----

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| x | Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|--------------------------------------------------------------------------------|

| o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|------------------------------------------------------------------------------------------|

|   | California                      | 46-1981399                                      |   |
|--------|---------------------------------|-------------------------------------------------|--------|
|   | (State or other jurisdiction of | (I.R.S.  Employer Identification No.) |   |
|   | incorporation or organization)  |                                            |   |

|   | Yes  o | No  x |
|--------|------------------|-----------------|

|   | Yes  o | No  x |
|--------|------------------|-----------------|

|   | Yes  x | No  o |
|--------|------------------|-----------------|

|   | Yes  x | No  o |
|--------|------------------|-----------------|

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

|   | Yes  o | No  x |
|--------|------------------|-----------------|

| Class                      |   | Outstanding at March 29, 2011 |
|----------------------------|--------|-------------------------------|
| Common Stock, no par value |   | 2,630,480 shares              |

| Document                                                                                          |   | Parts Into Which Incorporated |
|---------------------------------------------------------------------------------------------------|--------|-------------------------------|
|                                                                                              |   |                          |
| Proxy Statement for the Annual Meeting of Shareholders to be held May 24, 2011, (Proxy Statement) |   | Part III                      |

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|     |                      | Page |
|----------|---------------------------|------|
| Item 1.  | Business                  | 5    |
| Item 1A. | Risk Factors              | 16   |
| Item 1B. | Unresolved Staff Comments | 19   |
| Item 2.  | Properties                | 19   |
| Item 3.  | Legal Proceedings         | 20   |
| Item 4.  | (Removed and Reserved)    | 20   |

| Item 5.  | Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity  Securities | 21 |
|----------|-------------------------------------------------------------------------------------------------------------------------------|----|
| Item 6.  | Selected Financial Data                                                                                                       | 24 |
| Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                   | 26 |
| Item 7A. | Quantitative and Qualitative Disclosure About Market Risk                                                                     | 43 |
| Item 8.  | Financial Statements and Supplementary Data                                                                                   | 44 |
| Item 9.  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                                          | 95 |
| Item 9A. | Controls and Procedures                                                                                                       | 95 |
| Item 9B. | Other Information                                                                                                             | 95 |

| Item 10. | Directors, Executive Officers, and Corporate Governance.                                       | 96 |
|----------|------------------------------------------------------------------------------------------------|----|
| Item 11. | Executive Compensation                                                                         | 96 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 96 |
| Item 13. | Certain Relationships and Related Transactions and Director Independence                       | 96 |
| Item 14. | Principal Accountant Fees and Services                                                         | 96 |

| Item 15. | Exhibits, Financial Statement Schedules | 96     |
|----------|-----------------------------------------|--------|
|     |                                    |   |
|     | Signatures                              |   |

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|                       |   | December 31, |    |
|----------------------------|--------|--------------|---------|
| (dollars in 000’s)   |   | 2007         |    |   | 2008 |   |   | 2009 |   |   | 2010 |   |
| Total assets               |   | $            | 279,081 |   |   | $ | 306,099 |   |   | $ | 340,172 |   |   | $ | 341,421 |   |
| Loans, net                 |   |         | 199,514 |   |   |   | 226,697 |   |   |   | 234,823 |   |   |   | 234,304 |   |
| Deposits                   |   |         | 215,386 |   |   |   | 257,323 |   |   |   | 294,282 |   |   |   | 294,278 |   |
| Shareholders’ equity |   |         | 28,873  |   |   |   | 30,140 |   |   |   | 36,869 |   |   |   | 38,750 |   |

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| · | Treasury’s preferred stock earns 5% dividends for the first five years and 9% dividends thereafter; dividends on preferred stock issued by holding companies are cumulative; dividends on preferred stock issued by banks without holding companies are non-cumulative; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | No increase in common stock dividends for three years while Treasury is an investor; |
|--------|--------------------------------------------------------------------------------------|

| · | Treasury’s consent is required for common stock repurchases; |
|--------|--------------------------------------------------------------------|

