board, the Federal Deposit Insurance Corporation’s Temporary Liquidity      Guaranty Program and U.S. Treasury’s Capital Purchase Program and Troubled      Asset Repurchase Program authorized by the Emergency Economic      Stabilization Act of 2008. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Changes      in sources and uses of funds, including loans, deposits and borrowings,      including the ability of the Banks to maintain unsecured federal funds      lines with correspondent banks. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Changes      imposed by regulatory agencies to increase capital to a level greater than      the level required for well-capitalized financial      institutions. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Inflation      and interest rate, securities market and monetary      fluctuations. |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Political      instability, acts of war or terrorism and natural    disasters. |
|--------|--------|--------------------------------------------------------------------------------|

|   | · | The      timely development and acceptance of new products and services and      perceived overall value of these products and services by      customers. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Revenues      being lower than expected. |
|--------|--------|------------------------------------------|

|   | · | Changes      in consumer spending, borrowings and savings  habits. |
|--------|--------|--------------------------------------------------------------------|

|   | · | Changes      in the financial performance and/or condition of our      borrowers. |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | Credit      quality deterioration, which could cause an increase in the provision for      loan losses. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | Technological      changes. |
|--------|--------|-----------------------------|

|   | · | The      ability to increase market share and control  expenses. |
|--------|--------|------------------------------------------------------------------|

|   | · | Changes      in the competitive environment among financial or bank holding companies      and other financial serviceproviders. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      effect of changes in laws and regulations with which the Company and the      Banks must comply. |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | Changes      in the securities markets. |
|--------|--------|-----------------------------------------|

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|   | · | The      effect of changes in accounting policies and practices, as may be adopted      by the regulatory agencies, as well as the Public Company Accounting      Oversight Board, the Financial Accounting Standards Board and other      accounting standard setters. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      costs and effects of legal and regulatory developments, including the      resolution of regulatory or other governmental inquiries and the results      of regulatory examinations orreviews. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our      success at managing the risks involved in the foregoing    items. |
|--------|--------|----------------------------------------------------------------------------|

ITEM 7A.  QUANTITATIVE 

|                        |   | $ Change |   |   | % Change |   |
|-----------------------------|--------|----------|--------|--------|----------|--------|
| (dollars      in thousands) |   |     |   |   |     |   |
| +200      Basis Points      |   | $        | (2,017 | )      |     |   | -6.57 | % |
| +100      Basis Points      |   |     | (925   | )      |     |   | -3.01 | % |
| -100      Basis Points      |   |     | (547   | )      |     |   | -1.78 | % |
| -200      Basis Points      |   |     | (1,746 | )      |     |   | -5.69 | % |

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|                                                                  |   | Less      than three months |     |   | Three      months to one year |   |     | One      to five years |   |   | Over      five years |   |   | Cumulative      Total |    |
|-----------------------------------------------------------------------|--------|-----------------------------|----------|--------|-------------------------------|--------|----------|------------------------|--------|--------|----------------------|--------|--------|-----------------------|---------|
| (dollars      in thousands)                                           |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |
|                                                                  |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |
| Interest      - earning assets                                        |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |
| Interest-bearing      deposits with banks                             |   | $                           | 1,971    |   |                          | $      | 2,860    |                   |   | $      | 5,570                |   |   | $                     | -       |   |   | $ | 10,401 |   |
| Federal      funds sold                                               |   |                        | 16,533   |   |                          |   | -        |                   |   |   | -                    |   |   |                  | -       |   |   |   | 16,533 |   |
| Investments      (1)                                                  |   |                        | 11,970   |   |                          |   | 17,306   |                   |   |   | 141,118              |   |   |                  | 142,621 |   |   |   | 313,015 |   |
| Loans                                                                 |   |                        | 94,922   |   |                          |   | 69,817   |                   |   |   | 266,656              |   |   |                  | 28,337  |   |   |   | 459,732 |   |
| Loans      held for sale                                              |   |                        | 1,152    |   |                          |   | -        |                   |   |   | -                    |   |   |                  | -       |   |   |   | 1,152 |   |
|                                                                  |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |   |   |   |   |   |
| Total      interest - earning assets                                  |   | $                           | 126,548  |   |                          | $      | 89,983   |                   |   | $      | 413,344              |   |   | $                     | 170,958 |   |   | $ | 800,833 |   |
|                                                                  |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |   |   |   |   |   |
| Interest      - bearing liabilities                                   |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |   |   |   |   |   |
| Interest      bearing demand deposits                                 |   | $                           | 165,422  |   |                          | $      | -        |                   |   | $      | -                    |   |   | $                     | -       |   |   | $ | 165,422 |   |
| Money      market and savings deposits                                |   |                        | 153,771  |   |                          |   | -        |                   |   |   | -                    |   |   |                  | -       |   |   |   | 153,771 |   |
| Time      certificates < $100,000                                  |   |                        | 32,388   |   |                          |   | 72,592   |                   |   |   | 59,412               |   |   |                  | -       |   |   |   | 164,392 |   |
| Time      certificates > $100,000                                  |   |                        | 18,808   |   |                          |   | 38,589   |                   |   |   | 23,982               |   |   |                  | -       |   |   |   | 81,379 |   |
| Other      borrowed funds (2)                                         |   |                        | 44,074   |   |                          |   | 4,000    |                   |   |   | 10,500               |   |   |                  | 24,500  |   |   |   | 83,074 |   |
|                                                                  |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |   |   |   |   |   |
| Total      interest - bearing liabilities                             |   | $                           | 414,463  |   |                          | $      | 115,181  |                   |   | $      | 93,894               |   |   | $                     | 24,500  |   |   | $ | 648,038 |   |
|                                                                  |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |   |   |   |   |   |
| Interest      sensitivity gap                                         |   | $                           | (287,915 | )      |                          | $      | (25,198  | )                      |   | $      | 319,450              |   |   | $                     | 146,458 |   |   | $ | 152,795 |   |
|                                                                  |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |   |   |   |   |   |
| Cumulative      interest sensitivity gap                              |   | $                           | (287,915 | )      |                          | $      | (313,113 | )                      |   | $      | 6,337                |   |   | $                     | 152,795 |   |   | $ | 152,795 |   |
|                                                                  |   |                        |     |   |                          |   |     |                   |   |   |                 |   |   |                  |    |   |   |   |   |   |
| Cumulative      interest sensitivity gap as a percent of total assets |   |                        | -33.55   | %      |                          |   | -36.49   | %                      |   |   | 0.74                 | %      |   |                  | 17.81   | % |   |   |   |   |

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ITEM 8. 

|   | /s/ Thomas H. Pohlman               |
|--------|-------------------------------------|
|   | Thomas      H. Pohlman, President   |
|   | (Principal      Executive Officer)  |
|   |                                |
|   |                                |
|   | /s/ John P. Nelson                  |
|   | John      P. Nelson, Vice President |
|   | (Principal      Financial Officer)  |

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| ASSETS                                                                                                                                                                        |   | 2008   |        |   | 2007   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                                                                                                                                                          |   |   |        |   |   |   |
| Cash      and due from banks                                                                                                                                                  |   | $      | 24,697,591  |   |   | $      | 26,044,577 |   |
| Federal      funds sold                                                                                                                                                       |   |   | 16,533,000  |   |   |   | 5,500,000 |   |
| Interest      bearing deposits in financial institutions                                                                                                                      |   |   | 10,400,761  |   |   |   | 634,613 |   |
| Securities      available-for-sale                                                                                                                                            |   |   | 313,014,375 |   |   |   | 339,942,064 |   |
| Loans      receivable, net                                                                                                                                                    |   |   | 452,880,348 |   |   |   | 463,651,000 |   |
| Loans      held for sale                                                                                                                                                      |   |   | 1,152,020   |   |   |   | 344,970 |   |
| Bank      premises and equipment, net                                                                                                                                         |   |   | 12,570,302  |   |   |   | 13,446,865 |   |
| Accrued      income receivable                                                                                                                                                |   |   | 6,650,287   |   |   |   | 8,022,900 |   |
| Deferred      income taxes                                                                                                                                                    |   |   | 5,838,044   |   |   |   | 929,326 |   |
| Other      real estate owned                                                                                                                                                  |   |   | 13,333,565  |   |   |   | 2,845,938 |   |
| Other      assets                                                                                                                                                             |   |   | 1,070,588   |   |   |   | 228,895 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| Total      assets                                                                                                                                                             |   | $      | 858,140,881 |   |   | $      | 861,591,148 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                                                                                     |   |   |        |   |   |   |   |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| LIABILITIES                                                                                                                                                                   |   |   |        |   |   |   |   |   |
| Deposits                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| Demand,      noninterest bearing                                                                                                                                              |   | $      | 99,830,687  |   |   | $      | 80,638,995 |   |
| NOW      accounts                                                                                                                                                             |   |   | 165,422,333 |   |   |   | 160,672,326 |   |
| Savings      and money market                                                                                                                                                 |   |   | 153,771,034 |   |   |   | 162,291,544 |   |
| Time,      $100,000 and over                                                                                                                                                  |   |   | 81,378,796  |   |   |   | 109,189,660 |   |
| Other      time                                                                                                                                                               |   |   | 164,391,860 |   |   |   | 177,326,270 |   |
| Total      deposits                                                                                                                                                           |   |   | 664,794,710 |   |   |   | 690,118,795 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| Securities      sold under agreements to repurchase                                                                                                                           |   |   | 38,509,559  |   |   |   | 30,033,321 |   |
| Other      short-term borrowings                                                                                                                                              |   |   | 1,063,806   |   |   |   | 737,420 |   |
| Long-term      borrowings                                                                                                                                                     |   |   | 43,500,000  |   |   |   | 24,000,000 |   |
| Dividend      payable                                                                                                                                                         |   |   | 2,641,216   |   |   |   | 2,545,987 |   |
| Accrued      expenses and other liabilities                                                                                                                                   |   |   | 3,794,140   |   |   |   | 4,135,102 |   |
| Total      liabilities                                                                                                                                                        |   |   | 754,303,431 |   |   |   | 751,570,625 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| STOCKHOLDERS'      EQUITY                                                                                                                                                     |   |   |        |   |   |   |   |   |
| Common      stock, $2 par value, authorized 18,000,000 shares; 9,432,915 and 9,429,580      shares issued and outstanding as of December 31, 2008 and 2007,      respectively |   |   | 18,865,830  |   |   |   | 18,859,160 |   |
| Additional      paid-in capital                                                                                                                                               |   |   | 22,651,222  |   |   |   | 22,588,691 |   |
| Retained      earnings                                                                                                                                                        |   |   | 62,471,081  |   |   |   | 66,683,016 |   |
| Accumulated      other comprehensive income(loss)-net unrealized gain (loss) on securities      available-for-sale                                                            |   |   | (150,683    | )      |   |   | 1,889,656 |   |
| Total      stockholders' equity                                                                                                                                               |   |   | 103,837,450 |   |   |   | 110,020,523 |   |
|                                                                                                                                                                          |   |   |        |   |   |   |   |   |
| Total      liabilities and stockholders' equity                                                                                                                               |   | $      | 858,140,881 |   |   | $      | 861,591,148 |   |