| · | Treasury receives warrants for common stock equal to 15% of Treasury’s total investment, with an exercise price based on the common stock’s market price; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Participating bank executives must agree to certain compensation restrictions and executive compensation above $500,000 may not be claimed as a tax deduction; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | If an issuer fails to pay dividends for six quarters, whether or not consecutive, Treasury is entitled to appoint two persons to the issuer’s board of directors. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                            |   | Requirement for theBank to be: |   |   |            |   |   |               |   |
|---------------------------------|--------|--------------------------------|--------|--------|-----------------|--------|--------|--------------------|--------|
|                            |   | AdequatelyCapitalized          |   |   | WellCapitalized |   |   | ValleyBusinessBank |   |   | Valley CommerceBancorp |   |
| Tier 1 leverage capital ratio   |   |                           | 4.0    | %      |            |   | 5.0    | %                  |   |   | 12.0 | % |   |   | 12.1 | % |
| Tier 1 risk-based capital ratio |   |                           | 4.0    | %      |            |   | 6.0    | %                  |   |   | 16.2 | % |   |   | 16.2 | % |
| Total risk-based capital ratio  |   |                           | 8.0    | %      |            |   | 10.0   | %                  |   |   | 17.4 | % |   |   | 17.5 | % |

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|   | § | a membership stock requirement with an initial cap of $25 million (100% of “membership asset value” as defined), or |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | § | an activity based stock requirement (based on percentage of outstanding advances). |
|--------|--------|------------------------------------------------------------------------------------|

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|   | § | a bank’s or bank holding company’s executive officers, directors and principal shareholders (i.e., in most cases, those persons who own, control or have power to vote more than 10% of any class of voting securities), |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | any company controlled by any such executive officer, director or shareholder, or |
|--------|--------|-----------------------------------------------------------------------------------|

|   | § | any political or campaign committee controlled by such executive officer, director or principal shareholder. |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

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|   | · | In May 2009 the Helping Families Save Their Homes Act of 2009 was enacted to help consumers avoid mortgage foreclosures on their homes through certain loss mitigation actions including special forbearance, loan modification, pre-foreclosure sale, deed in lieu of foreclosure, support for borrower housing counseling, subordinate lien resolution, and borrower relocation. The new law permits the Secretary of Housing and Urban Development (HUD), for mortgages either in default or facing imminent default, to: (1) authorize the modification of such mortgages; and (2) establish a program for payment of a partial claim to a mortgagee who agrees to apply the claim amount to payment of a mortgage on a 1- to 4-family residence. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | The California Foreclosure Prevention Act. The California Foreclosure Prevention Act, enacted on February 20, 2009, modifies the foreclosure process in California to provide additional time for borrowers to work out loan modifications while providing an exemption for mortgage loan servicers that have implemented a comprehensive loan modification program. Civil Code Section 2923.52 requires an additional 90 day period beyond the period already provided before a Notice of Sale can be given in order to allow all parties to pursue a loan modification to prevent foreclosure of loans meeting certain criteria identified in that section. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In California, SB931 enacted in 2010 requires the holder of a first mortgage or deed of trust that is secured by 1-4 family residential real property to accept as full payment, the proceeds of a short sale to which it agrees to in writing, and obligates the holder to discharge the remaining amount of a borrower’s indebtedness on such mortgage or deed of trust (excludes borrowers that are corporate entities or political subdivisions), except to the extent the borrower has committed fraud or waste upon the property. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The enactment of AB 2325 in 2010 requires foreclosure consultants register and become certificated by the Department of Justice. The definition of foreclosure consultant includes one who arranges or attempts to arrange for the audit of any obligation secured by a lien on a residence in foreclosure. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The enactment of SB1427 in 2010 provides that prior to imposing a fine or penalty for failure to maintain a vacant property in California that is subject to a notice of default or that has been purchased at a foreclosure sale or acquired through foreclosure under a mortgage or deed of trust that a governmental entity shall provide the owner of that property with a notice of violation and an opportunity to correct the violation. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The enactment of AB329 in 2009, the Reverse Mortgage Elder Protection Act of 2009 prohibits a lender or any other person who participates in the origination of the mortgage from participation in, being associated with, or employing any party that participates in or is associated with any other financial or insurance activity or referring a prospective borrower to anyone for the purchase of other financial or insurance products; and imposes certain disclosure requirements on the lender. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The enactment of AB1160 in 2009, requires a supervised financial institution in California that negotiates primarily in any of a number of specified languages in the course of entering into a contract or agreement for a loan or extension of credit secured by residential real property, to deliver, prior to the execution of the contract or agreement, and no later than 3 business days after receiving the written application, a specified form in that language summarizing the terms of the contract or agreement; provides for administrative penalties for violations; and requires the California Department of Corporations and the Department of Financial Institutions to create a form for providing translations and make it available in Spanish, Chinese, Tagalog, Vietnamese and Korean. The statute became operative on July 1, 2010, or 90 days after issuance of the form, whichever occurred later. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The enactment of SB306 makes specified changes to clarify existing law related to filing a notice of default on residential real property in California, including (among other things): clarifying that the provisions apply to mortgages and deeds of trust recorded from January 1, 2003 through December 31, 2007, secured by owner-occupied residential real property containing no more than 4 dwelling units; revising the declaration to be filed with the notice of default; specifying how the loan servicers have to maximize net present value under their pooling and servicing agreements applies to certain investors; specifying how and when the notice to residents of property subject to foreclosure is to be mailed; and extending the time during which the notice of sale must be recorded from 14 to 20 days. The bill also makes certain changes related to short-pay agreements and short-pay demand statements. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A mortgage loan servicer who has implemented a comprehensive loan modification program may file an application for exemption from the provisions of Civil Code Section 2923.52. Approval of this application provides the mortgage loan servicer an exemption from the additional 90-day period before filing the Notice of Sale when foreclosing on real property covered by the new law. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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TE