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|                                                              |   | 2008   |        |   | 2007   |   |       | 2006   |   |
|-------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|
|                                                              |   |   |        |   |   |   |       |   |   |
| Interest      and dividend income:                                |   |   |        |   |   |   |       |   |   |
| Loans,      including fees                                        |   | $      | 29,458,407  |   |   | $      | 31,629,493 |   |   | $ | 29,593,896 |   |
| Securities:                                                       |   |   |        |   |   |   |       |   |   |   |   |   |
| Taxable                                                           |   |   | 9,876,452   |   |   |   | 9,304,036  |   |   |   | 8,830,356 |   |
| Tax-exempt                                                        |   |   | 4,946,022   |   |   |   | 4,828,248  |   |   |   | 4,226,941 |   |
| Federal      funds sold                                           |   |   | 171,078     |   |   |   | 232,723    |   |   |   | 224,882 |   |
| Dividends                                                         |   |   | 1,062,208   |   |   |   | 1,567,578  |   |   |   | 1,419,617 |   |
| Total      interest and dividend income                           |   |   | 45,514,167  |   |   |   | 47,562,078 |   |   |   | 44,295,692 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Interest      expense:                                            |   |   |        |   |   |   |       |   |   |   |   |   |
| Deposits                                                          |   |   | 14,207,734  |   |   |   | 21,055,100 |   |   |   | 19,742,379 |   |
| Other      borrowed funds                                         |   |   | 2,193,958   |   |   |   | 2,482,030  |   |   |   | 1,563,149 |   |
| Total      interest expense                                       |   |   | 16,401,692  |   |   |   | 23,537,130 |   |   |   | 21,305,528 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Net      interest income                                          |   |   | 29,112,475  |   |   |   | 24,024,948 |   |   |   | 22,990,164 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Provision      (credit) for loan losses                           |   |   | 1,312,785   |   |   |   | (94,100    | )      |   |   | (182,686 | ) |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Net      interest income after provision (credit) for loan losses |   |   | 27,799,690  |   |   |   | 24,119,048 |   |   |   | 23,172,850 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Noninterest      income (loss):                                   |   |   |        |   |   |   |       |   |   |   |   |   |
| Trust      department income                                      |   |   | 1,597,096   |   |   |   | 2,014,277  |   |   |   | 1,462,734 |   |
| Service      fees                                                 |   |   | 1,791,713   |   |   |   | 1,855,964  |   |   |   | 1,840,699 |   |
| Securities      gains, net                                        |   |   | 3,515,323   |   |   |   | 1,466,697  |   |   |   | 1,333,136 |   |
| Other-than-temporary      impairment of investment securities     |   |   | (12,054,387 | )      |   |   | -          |   |   |   | (198,000 | ) |
| Gain      on sales of loans held for sale                         |   |   | 834,129     |   |   |   | 743,009    |   |   |   | 564,819 |   |
| Merchant      and ATM fees                                        |   |   | 616,802     |   |   |   | 553,644    |   |   |   | 645,517 |   |
| Gain      on sale or foreclosure of real estate                   |   |   | 66,219      |   |   |   | -          |   |   |   | 482,203 |   |
| Other                                                             |   |   | 624,679     |   |   |   | 574,759    |   |   |   | 542,924 |   |
| Total      noninterest income (loss)                              |   |   | (3,008,426  | )      |   |   | 7,208,350  |   |   |   | 6,674,032 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Noninterest      expense:                                         |   |   |        |   |   |   |       |   |   |   |   |   |
| Salaries      and employee benefits                               |   |   | 10,572,597  |   |   |   | 10,041,947 |   |   |   | 9,408,293 |   |
| Data      processing                                              |   |   | 2,246,473   |   |   |   | 2,239,595  |   |   |   | 2,185,478 |   |
| Occupancy      expenses                                           |   |   | 1,587,076   |   |   |   | 1,292,424  |   |   |   | 1,159,750 |   |
| Other      operating expenses                                     |   |   | 3,188,108   |   |   |   | 3,202,281  |   |   |   | 2,750,341 |   |
| Total      noninterest expense                                    |   |   | 17,594,254  |   |   |   | 16,776,247 |   |   |   | 15,503,862 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Income      before income taxes                                   |   |   | 7,197,010   |   |   |   | 14,551,151 |   |   |   | 14,343,020 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Provision      for income taxes                                   |   |   | 845,014     |   |   |   | 3,542,049  |   |   |   | 3,399,403 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Net      income                                                   |   | $      | 6,351,996   |   |   | $      | 11,009,102 |   |   | $ | 10,943,617 |   |
|                                                              |   |   |        |   |   |   |       |   |   |   |   |   |
| Basic      earnings per share                                     |   | $      | 0.67        |   |   | $      | 1.17       |   |   | $ | 1.16 |   |

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|                                                                                                                          |   | Comprehensive      Income |       |   | Common      Stock |       |       | Additional      Paid-in      Capital |   |       | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income      (Loss) |        |   | Total      Stockholders'      Equity |      |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|------------|--------|-------------------|------------|------------|--------------------------------------|--------|------------|------------------------|--------|--------|---------------------------------------------------------|-------------|--------|--------------------------------------|-----------|
|                                                                                                                          |   |                      |       |   |              |       |       |                                 |   |       |                   |   |   |                                                    |        |   |                                 |      |
| Balance,      December 31, 2005                                                                                          |   |                      |       |   | $                 | 18,838,542 |       |                                 | $      | 22,383,375 |                   |   | $      | 64,713,530                                              |        |   | $                                    | 3,291,854 |   |   | $ | 109,227,301 |   |
| Comprehensive      income:                                                                                                    |   |                      |       |   |              |       |       |                                 |   |       |                   |   |   |                                                    |        |   |                                 |      |   |   |   |   |   |
| Net      income                                                                                                               |   | $                         | 10,943,617 |   |              |       | -          |                                 |   |       | -                      |   |   |                                                    | 10,943,617  |   |                                 |      | - |   |   |   | 10,943,617 |   |
| Other      comprehensive income, unrealized gains on securities, net of      reclassification adjustment, net of tax          |   |                      | 2,425,901  |   |              |       | -          |                                 |   |       | -                      |   |   |                                                    | -           |   |                                 |      | 2,425,901 |   |   |   | 2,425,901 |   |
| Total      comprehensive income                                                                                               |   | $                         | 13,369,518 |   |              |       |       |                                 |   |       |                   |   |   |                                                    |        |   |                                 |      |   |   |   |   |   |   |
| Cash      dividends declared, $1.04 per share                                                                                 |   |                      |       |   |              |       | -          |                                 |   |       | -                      |   |   |                                                    | (9,800,520  | )      |                                 |      | - |   |   |   | (9,800,520 | ) |
| Sale      of 5,742 shares of common stock                                                                                     |   |                      |       |   |              |       | 11,484     |                                 |   |       | 115,529                |   |   |                                                    | -           |   |                                 |      | - |   |   |   | 127,013 |   |
| Balance,      December 31, 2006                                                                                          |   |                      |       |   |              |       | 18,850,026 |                                 |   |       | 22,498,904             |   |   |                                                    | 65,856,627  |   |                                 |      | 5,717,755 |   |   |   | 112,923,312 |   |
| Comprehensive      income:                                                                                                    |   |                      |       |   |              |       |       |                                 |   |       |                   |   |   |                                                    |        |   |                                 |      |   |   |   |   |   |   |
| Net      income                                                                                                               |   | $                         | 11,009,102 |   |              |       | -          |                                 |   |       | -                      |   |   |                                                    | 11,009,102  |   |                                 |      | - |   |   |   | 11,009,102 |   |
| Other      comprehensive income, unrealized losses on securities, net of      reclassification adjustment, net of tax benefit |   |                      | (3,828,099 | )      |              |       | -          |                                 |   |       | -                      |   |   |                                                    | -           |   |                                 |      | (3,828,099 | ) |   |   | (3,828,099 | ) |
| Total      comprehensive income                                                                                               |   | $                         | 7,181,003  |   |              |       |       |                                 |   |       |                   |   |   |                                                    |        |   |                                 |      |   |   |   |   |   |   |
| Cash      dividends declared, $1.08 per share                                                                                 |   |                      |       |   |              |       | -          |                                 |   |       | -                      |   |   |                                                    | (10,182,713 | )      |                                 |      | - |   |   |   | (10,182,713 | ) |
| Sale      of 4,567 shares of common stock                                                                                     |   |                      |       |   |              |       | 9,134      |                                 |   |       | 89,787                 |   |   |                                                    | -           |   |                                 |      | - |   |   |   | 98,921 |   |
| Balance,      December 31, 2007                                                                                          |   |                      |       |   |              |       | 18,859,160 |                                 |   |       | 22,588,691             |   |   |                                                    | 66,683,016  |   |                                 |      | 1,889,656 |   |   |   | 110,020,523 |   |
| Comprehensive      income:                                                                                                    |   |                      |       |   |              |       |       |                                 |   |       |                   |   |   |                                                    |        |   |                                 |      |   |   |   |   |   |   |
| Net      income                                                                                                               |   | $                         | 6,351,996  |   |              |       | -          |                                 |   |       | -                      |   |   |                                                    | 6,351,996   |   |                                 |      | - |   |   |   | 6,351,996 |   |
| Other      comprehensive income, unrealized losses on securities, net of      reclassification adjustment, net of tax benefit |   |                      | (2,040,339 | )      |              |       | -          |                                 |   |       | -                      |   |   |                                                    | -           |   |                                 |      | (2,040,339 | ) |   |   | (2,040,339 | ) |
| Total      comprehensive income                                                                                               |   | $                         | 4,311,657  |   |              |       |       |                                 |   |       |                   |   |   |                                                    |        |   |                                 |      |   |   |   |   |   |   |
| Cash      dividends declared, $1.12 per share                                                                                 |   |                      |       |   |              |       | -          |                                 |   |       | -                      |   |   |                                                    | (10,563,931 | )      |                                 |      | - |   |   |   | (10,563,931 | ) |
| Sale      of 3,335 shares of common stock                                                                                     |   |                      |       |   |              |       | 6,670      |                                 |   |       | 62,531                 |   |   |                                                    | -           |   |                                 |      | - |   |   |   | 69,201 |   |
| Balance,      December 31, 2008                                                                                          |   |                      |       |   |              | $          | 18,865,830 |                                 |   | $          | 22,651,222             |   |   | $                                                       | 62,471,081  |   |                                 | $         | (150,683 | ) |   | $ | 103,837,450 |   |

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|                                                                                                        |   | 2008   |         |   | 2007   |   |        | 2006   |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|-------------|--------|--------|
|                                                                                                        |   |   |         |   |   |   |        |   |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES                                                                   |   |   |         |   |   |   |        |   |   |
| Net      income                                                                                             |   | $      | 6,351,996    |   |   | $      | 11,009,102  |   |   | $ | 10,943,617 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities:                 |   |   |         |   |   |   |        |   |   |   |   |   |
| Provision      (credit) for loan losses                                                                     |   |   | 1,312,785    |   |   |   | (94,100     | )      |   |   | (182,686 | ) |
| Amortization      and accretion                                                                             |   |   | (184,998     | )      |   |   | (244,069    | )      |   |   | 131,704 |   |
| Depreciation                                                                                                |   |   | 1,096,653    |   |   |   | 1,086,400   |   |   |   | 973,257 |   |
| Provision      for deferred taxes                                                                           |   |   | (3,710,424   | )      |   |   | 130,978     |   |   |   | 107,200 |   |
| Securities      gains, net                                                                                  |   |   | (3,515,323   | )      |   |   | (1,466,697  | )      |   |   | (1,333,136 | ) |
| Other-than-temporary      impairment of investment securities                                               |   |   | 12,054,387   |   |   |   | -           |   |   |   | 198,000 |   |
| Change      in assets and liabilities:                                                                      |   |   |         |   |   |   |        |   |   |   |   |   |
| Decrease      (increase) in loans held for sale                                                             |   |   | (807,050     | )      |   |   | 181,029     |   |   |   | 455,281 |   |
| Decrease      (increase) in accrued income receivable                                                       |   |   | 1,372,613    |   |   |   | (151,535    | )      |   |   | (1,237,570 | ) |
| Increase      in other assets                                                                               |   |   | (841,693     | )      |   |   | (85,743     | )      |   |   | (798,438 | ) |
| Increase      (decrease) in accrued expenses and other liabilities                                          |   |   | (340,962     | )      |   |   | 398,363     |   |   |   | 1,798,232 |   |
| Net      cash provided by operating activities                                                              |   |   | 12,787,984   |   |   |   | 10,763,728  |   |   |   | 11,055,461 |   |
|                                                                                                        |   |   |         |   |   |   |        |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES                                                                   |   |   |         |   |   |   |        |   |   |   |   |   |
| Purchase      of securities available-for-sale                                                              |   |   | (140,744,441 | )      |   |   | (88,955,529 | )      |   |   | (69,015,999 | ) |
| Proceeds      from sale of securities available-for-sale                                                    |   |   | 59,489,208   |   |   |   | 23,445,749  |   |   |   | 6,013,192 |   |
| Proceeds      from maturities and calls of securities available-for-sale                                    |   |   | 96,590,223   |   |   |   | 75,773,995  |   |   |   | 46,795,165 |   |
| Net      decrease (increase) in interest bearing deposits in financial      institutions                    |   |   | (9,766,148   | )      |   |   | 909,693     |   |   |   | 4,439,236 |   |
| Net      decrease (increase) in federal funds sold                                                          |   |   | (11,033,000  | )      |   |   | 7,600,000   |   |   |   | (12,800,000 | ) |
| Net      decrease (increase) in loans                                                                       |   |   | (1,677,154   | )      |   |   | (34,434,359 | )      |   |   | 11,377,830 |   |
| Net      proceeds for the sale of other real estate owned                                                   |   |   | 1,024,933    |   |   |   | -           |   |   |   | - |   |
| Purchase      of bank premises and equipment, net                                                           |   |   | (220,090     | )      |   |   | (1,915,524  | )      |   |   | (2,560,158 | ) |
| Improvements      in other real estate owned                                                                |   |   | (377,539     | )      |   |   | -           |   |   |   | - |   |
| Net      cash used in investing activities                                                                  |   |   | (6,714,008   | )      |   |   | (17,575,975 | )      |   |   | (15,750,734 | ) |
|                                                                                                        |   |   |         |   |   |   |        |   |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                                                                   |   |   |         |   |   |   |        |   |   |   |   |   |
| Increase      (decrease) in deposits                                                                        |   |   | (25,324,085  | )      |   |   | 9,762,322   |   |   |   | 12,014,138 |   |
| Increase      (decrease) in federal funds purchased and securities sold under agreements      to repurchase |   |   | 8,476,238    |   |   |   | (4,694,576  | )      |   |   | 67,914 |   |
| Proceeds      from other short-term borrowings, net                                                         |   |   | 326,386      |   |   |   | 1,267,304   |   |   |   | 608,986 |   |
| Proceeds      from long-term borrowings                                                                     |   |   | 21,500,000   |   |   |   | 20,000,000  |   |   |   | - |   |
| Payments      on long-term borrwings                                                                        |   |   | (2,000,000   | )      |   |   | -           |   |   |   | - |   |
| Dividends      paid                                                                                         |   |   | (10,468,702  | )      |   |   | (10,087,229 | )      |   |   | (9,704,835 | ) |
| Proceeds      from issuance of stock                                                                        |   |   | 69,201       |   |   |   | 98,921      |   |   |   | 127,013 |   |
| Net      cash provided by (used in) financing activities                                                    |   |   | (7,420,962   | )      |   |   | 16,346,742  |   |   |   | 3,113,216 |   |
|                                                                                                        |   |   |         |   |   |   |        |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                                   |   |   | (1,346,986   | )      |   |   | 9,534,495   |   |   |   | (1,582,057 | ) |
|                                                                                                        |   |   |         |   |   |   |        |   |   |   |   |   |
| CASH      AND DUE FROM BANKS                                                                                |   |   |         |   |   |   |        |   |   |   |   |   |
| Beginning                                                                                                   |   |   | 26,044,577   |   |   |   | 16,510,082  |   |   |   | 18,092,139 |   |
| Ending                                                                                                      |   | $      | 24,697,591   |   |   | $      | 26,044,577  |   |   | $ | 16,510,082 |   |

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|                                                                            |   | 2008   |       |   | 2007   |   |       | 2006   |   |
|---------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                                                            |   |   |       |   |   |   |       |   |   |
| SUPPLEMENTAL      DISCLOSURE OF CASH FLOW INFORMATION                           |   |   |       |   |   |   |       |   |   |
| Cash      payments for:                                                         |   |   |       |   |   |   |       |   |   |
| Interest                                                                        |   | $      | 17,225,985 |   |   | $      | 23,456,721 |   |   | $ | 21,064,363 |   |
| Income      taxes                                                               |   |   | 5,430,551  |   |   |   | 3,691,664  |   |   |   | 3,461,781 |   |
|                                                                            |   |   |       |   |   |   |       |   |   |   |   |   |
| SUPLEMENTAL      DISCLOSURE OF NONCASH INVESTING AND FINANCING      ACTIVITIES, |   |   |       |   |   |   |       |   |   |   |   |   |
| Transfer      of loans to other real estate owned                               |   | $      | 11,135,022 |   |   | $      | 62,590     |   |   | $ | 1,306,469 |   |

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|                                            |   | 2008   |      |   | 2007   |   |       | 2006   |   |
|-------------------------------------------------|--------|--------|-----------|--------|--------|--------|------------|--------|--------|
| Basic      earning per share computation:       |   |   |      |   |   |   |       |   |   |
| Net      income                                 |   | $      | 6,351,996 |   |   | $      | 11,009,102 |   |   | $ | 10,943,617 |   |
| Weighted      average common shares outstanding |   |   | 9,431,393 |   |   |   | 9,427,503  |   |   |   | 9,422,402 |   |
| Basic      EPS                                  |   | $      | 0.67      |   |   | $      | 1.17       |   |   | $ | 1.16 |   |

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|                                            |   | Amortized      Cost |        |   | Gross      Unrealized Gains |   |      | Gross      Unrealized Losses |   |   | Estimated      Fair Value |   |
|-------------------------------------------------|--------|---------------------|-------------|--------|-----------------------------|--------|-----------|------------------------------|--------|--------|---------------------------|--------|
| 2008:                                           |   |                |        |   |                        |   |      |                         |   |   |                      |   |
| U.S.      treasury                              |   | $                   | 498,102     |   |                        | $      | 47,445    |                         |   | $      | -                         |   |   | $ | 545,547 |   |
| U.S.      government agencies                   |   |                | 48,195,482  |   |                        |   | 1,537,009 |                         |   |   | (37,748                   | )      |   |   | 49,694,743 |   |
| U.S.      government mortgage-backed securities |   |                | 66,421,362  |   |                        |   | 1,116,775 |                         |   |   | (22,258                   | )      |   |   | 67,515,879 |   |
| State      and political subdivisions           |   |                | 127,826,526 |   |                        |   | 1,592,343 |                         |   |   | (677,869                  | )      |   |   | 128,741,000 |   |
| Corporate      bonds                            |   |                | 58,003,206  |   |                        |   | 224,679   |                         |   |   | (2,990,315                | )      |   |   | 55,237,570 |   |
| Equity      securities                          |   |                | 12,308,876  |   |                        |   | 205,593   |                         |   |   | (1,234,833                | )      |   |   | 11,279,636 |   |
|                                            |   | $                   | 313,253,554 |   |                        | $      | 4,723,844 |                         |   | $      | (4,963,023                | )      |   | $ | 313,014,375 |   |

|                                            |   | Amortized      Cost |        |   | Gross      Unrealized Gains |   |      | Gross      Unrealized Losses |   |   | Estimated      Fair Value |   |
|-------------------------------------------------|--------|---------------------|-------------|--------|-----------------------------|--------|-----------|------------------------------|--------|--------|---------------------------|--------|
| 2007:                                           |   |                |        |   |                        |   |      |                         |   |   |                      |   |
| U.S.      treasury                              |   | $                   | 497,277     |   |                        | $      | 26,883    |                         |   | $      | -                         |   |   | $ | 524,160 |   |
| U.S.      government agencies                   |   |                | 94,500,440  |   |                        |   | 1,207,999 |                         |   |   | (111,206                  | )      |   |   | 95,597,233 |   |
| U.S.      government mortgage-backed securities |   |                | 27,064,931  |   |                        |   | 27,833    |                         |   |   | (215,392                  | )      |   |   | 26,877,372 |   |
| State      and political subdivisions           |   |                | 132,698,746 |   |                        |   | 963,002   |                         |   |   | (379,397                  | )      |   |   | 133,282,351 |   |
| Corporate      bonds                            |   |                | 65,455,863  |   |                        |   | 527,546   |                         |   |   | (1,030,111                | )      |   |   | 64,953,298 |   |
| Equity      securities                          |   |                | 16,725,353  |   |                        |   | 3,326,847 |                         |   |   | (1,344,550                | )      |   |   | 18,707,650 |   |
|                                            |   | $                   | 336,942,610 |   |                        | $      | 6,080,110 |                         |   | $      | (3,080,656                | )      |   | $ | 339,942,064 |   |

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|                                        |   | Amortized      Cost |        |   | Estimated      Fair Value |   |
|---------------------------------------------|--------|---------------------|-------------|--------|---------------------------|--------|
|                                        |   |                |        |   |                      |   |
| Due      in one year or less                |   | $                   | 29,024,152  |   |                      | $      | 29,276,236 |   |
| Due      after one year through five years  |   |                | 139,774,377 |   |                      |   | 141,117,397 |   |
| Due      after five years through ten years |   |                | 112,218,463 |   |                      |   | 111,398,083 |   |
| Due      after ten years                    |   |                | 19,927,686  |   |                      |   | 19,943,023 |   |
|                                        |   |                | 300,944,678 |   |                      |   | 301,734,739 |   |
| Equity      securities                      |   |                | 12,308,876  |   |                      |   | 11,279,636 |   |
|                                        |   | $                   | 313,253,554 |   |                      | $      | 313,014,375 |   |

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|                                                                             |   | 2008   |        |   | 2007   |   |       | 2006   |   |
|----------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|
|                                                                             |   |   |        |   |   |   |       |   |   |
| Unrealized      holding gains (losses) arising during the period                 |   | $      | (11,777,697 | )      |   | $      | (4,609,651 | )      |   | $ | 4,985,773 |   |
| Reclassification      adjustment for net losses (gains) realized in net income   |   |   | 8,539,064   |   |   |   | (1,466,697 | )      |   |   | (1,135,136 | ) |
| Net      unrealized gains (losses) before tax effect                             |   |   | (3,238,633  | )      |   |   | (6,076,348 | )      |   |   | 3,850,637 |   |
| Tax      effect                                                                  |   |   | 1,198,294   |   |   |   | 2,248,249  |   |   |   | (1,424,736 | ) |
| Other      comprehensive income -Net unrealized gains (losses)on      securities |   | $      | (2,040,339  | )      |   | $      | (3,828,099 | )      |   | $ | 2,425,901 |   |

|                                            |   | Less      than 12 Months |       |   | 12      Months or More |   |       | Total           |   |
|-------------------------------------------------|--------|--------------------------|------------|--------|------------------------|--------|------------|-----------------|--------|
|                                            |   | Fair      Value          |       |   | Unrealized      Losses |   |       | Fair      Value |   |   | Unrealized      Losses |   |   | Fair      Value |   |   | Unrealized      Losses |   |
| 2008:                                           |   |                     |       |   |                   |   |       |            |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                     |       |   |                   |   |       |            |   |   |   |   |   |   |   |   |   |   |
| Securities      available for sale:             |   |                     |       |   |                   |   |       |            |   |   |   |   |   |   |   |   |   |   |
| U.S.      government agencies                   |   | $                        | 1,801,958  |   |                   | $      | (17,068    | )               |   | $ | 629,993 |   |   | $ | (20,680 | ) |   | $ | 2,431,951 |   |   | $ | (37,748 | ) |
| U.S.      government mortgage-backed securities |   |                     | 5,012,003  |   |                   |   | (18,645    | )               |   |   | 100,052 |   |   |   | (3,613 | ) |   |   | 5,112,055 |   |   |   | (22,258 | ) |
| State      and political subsidivisions         |   |                     | 29,377,281 |   |                   |   | (594,462   | )               |   |   | 1,482,034 |   |   |   | (83,407 | ) |   |   | 30,859,315 |   |   |   | (677,869 | ) |
| Corporate      obligations                      |   |                     | 30,284,263 |   |                   |   | (1,810,579 | )               |   |   | 10,092,995 |   |   |   | (1,179,736 | ) |   |   | 40,377,258 |   |   |   | (2,990,315 | ) |
| Equity      securities                          |   |                     | 5,060,837  |   |                   |   | (1,234,833 | )               |   |   | - |   |   |   | - |   |   |   | 5,060,837 |   |   |   | (1,234,833 | ) |
|                                            |   | $                        | 71,536,342 |   |                   | $      | (3,675,587 | )               |   | $ | 12,305,074 |   |   | $ | (1,287,436 | ) |   | $ | 83,841,416 |   |   | $ | (4,963,023 | ) |

|                                             |   | Less      than 12 Months |       |   | 12      Months or More |   |       | Total           |   |
|--------------------------------------------------|--------|--------------------------|------------|--------|------------------------|--------|------------|-----------------|--------|
|                                             |   | Fair      Value          |       |   | Unrealized      Losses |   |       | Fair      Value |   |   | Unrealized      Losses |   |   | Fair      Value |   |   | Unrealized      Losses |   |
| 2007:                                            |   |                     |       |   |                   |   |       |            |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                     |       |   |                   |   |       |            |   |   |   |   |   |   |   |   |   |   |
| Securities      available for sale:              |   |                     |       |   |                   |   |       |            |   |   |   |   |   |   |   |   |   |   |
| U.S.      government agencies                    |   | $                        | 2,497,127  |   |                   | $      | (2,873     | )               |   | $ | 22,807,372 |   |   | $ | (108,334 | ) |   | $ | 25,304,499 |   |   | $ | (111,207 | ) |
| U.S.      government mortgage- backed securities |   |                     | 12,696,160 |   |                   |   | (71,106    | )               |   |   | 8,706,270 |   |   |   | (144,286 | ) |   |   | 21,402,430 |   |   |   | (215,392 | ) |
| State      and political subsidivisions          |   |                     | 14,067,294 |   |                   |   | (84,174    | )               |   |   | 26,526,618 |   |   |   | (295,222 | ) |   |   | 40,593,912 |   |   |   | (379,396 | ) |
| Corporate      obligations                       |   |                     | 21,577,269 |   |                   |   | (786,802   | )               |   |   | 14,392,174 |   |   |   | (243,309 | ) |   |   | 35,969,443 |   |   |   | (1,030,111 | ) |
| Equity      securities                           |   |                     | 6,336,950  |   |                   |   | (1,344,550 | )               |   |   | - |   |   |   | - |   |   |   | 6,336,950 |   |   |   | (1,344,550 | ) |
|                                             |   | $                        | 57,174,800 |   |                   | $      | (2,289,505 | )               |   | $ | 72,432,434 |   |   | $ | (791,151 | ) |   | $ | 129,607,234 |   |   | $ | (3,080,656 | ) |

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|                             |   | 2008   |        |   | 2007   |   |
|----------------------------------|--------|--------|-------------|--------|--------|--------|
|                             |   |   |        |   |   |   |
| Commercial      and agricultural |   | $      | 116,976,463 |   |   | $      | 114,748,926 |   |
| Real      estate - mortgage      |   |   | 282,901,692 |   |   |   | 285,468,860 |   |
| Real      estate - construction  |   |   | 35,325,692  |   |   |   | 46,568,105 |   |
| Consumer                         |   |   | 9,049,309   |   |   |   | 9,472,218 |   |
| Other                            |   |   | 15,478,724  |   |   |   | 13,310,271 |   |
|                             |   |   | 459,731,880 |   |   |   | 469,568,380 |   |
| Less:                            |   |   |        |   |   |   |   |   |
| Allowance      for loan losses   |   |   | (6,779,215  | )      |   |   | (5,780,678 | ) |
| Deferred      loan fees          |   |   | (72,317     | )      |   |   | (136,702 | ) |
|                             |   | $      | 452,880,348 |   |   | $      | 463,651,000 |   |

|                                    |   | 2008   |      |   | 2007   |   |      | 2006   |   |
|-----------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
|                                    |   |   |      |   |   |   |      |   |   |
| Balance,      beginning                 |   | $      | 5,780,678 |   |   | $      | 6,532,617 |   |   | $ | 6,765,356 |   |
| Provision      (credit) for loan losses |   |   | 1,312,785 |   |   |   | (94,100   | )      |   |   | (182,686 | ) |
| Recoveries      of loans charged-off    |   |   | 112,440   |   |   |   | 68,803    |   |   |   | 55,055 |   |
| Loans      charged-off                  |   |   | (426,688  | )      |   |   | (726,642  | )      |   |   | (105,108 | ) |
| Balance,      ending                    |   | $      | 6,779,215 |   |   | $      | 5,780,678 |   |   | $ | 6,532,617 |   |

|                            |   | 2008   |        |   | 2007   |   |
|---------------------------------|--------|--------|-------------|--------|--------|--------|
|                            |   |   |        |   |   |   |
| Balance,      beginning of year |   | $      | 14,065,125  |   |   | $      | 22,100,213 |   |
| New      loans                  |   |   | 25,425,856  |   |   |   | 20,355,673 |   |
| Repayments                      |   |   | (27,991,382 | )      |   |   | (18,259,135 | ) |
| Change      in status           |   |   | 2,691,770   |   |   |   | (10,131,626 | ) |
| Balance,      end of year       |   | $      | 14,191,369  |   |   | $      | 14,065,125 |   |

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|                               |   | 2008   |       |   | 2007   |   |
|------------------------------------|--------|--------|------------|--------|--------|--------|
|                               |   |   |       |   |   |   |
| Land                               |   | $      | 2,426,383  |   |   | $      | 2,426,383 |   |
| Buildings      and improvements    |   |   | 14,545,054 |   |   |   | 14,534,553 |   |
| Furniture      and equipment       |   |   | 7,179,512  |   |   |   | 7,029,181 |   |
|                               |   |   | 24,150,949 |   |   |   | 23,990,117 |   |
| Less      accumulated depreciation |   |   | 11,580,647 |   |   |   | 10,543,252 |   |
|                               |   | $      | 12,570,302 |   |   | $      | 13,446,865 |   |

| 2009   |   | $      | 162,375,867 |   |
|--------|--------|--------|-------------|--------|
| 2010   |   |   | 57,864,090  |   |
| 2011   |   |   | 14,644,645  |   |
| 2012   |   |   | 6,376,578   |   |
| 2013   |   |   | 4,509,476   |   |
|   |   | $      | 245,770,656 |   |

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|                          |   | 2008   |       |   | 2007   |   |       | 2006   |   |
|-------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                          |   |   |       |   |   |   |       |   |   |
| NOW      accounts             |   | $      | 897,544    |   |   | $      | 2,050,655  |   |   | $ | 2,362,608 |   |
| Savings      and money market |   |   | 2,759,380  |   |   |   | 5,683,264  |   |   |   | 5,886,737 |   |
| Time,      $100,000 and over  |   |   | 3,948,039  |   |   |   | 5,325,045  |   |   |   | 4,421,595 |   |
| Other      time               |   |   | 6,602,771  |   |   |   | 7,996,136  |   |   |   | 7,071,439 |   |
|                          |   | $      | 14,207,734 |   |   | $      | 21,055,100 |   |   | $ | 19,742,379 |   |

|                                         |   | Amount |       |   | Weighted      Average Interest Rate |   | Features |
|----------------------------------------------|--------|--------|------------|--------|-------------------------------------|--------|----------|
|                                         |   |   |       |   |                                |   |     |
| FHLB      advances maturing in:              |   |   |       |   |                                |   |     |
| 2009                                         |   | $      | 8,500,000  |   |                                |   | 2.39%    |   |   |
| 2010                                         |   |   | 1,500,000  |   |                                |   | 4.57%    |   |   |
| 2011                                         |   |   | 1,000,000  |   |                                |   | 5.04%    |   |   |
| 2013                                         |   |   | 1,000,000  |   |                                |   | 2.17%    |   | Callable      in March, 2011 |
| After                                        |   |   | 11,500,000 |   |                                |   | 2.94%    |   | Includes      $4,500,000 callable in February, 2011; $7,000,000 callable in March,      2011 |
|                                         |   |   |       |   |                                |   |     |   |   |
| Total      FHLB advances                     |   | $      | 23,500,000 |   |                                |   | 2.90%    |   |   |
|                                         |   |   |       |   |                                |   |     |   |   |
| Term      repurchase agreements maturing in: |   |   |       |   |                                |   |     |   |   |
| 2012                                         |   |   | 7,000,000  |   |                                |   | 4.15%    |   | Callable      in 2009 |
| 2018                                         |   |   | 13,000,000 |   |                                |   | 3.56%    |   | Callable      in 2009 |
| Total      term repurchase agreements        |   | $      | 20,000,000 |   |                                |   | 3.77%    |   |   |
|                                         |   |   |       |   |                                |   |     |   |   |
| Total      long-term borrowings              |   | $      | 43,500,000 |   |                                |   | 3.30%    |   |   |

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|                    |   | 2008   |       |   | 2007   |   |      | 2006   |   |
|-------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
|                    |   |   |       |   |   |   |      |   |   |
| Federal:                |   |   |       |   |   |   |      |   |   |
| Current                 |   | $      | 3,839,793  |   |   | $      | 2,726,253 |   |   | $ | 2,633,706 |   |
| Deferred                |   |   | (3,370,787 | )      |   |   | 111,616   |   |   |   | 90,186 |   |
|                    |   |   | 469,006    |   |   |   | 2,837,869 |   |   |   | 2,723,892 |   |
| State:                  |   |   |       |   |   |   |      |   |   |   |   |   |
| Current                 |   |   | 715,645    |   |   |   | 684,818   |   |   |   | 658,497 |   |
| Deferred                |   |   | (339,637   | )      |   |   | 19,362    |   |   |   | 17,014 |   |
|                    |   |   | 376,008    |   |   |   | 704,180   |   |   |   | 675,511 |   |
|                    |   |   |       |   |   |   |      |   |   |   |   |   |
| Income      tax expense |   | $      | 845,014    |   |   | $      | 3,542,049 |   |   | $ | 3,399,403 |   |

|                                         |   | 2008   |       |   | 2007   |   |       | 2006   |   |
|----------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                         |   |   |       |   |   |   |       |   |   |
| Income      taxes at 35% federal tax rate    |   | $      | 2,518,955  |   |   | $      | 5,092,903  |   |   | $ | 5,020,058 |   |
| Increase      (decrease) resulting from:     |   |   |       |   |   |   |       |   |   |   |   |   |
| Tax-exempt      interest and dividends       |   |   | (1,984,052 | )      |   |   | (1,942,031 | )      |   |   | (1,797,533 | ) |
| State      taxes, net of federal tax benefit |   |   | 520,100    |   |   |   | 435,391    |   |   |   | 437,893 |   |
| Other                                        |   |   | (209,989   | )      |   |   | (44,214    | )      |   |   | (261,015 | ) |
| Total      income tax expense                |   | $      | 845,014    |   |   | $      | 3,542,049  |   |   | $ | 3,399,403 |   |

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|                                                        |   | 2008   |      |   | 2007   |   |
|-------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                        |   |   |      |   |   |   |
| Deferred      tax assets:                                   |   |   |      |   |   |   |
| Allowance      for loan losses                              |   | $      | 2,030,390 |   |   | $      | 1,639,108 |   |
| Net      unrealized losses on securities available for sale |   |   | 88,495    |   |   |   | - |   |
| Other      than temporary impairment                        |   |   | 3,605,328 |   |   |   | - |   |
| Other      items                                            |   |   | 637,610   |   |   |   | 770,441 |   |
|                                                        |   |   | 6,361,823 |   |   |   | 2,409,549 |   |
| Deferred      tax liabilities:                              |   |   |      |   |   |   |   |   |
| Net      unrealized gains on securities available for sale  |   |   | -         |   |   |   | (1,109,799 | ) |
| Other                                                       |   |   | (523,779  | )      |   |   | (370,424 | ) |
|                                                        |   |   | (523,779  | )      |   |   | (1,480,223 | ) |
|                                                        |   |   |      |   |   |   |   |   |
| Net      deferred tax assets                                |   | $      | 5,838,044 |   |   | $      | 929,326 |   |

----

Table of Contents

|                              |   | 2008   |       |   | 2007   |   |
|-----------------------------------|--------|--------|------------|--------|--------|--------|
|                              |   |   |       |   |   |   |
| Commitments      to extend credit |   | $      | 68,633,000 |   |   | $      | 96,753,000 |   |
| Standby      letters of credit    |   |   | 1,887,000  |   |   |   | 1,021,000 |   |
|                              |   | $      | 70,520,000 |   |   | $      | 97,774,000 |   |

----

Table of Contents

----

Table of Contents

|                                              |   | Actual |    |   | For      Capital Adequacy Purposes |   |   | To      Be Well Capitalized Under Prompt Corrective Action      Provisions |   |
|---------------------------------------------------|--------|--------|---------|--------|------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|
|                                              |   | Amount |    |   | Ratio                              |   |   | Amount                                                                     |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                              |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |
| As      of December 31, 2008:                     |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |
| Total      capital (to risk-weighted assets):     |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                      |   | $      | 110,419 |   |                               |   | 16.8   | %                                                                          |   | $ | 52,513 |   |   |   | 8.0 | % |   |   | N/A |   |   |   | N/A |   |
| Boone      Bank & Trust                       |   |   | 12,930  |   |                               |   | 16.8   |                                                                       |   |   | 6,152 |   |   |   | 8.0 |   |   | $ | 7,690 |   |   |   | 10.0 | % |
| First      National Bank                          |   |   | 41,202  |   |                               |   | 12.4   |                                                                       |   |   | 26,670 |   |   |   | 8.0 |   |   |   | 33,337 |   |   |   | 10.0 |   |
| Randall-Story      State Bank                     |   |   | 8,734   |   |                               |   | 14.0   |                                                                       |   |   | 4,984 |   |   |   | 8.0 |   |   |   | 6,230 |   |   |   | 10.0 |   |
| State      Bank & Trust                       |   |   | 13,121  |   |                               |   | 13.4   |                                                                       |   |   | 7,812 |   |   |   | 8.0 |   |   |   | 9,764 |   |   |   | 10.0 |   |
| United      Bank & Trust                      |   |   | 8,797   |   |                               |   | 14.0   |                                                                       |   |   | 5,017 |   |   |   | 8.0 |   |   |   | 6,271 |   |   |   | 10.0 |   |
|                                              |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital (to risk-weighted assets):    |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                      |   | $      | 103,340 |   |                               |   | 15.7   | %                                                                          |   | $ | 26,257 |   |   |   | 4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Boone      Bank & Trust                       |   |   | 12,108  |   |                               |   | 15.8   |                                                                       |   |   | 3,076 |   |   |   | 4.0 |   |   | $ | 4,614 |   |   |   | 6.0 | % |
| First      National Bank                          |   |   | 37,861  |   |                               |   | 11.4   |                                                                       |   |   | 13,335 |   |   |   | 4.0 |   |   |   | 20,002 |   |   |   | 6.0 |   |
| Randall-Story      State Bank                     |   |   | 8,090   |   |                               |   | 13.0   |                                                                       |   |   | 2,492 |   |   |   | 4.0 |   |   |   | 3,738 |   |   |   | 6.0 |   |
| State      Bank & Trust                       |   |   | 12,229  |   |                               |   | 12.5   |                                                                       |   |   | 3,906 |   |   |   | 4.0 |   |   |   | 5,859 |   |   |   | 6.0 |   |
| United      Bank & Trust                      |   |   | 8,609   |   |                               |   | 13.7   |                                                                       |   |   | 2,509 |   |   |   | 4.0 |   |   |   | 3,763 |   |   |   | 6.0 |   |
|                                              |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital (to average-weighted assets): |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                      |   | $      | 103,340 |   |                               |   | 12.3   | %                                                                          |   | $ | 33,647 |   |   |   | 4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Boone      Bank & Trust                       |   |   | 12,108  |   |                               |   | 11.9   |                                                                       |   |   | 4,065 |   |   |   | 4.0 |   |   | $ | 5,081 |   |   |   | 5.0 | % |
| First      National Bank                          |   |   | 37,861  |   |                               |   | 8.9    |                                                                       |   |   | 17,044 |   |   |   | 4.0 |   |   |   | 21,305 |   |   |   | 5.0 |   |
| Randall-Story      State Bank                     |   |   | 8,090   |   |                               |   | 10.9   |                                                                       |   |   | 2,975 |   |   |   | 4.0 |   |   |   | 3,719 |   |   |   | 5.0 |   |
| State      Bank & Trust                       |   |   | 12,229  |   |                               |   | 10.3   |                                                                       |   |   | 4,768 |   |   |   | 4.0 |   |   |   | 5,960 |   |   |   | 5.0 |   |
| United      Bank & Trust                      |   |   | 8,609   |   |                               |   | 8.7    |                                                                       |   |   | 3,940 |   |   |   | 4.0 |   |   |   | 4,925 |   |   |   | 5.0 |   |

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Table of Contents

|                                              |   | Actual |    |   | For      Capital Adequacy Purposes |   |   | To      Be Well Capitalized Under Prompt Corrective Action      Provisions |   |
|---------------------------------------------------|--------|--------|---------|--------|------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|
|                                              |   | Amount |    |   | Ratio                              |   |   | Amount                                                                     |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                              |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |
| As      of December 31, 2007:                     |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |
| Total      capital (to risk-weighted assets):     |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                      |   | $      | 113,020 |   |                               |   | 18.6   | %                                                                          |   | $ | 48,618 |   |   |   | 8.0 | % |   |   | N/A |   |   |   | N/A |   |
| Boone      Bank & Trust                       |   |   | 13,222  |   |                               |   | 17.0   |                                                                       |   |   | 6,234 |   |   |   | 8.0 |   |   | $ | 7,792 |   |   |   | 10.0 | % |
| First      National Bank                          |   |   | 43,796  |   |                               |   | 14.2   |                                                                       |   |   | 24,601 |   |   |   | 8.0 |   |   |   | 30,751 |   |   |   | 10.0 |   |
| Randall-Story      State Bank                     |   |   | 8,680   |   |                               |   | 14.5   |                                                                       |   |   | 4,795 |   |   |   | 8.0 |   |   |   | 5,994 |   |   |   | 10.0 |   |
| State      Bank & Trust                       |   |   | 12,552  |   |                               |   | 14.6   |                                                                       |   |   | 6,865 |   |   |   | 8.0 |   |   |   | 8,581 |   |   |   | 10.0 |   |
| United      Bank & Trust                      |   |   | 9,474   |   |                               |   | 13.7   |                                                                       |   |   | 5,547 |   |   |   | 8.0 |   |   |   | 6,933 |   |   |   | 10.0 |   |
|                                              |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital (to risk-weighted assets):    |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                      |   | $      | 107,239 |   |                               |   | 17.6   | %                                                                          |   | $ | 24,309 |   |   |   | 4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Boone      Bank & Trust                       |   |   | 12,383  |   |                               |   | 15.9   |                                                                       |   |   | 3,117 |   |   |   | 4.0 |   |   | $ | 4,675 |   |   |   | 6.0 | % |
| First      National Bank                          |   |   | 41,006  |   |                               |   | 13.3   |                                                                       |   |   | 12,300 |   |   |   | 4.0 |   |   |   | 18,450 |   |   |   | 6.0 |   |
| Randall-Story      State Bank                     |   |   | 8,058   |   |                               |   | 13.4   |                                                                       |   |   | 2,398 |   |   |   | 4.0 |   |   |   | 3,596 |   |   |   | 6.0 |   |
| State      Bank & Trust                       |   |   | 11,690  |   |                               |   | 13.6   |                                                                       |   |   | 3,432 |   |   |   | 4.0 |   |   |   | 5,149 |   |   |   | 6.0 |   |
| United      Bank & Trust                      |   |   | 8,606   |   |                               |   | 12.4   |                                                                       |   |   | 2,773 |   |   |   | 4.0 |   |   |   | 4,160 |   |   |   | 6.0 |   |
|                                              |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital (to average-weighted assets): |   |   |    |   |                               |   |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                      |   | $      | 107,239 |   |                               |   | 12.6   | %                                                                          |   | $ | 33,963 |   |   |   | 4.0 | % |   |   | N/A |   |   |   | N/A |   |
| Boone      Bank & Trust                       |   |   | 12,383  |   |                               |   | 12.6   |                                                                       |   |   | 3,945 |   |   |   | 4.0 |   |   | $ | 4,931 |   |   |   | 5.0 | % |
| First      National Bank                          |   |   | 41,006  |   |                               |   | 9.3    |                                                                       |   |   | 17,668 |   |   |   | 4.0 |   |   |   | 22,085 |   |   |   | 5.0 |   |
| Randall-Story      State Bank                     |   |   | 8,058   |   |                               |   | 11.3   |                                                                       |   |   | 2,861 |   |   |   | 4.0 |   |   |   | 3,576 |   |   |   | 5.0 |   |
| State      Bank & Trust                       |   |   | 11,690  |   |                               |   | 10.6   |                                                                       |   |   | 4,425 |   |   |   | 4.0 |   |   |   | 5,531 |   |   |   | 5.0 |   |
| United      Bank & Trust                      |   |   | 8,606   |   |                               |   | 8.1    |                                                                       |   |   | 4,275 |   |   |   | 4.0 |   |   |   | 5,343 |   |   |   | 5.0 |   |

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Table of Contents

|                                               |   | 2008                 |        |   | 2007            |   |
|----------------------------------------------------|--------|----------------------|-------------|--------|-----------------|--------|
|                                               |   | Carrying      Amount |        |   | Fair      Value |   |   | Carrying      Amount |   |   | Fair      Value |   |
|                                               |   |                 |        |   |            |   |   |   |   |   |   |   |
| Financial      assets:                             |   |                 |        |   |            |   |   |   |   |   |   |   |
| Cash      and due from banks                       |   | $                    | 24,697,591  |   |            | $      | 24,698,000 |   |   | $ | 26,044,577 |   |   | $ | 26,045,000 |   |
| Federal      funds sold                            |   |                 | 16,533,000  |   |            |   | 16,533,000 |   |   |   | 5,500,000 |   |   |   | 5,500,000 |   |
| Interest-bearing      deposits                     |   |                 | 10,400,761  |   |            |   | 10,401,000 |   |   |   | 634,613 |   |   |   | 635,000 |   |
| Securities      available-for-sale                 |   |                 | 313,014,375 |   |            |   | 313,014,000 |   |   |   | 339,942,064 |   |   |   | 339,942,000 |   |
| Loans      receivable, net                         |   |                 | 452,880,348 |   |            |   | 448,238,000 |   |   |   | 463,651,000 |   |   |   | 460,401,000 |   |
| Loans      held for sale                           |   |                 | 1,152,020   |   |            |   | 1,152,000 |   |   |   | 344,970 |   |   |   | 345,000 |   |
| Accrued      income receivable                     |   |                 | 6,650,287   |   |            |   | 6,650,000 |   |   |   | 8,022,900 |   |   |   | 8,023,000 |   |
| Financial      liabilities:                        |   |                 |        |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                           |   | $                    | 664,794,710 |   |            | $      | 668,424,000 |   |   | $ | 690,118,795 |   |   | $ | 691,523,000 |   |
| Securities      sold under agreement to repurchase |   |                 | 38,509,559  |   |            |   | 38,510,000 |   |   |   | 30,033,321 |   |   |   | 30,033,000 |   |
| Other      short-term borrowings                   |   |                 | 1,063,806   |   |            |   | 1,064,000 |   |   |   | 737,420 |   |   |   | 737,000 |   |
| Long-term      borrowings                          |   |                 | 43,500,000  |   |            |   | 46,286,000 |   |   |   | 24,000,000 |   |   |   | 24,529,000 |   |
| Accrued      interest payable                      |   |                 | 1,578,301   |   |            |   | 1,578,000 |   |   |   | 2,402,594 |   |   |   | 2,403,000 |   |

----

Table of Contents

|   | Level      1: | Inputs      to the valuation methodology are quoted prices, unadjusted, for identical      assets or liabilities in active markets. A quoted price in an active      market provides the most reliable evidence of fair value and shall be used      to measure fair value wheneveravailable. |
|--------|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      2: | Inputs      to the valuation methodology include quoted prices for similar assets or      liabilities in active markets; inputs to the valuation methodology include      quoted prices for identical or similar assets or liabilities in markets      that are not active; or inputs to the valuation methodology that are      derived principally from or can be corroborated by observable market data      by correlation or other means. |
|--------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      3: | Inputs      to the valuation methodology are unobservable and significant to the fair      value measurement. Level 3 assets and liabilities include financial      instruments whose value is determined using discounted cash flow      methodologies, as well as instruments for which the determination of fair      value requires significant management judgment or    estimation. |
|--------|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Description                                                  |   | Total       |   |   | Quoted      Prices in Active markets for Identical Assets(Level      1) |   |   | Significant      Other Observable Inputs(Level      2) |   |   | Significant      Unobservable Inputs(Level      3) |   |
|--------------------------------------------------------------|--------|-------------|--------|--------|---------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------|--------|--------|---------------------------------------------------------|--------|
|                                                         |   |        |   |   |                                                                                        |   |   |                                                        |   |   |                                                    |   |
| Assets Measured at      Fair Value on a Recurring      Basis |   |        |   |   |                                                                                        |   |   |                                                        |   |   |                                                    |   |
|                                                         |   |        |   |   |                                                                                        |   |   |                                                        |   |   |                                                    |   |
| Securities      available-for-sale                           | $      | 313,014,000 |   | $      | 8,445,000                                                                                   |   | $      | 304,569,000                                                 |   | $      | -                                                       |   |

----

Table of Contents

| Description                                                     |   | Total     |   |   | Quoted      Prices in Active markets for Identical Assets(Level      1) |   |   | Significant      Other Observable Inputs(Level      2) |   |   | Significant      Unobservable Inputs(Level      3) |   |
|-----------------------------------------------------------------|--------|-----------|--------|--------|---------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------|--------|--------|---------------------------------------------------------|--------|
|                                                            |   |      |   |   |                                                                                        |   |   |                                                        |   |   |                                                    |   |
| Assets Measured at      Fair Value on a Nonrecurring      Basis |   |      |   |   |                                                                                        |   |   |                                                        |   |   |                                                    |   |
|                                                            |   |      |   |   |                                                                                        |   |   |                                                        |   |   |                                                    |   |
| Loans                                                           | $      | 6,253,000 | $      |   | -                                                                                           | $      |   | -                                                           | $      |   | 6,253,000                                               |   |

----

Table of Contents

|                                               |   | 2008   |        |   | 2007   |   |
|----------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                               |   |   |        |   |   |   |
| ASSETS                                             |   |   |        |   |   |   |
|                                               |   |   |        |   |   |   |
| Cash      and due from banks                       |   | $      | 1,347       |   |   | $      | 78,323 |   |
| Interest-bearing      deposits in banks            |   |   | 101,977     |   |   |   | 9,987,887 |   |
| Securities      available-for-sale                 |   |   | 11,038,946  |   |   |   | 20,357,493 |   |
| Investment      in bank subsidiaries               |   |   | 79,329,618  |   |   |   | 82,359,583 |   |
| Loans      receivable, net                         |   |   | 18,619,318  |   |   |   | 200,000 |   |
| Premises      and equipment, net                   |   |   | 645,109     |   |   |   | 696,812 |   |
| Accrued      income receivable                     |   |   | 179,411     |   |   |   | 209,179 |   |
| Deferred      income taxes                         |   |   | 690,860     |   |   |   | - |   |
| Other      assets                                  |   |   | 243,661     |   |   |   | 67,126 |   |
|                                               |   |   |        |   |   |   |   |   |
| Total      assets                                  |   | $      | 110,850,247 |   |   | $      | 113,956,403 |   |
|                                               |   |   |        |   |   |   |   |   |
| LIABILITIES                                        |   |   |        |   |   |   |   |   |
|                                               |   |   |        |   |   |   |   |   |
|                                               |   |   |        |   |   |   |   |   |
| Other      borrowed funds                          |   | $      | 4,160,000   |   |   | $      | - |   |
| Dividends      payable                             |   |   | 2,641,216   |   |   |   | 2,545,987 |   |
| Deferred      income taxes                         |   |   | -           |   |   |   | 1,046,720 |   |
| Accrued      expenses and other liabilities        |   |   | 211,581     |   |   |   | 343,173 |   |
|                                               |   |   |        |   |   |   |   |   |
| Total      liabilities                             |   |   | 7,012,797   |   |   |   | 3,935,880 |   |
|                                               |   |   |        |   |   |   |   |   |
| STOCKHOLDERS'      EQUITY                          |   |   |        |   |   |   |   |   |
|                                               |   |   |        |   |   |   |   |   |
| Common      stock                                  |   |   | 18,865,830  |   |   |   | 18,859,160 |   |
| Additional      paid-in capital                    |   |   | 22,651,222  |   |   |   | 22,588,691 |   |
| Retained      earnings                             |   |   | 62,471,081  |   |   |   | 66,683,016 |   |
| Accumulated      other comprehensive income (loss) |   |   | (150,683    | )      |   |   | 1,889,656 |   |
| Total      stockholders' equity                    |   |   | 103,837,450 |   |   |   | 110,020,523 |   |
|                                               |   |   |        |   |   |   |   |   |
| Total      liabilities and stockholders' equity    |   | $      | 110,850,247 |   |   | $      | 113,956,403 |   |

----

Table of Contents

|                                                           |   | 2008   |      |   | 2007   |   |       | 2006   |   |
|----------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|------------|--------|--------|
| Operating      income:                                         |   |   |      |   |   |   |       |   |   |
| Equity      in net income of bank subsidiaries                 |   | $      | 5,125,234 |   |   | $      | 9,897,030  |   |   | $ | 9,728,640 |   |
| Interest                                                       |   |   | 759,461   |   |   |   | 600,495    |   |   |   | 690,704 |   |
| Dividends                                                      |   |   | 673,506   |   |   |   | 1,045,125  |   |   |   | 919,039 |   |
| Rents                                                          |   |   | 88,624    |   |   |   | 84,058     |   |   |   | 81,306 |   |
| Securities      gains, net                                     |   |   | 3,171,215 |   |   |   | 1,459,228  |   |   |   | 1,333,136 |   |
| Other-than-temporary      impairment of investment securities  |   |   | (903,600  | )      |   |   | -          |   |   |   | - |   |
|                                                           |   |   | 8,914,440 |   |   |   | 13,085,936 |   |   |   | 12,752,825 |   |
|                                                           |   |   |      |   |   |   |       |   |   |   |   |   |
| Provision      (credit) for loan losses                        |   |   | 327,558   |   |   |   | (16,000    | )      |   |   | - |   |
|                                                           |   |   |      |   |   |   |       |   |   |   |   |   |
| Operating      income after provision (credit) for loan losses |   |   | 8,586,882 |   |   |   | 13,101,936 |   |   |   | 12,752,825 |   |
|                                                           |   |   |      |   |   |   |       |   |   |   |   |   |
| Operating      expenses                                        |   |   | 1,934,886 |   |   |   | 1,942,834  |   |   |   | 1,609,208 |   |
|                                                           |   |   |      |   |   |   |       |   |   |   |   |   |
| Income      before income taxes                                |   |   | 6,651,996 |   |   |   | 11,159,102 |   |   |   | 11,143,617 |   |
|                                                           |   |   |      |   |   |   |       |   |   |   |   |   |
| Income      tax expense                                        |   |   | 300,000   |   |   |   | 150,000    |   |   |   | 200,000 |   |
|                                                           |   |   |      |   |   |   |       |   |   |   |   |   |
| Net      income                                                |   | $      | 6,351,996 |   |   | $      | 11,009,102 |   |   | $ | 10,943,617 |   |

----

Table of Contents

|                                                                                        |   | 2008   |        |   | 2007   |   |        | 2006   |   |
|---------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| CASH      FLOWS FROM OPERATING ACTIVITIES                                                   |   |   |        |   |   |   |        |   |   |
| Net      income                                                                             |   | $      | 6,351,996   |   |   | $      | 11,009,102  |   |   | $ | 10,943,617 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities: |   |   |        |   |   |   |        |   |   |   |   |   |
| Depreciation                                                                                |   |   | 54,970      |   |   |   | 61,462      |   |   |   | 65,498 |   |
| Provision      (credit) for loan losses                                                     |   |   | 327,558     |   |   |   | (16,000     | )      |   |   | - |   |
| Amortization      and accretion, net                                                        |   |   | (18,734     | )      |   |   | (22,618     | )      |   |   | (18,575 | ) |
| Provision      for deferred taxes                                                           |   |   | (123,005    | )      |   |   | (42,065     | )      |   |   | (22,320 | ) |
| Securities      gains, net                                                                  |   |   | (3,171,215  | )      |   |   | (1,459,228  | )      |   |   | (1,333,136 | ) |
| Other-than-temporary      impairment of investment securities                               |   |   | 903,600     |   |   |   | -           |   |   |   | - |   |
| Equity      in net income of bank subsidiaries                                              |   |   | (5,125,234  | )      |   |   | (9,897,030  | )      |   |   | (9,728,640 | ) |
| Dividends      received from bank subsidiaries                                              |   |   | 8,864,000   |   |   |   | 8,849,000   |   |   |   | 8,734,000 |   |
| Decrease      (increase) in accrued income receivable                                       |   |   | 29,768      |   |   |   | 38,323      |   |   |   | (9,614 | ) |
| Decrease      (increase) in other assets                                                    |   |   | (176,535    | )      |   |   | (57,126     | )      |   |   | 225,584 |   |
| Decrease      in accrued expense payable and other liabilities                              |   |   | (131,592    | )      |   |   | (100,003    | )      |   |   | (206,319 | ) |
| Net      cash provided by operating activities                                              |   |   | 7,785,577   |   |   |   | 8,363,817   |   |   |   | 8,650,095 |   |
|                                                                                        |   |   |        |   |   |   |        |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES                                                   |   |   |        |   |   |   |        |   |   |   |   |   |
| Purchase      of securities available-for-sale                                              |   |   | (9,303,034  | )      |   |   | (5,887,840  | )      |   |   | (7,130,088 | ) |
| Proceeds      from sale of securities available-for-sale                                    |   |   | 13,159,215  |   |   |   | 14,436,995  |   |   |   | 4,629,061 |   |
| Proceeds      from maturities and calls of securities available-for-sale                    |   |   | 3,385,000   |   |   |   | 2,500,000   |   |   |   | 2,335,000 |   |
| Decrease      (increase) in interest bearing deposits in banks                              |   |   | 9,885,910   |   |   |   | (9,688,233  | )      |   |   | 1,316,834 |   |
| Decrease      (increase) in loans                                                           |   |   | (18,746,876 | )      |   |   | 1,063,000   |   |   |   | - |   |
| Purchase      of bank premises and equipment                                                |   |   | (3,267      | )      |   |   | (6,282      | )      |   |   | (36,059 | ) |
| Investment      in bank subsidiaries                                                        |   |   | -           |   |   |   | (750,000    | )      |   |   | (160,000 | ) |
| Net      cash provided by (used in) investing activities                                    |   |   | (1,623,052  | )      |   |   | 1,667,640   |   |   |   | 954,748 |   |
|                                                                                        |   |   |        |   |   |   |        |   |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                                                   |   |   |        |   |   |   |        |   |   |   |   |   |
| Proceeds      from other borrowings, net                                                    |   |   | 4,160,000   |   |   |   | -           |   |   |   | - |   |
| Dividends      paid                                                                         |   |   | (10,468,702 | )      |   |   | (10,087,229 | )      |   |   | (9,704,835 | ) |
| Proceeds      from issuance of stock                                                        |   |   | 69,201      |   |   |   | 98,921      |   |   |   | 127,013 |   |
| Net      cash used in financing activities                                                  |   |   | (6,239,501  | )      |   |   | (9,988,308  | )      |   |   | (9,577,822 | ) |
|                                                                                        |   |   |        |   |   |   |        |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                   |   |   | (76,976     | )      |   |   | 43,149      |   |   |   | 27,021 |   |
|                                                                                        |   |   |        |   |   |   |        |   |   |   |   |   |
| CASH      AND DUE FROM BANKS                                                                |   |   |        |   |   |   |        |   |   |   |   |   |
| Beginning                                                                                   |   |   | 78,323      |   |   |   | 35,174      |   |   |   | 8,153 |   |
| Ending                                                                                      |   | $      | 1,347       |   |   | $      | 78,323      |   |   | $ | 35,174 |   |
|                                                                                        |   |   |        |   |   |   |        |   |   |   |   |   |
| SUPPLEMENTAL      DISCLOSURE OF CASH FLOW                                                   |   |   |        |   |   |   |        |   |   |   |   |   |
| INFORMATION                                                                                 |   |   |        |   |   |   |        |   |   |   |   |   |
| Cash      payments for income taxes                                                         |   |   | 793,080     |   |   |   | 321,045     |   |   |   | 110,996 |   |

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|                                             |   | 2008          |       |
|--------------------------------------------------|--------|---------------|------------|
|                                             |   | March      31 |       |   | June      30 |   |   | September      30 |   |   | December      31 |   |
|                                             |   |          |       |   |   |   |   |   |   |   |   |   |
| Total      interest income                       |   | $             | 12,014,263 |   |   | $ | 11,537,705 |   |   | $ | 11,181,060 |   |   | $ | 10,781,139 |   |
| Total      interest expense                      |   |          | 5,023,193  |   |   |   | 4,181,050 |   |   |   | 3,847,132 |   |   |   | 3,350,317 |   |
| Net      interest income                         |   |          | 6,991,070  |   |   |   | 7,356,655 |   |   |   | 7,333,928 |   |   |   | 7,430,822 |   |
| Provision      for loan losses                   |   |          | 109,699    |   |   |   | 818,995 |   |   |   | 73,514 |   |   |   | 310,577 |   |
| Net      income                                  |   |          | 2,900,628  |   |   |   | 1,867,201 |   |   |   | 6,906 |   |   |   | 1,577,261 |   |
| Basic      and diluted earnings per common share |   |          | 0.31       |   |   |   | 0.20 |   |   |   | - |   |   |   | 0.17 |   |

|                                             |   | 2007          |       |
|--------------------------------------------------|--------|---------------|------------|
|                                             |   | March      31 |       |   | June      30 |   |   | September      30 |   |   | December      31 |   |
|                                             |   |          |       |   |   |   |   |   |   |   |   |   |
| Total      interest income                       |   | $             | 11,525,367 |   |   | $ | 11,910,093 |   |   | $ | 12,003,252 |   |   | $ | 12,123,366 |   |
| Total      interest expense                      |   |          | 5,817,365  |   |   |   | 6,006,434 |   |   |   | 6,022,049 |   |   |   | 5,691,282 |   |
| Net      interest income                         |   |          | 5,708,002  |   |   |   | 5,903,659 |   |   |   | 5,981,203 |   |   |   | 6,432,084 |   |
| Provision      (credit) for loan losses          |   |          | 9,728      |   |   |   | 143,877 |   |   |   | (264,131 | ) |   |   | 16,426 |   |
| Net      income                                  |   |          | 2,521,014  |   |   |   | 2,827,431 |   |   |   | 2,938,539 |   |   |   | 2,722,118 |   |
| Basic      and diluted earnings per common share |   |          | 0.27       |   |   |   | 0.30 |   |   |   | 0.31 |   |   |   | 0.29 |   |

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Table of Contents

ITEM 9

ITEM 9A

ITEM 9B

ITEM 10.  DIRECTORS

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Table of Contents

ITEM 11

| ITEM 12. | SECURITY      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED      SHAREHOLDER MATTERS |
|----------|----------------------------------------------------------------------------------------------------------|

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Table of Contents

ITEM 

ITEM 14. 

ITEM 15.  
EXHIBITS 

| (a) | List      of Financial Statements andSchedules. |
|-----|-------------------------------------------------|

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Table of Contents

| (b) | List      of Exhibits. |
|-----|------------------------|

| 3.1  | -  | Restated      Articles of Incorporation of the Company, as amended (incorporated by      reference to Exhibit 3.1 to Form 8-K as filed June 16,    2005)                                       |   |
|------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 3.2  | -  | Bylaws      of the Company, as amended (incorporated by reference to Exhibit 3.2 to      Form 8-K as filed February 19, 2008)                                                                  |   |
| 10.1 | -  | Management      Incentive Compensation Plan (incorporated by reference to Exhibit 10 filed      with the Company’s Annual Report on Form 10K for the year ended December      31, 2002)* |   |
| 21   | -  | Subsidiaries      of the Registrant                                                                                                                                                            |   |
| 23   | -  | Consent      of Independent Registered Public Accounting Firm                                                                                                                                  |   |
| 31.1 | -  | Certification      of Principal Executive Officer Pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002                                                                               |   |
| 31.2 | -  | Certification      of Principal Financial Officer Pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002                                                                               |   |
| 32.1 | -  | Certification      of Principal Executive Officer Pursuant to 18 U.S.C. Section      1350                                                                                                      |   |
| 32.2 | -  | Certification      of Principal Financial Officer Pursuant to 18 U.S.C. Section      1350                                                                                                      |   |

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Table of Contents

|                | AMES      NATIONAL CORPORATION |
|---------------------|--------------------------------|
|                |                           |   |
|                |                           |   |
| March      13, 2009 | By:                            | /s/      Thomas H. Pohlman |
|                |                           | Thomas      H. Pohlman, President |

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Table of Contents

|   | /s/ Thomas H. Pohlman                             |   |
|--------|---------------------------------------------------|--------|
|   | Thomas      H. Pohlman, President                 |   |
|   | (Principal      Executive Officer)                |   |
|   |                                              |   |
|   | /s/ John P. Nelson                                |   |
|   | John      P. Nelson, Vice President               |   |
|   | (Principal      Financial and Accounting Officer) |   |
|   |                                              |   |
|   | /s/ Betty A. Baudler Horras                       |   |
|   | Betty      A. Baudler Horras, Director            |   |
|   |                                              |   |
|   | /s/ Robert L. Cramer                              |   |
|   | Robert      L. Cramer, Director                   |   |
|   |                                              |   |
|   | /s/ Douglas C. Gustafson                          |   |
|   | Douglas      C. Gustafson, Director               |   |
|   |                                              |   |
|   | /s/ Charles D. Jons                               |   |
|   | Charles      D. Jons, Director                    |   |
|   |                                              |   |
|   | /s/ Steven D. Forth                               |   |
|   | Steven      D. Forth, Director                    |   |
|   |                                              |   |
|   | /s/ James R. Larson II                            |   |
|   | James      R. Larson II, Director                 |   |
|   |                                              |   |
|   | /s/ Daniel L. Krieger                             |   |
|   | Daniel      L. Krieger, Director                  |   |
|   |                                              |   |
|   | /s/ Warren R. Madden                              |   |
|   | Warren      R. Madden, Director                   |   |
|   |                                              |   |
|   | /s/ Larry A. Raymon                               |   |
|   | Larry      A. Raymon, Director                    |   |
|   |                                              |   |
|   | /s/ Fred C. Samuelson                             |   |
|   | Fred      C. Samuelson, Director                  |   |
|   |                                              |   |
|   | /s/ Marvin J. Walter                              |   |
|   | Marvin      J. Walter, Director                   |   |

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| Exhibit No. |   | Description                                                                                                       |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                              |
| 21          |   | -Subsidiaries      of the Registrant                                                                              |
| 23          |   | -Consent      of Independent Registered Public Accounting Firm.                                                   |
| 31.1        |   | -Certification      of Principal Executive Officer pursuant to Section 302 of the Sarbanes      Oxley Act of 2002 |
| 31.2        |   | -Certification      of Principal Financial Officer pursuant to Section 302 of the Sarbanes      Oxley Act of 2002 |
| 32.1        |   | -Certification      of Principal Executive Officer pursuant to 18 U.S.C. Section      1350                        |
| 32.2        |   | -Cert      ification of Principal Financial Officer pursuant to 18 U.S.C. Section      1350                       |

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