ITE

|  Office location                     |  Year opened | Approximatesquare footage |  Owned or leased |
|-------------------------------------------|-------------------|---------------------------|-----------------------|
|                                      |              |                      |                  |
| Visalia branch and Administrative offices | 2009              | 18,700                    | Owned                 |
| 701 W. Main Street                        |              |                      |                  |
| Visalia, California                       |              |                      |                  |
|                                      |              |                      |                  |
| Fresno branch                             | 2003              | 4,654                     | Leased                |
| 7391 N.  Palm Avenue            |              |                      |                  |
| Fresno, California                        |              |                      |                  |
|                                      |              |                      |                  |
| Woodlake branch                           | 1998              | 5,000                     | Owned                 |
| 232 North Valencia                        |              |                      |                  |
| Woodlake, California                      |              |                      |                  |
|                                      |              |                      |                  |
| Tipton branch                             | 1998              | 5,610                     | Owned                 |
| 174 South Burnett                         |              |                      |                  |
| Tipton, California                        |              |                      |                  |
|                                      |              |                      |                  |
| Tulare branch                             | 2008              | 4,135                     | Owned                 |
| 1901 E. Prosperity                        |              |                      |                  |
| Tulare, California                        |              |                      |                  |

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|           |   | High and low bid quotations |   |
|----------------|--------|-----------------------------|--------|
|           |   | High                        |   |   | Low |   |
| 2010           |   |                        |   |   |   |   |
| Fourth quarter |   | $                           | 8.70   |   |   | $ | 6.35 |   |
| Third quarter  |   |                        | 7.15   |   |   |   | 5.90 |   |
| Second quarter |   |                        | 7.50   |   |   |   | 5.60 |   |
| First quarter  |   |                        | 6.50   |   |   |   | 5.80 |   |
|           |   |                        |   |   |   |   |   |   |
| 2009           |   |                        |   |   |   |   |   |   |
| Fourth quarter |   | $                           | 7.50   |   |   | $ | 5.64 |   |
| Third quarter  |   |                        | 9.01   |   |   |   | 6.50 |   |
| Second quarter |   |                        | 9.99   |   |   |   | 5.00 |   |
| First quarter  |   |                        | 10.00  |   |   |   | 3.00 |   |

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| Period        |   | (a)Totalnumber ofsharespurchased |   |   | (b)Averageprice paidper share |   |       | (c)Total number of shares purchased aspart of publiclyannounced plans or programs |   |   | (d)Maximum number (orapproximate dollar value)of shares that may yet bepurchased under the plansor programs |   |
|---------------|--------|---------------------------------------|--------|--------|------------------------------------|--------|------------|-------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------|--------|
| November 2007 |   |                                  | 30,251 | (1)    |                               | $      | 12.62      | (1)                                                                                                   |   |   | 30,251                                                                                                           |   |   | $ | 2,618,191 |   |
| February 2008 |   |                                  | 51,118 | (1)    |                               |   | 13.76      | (1)                                                                                                   |   |   | 51,118                                                                                                           |   |   |   | 1,914,690 |   |
| March 2008    |   |                                  | 7,348  | (1)    |                               |   | 13.70      | (1)                                                                                                   |   |   | 7,348                                                                                                            |   |   |   | 1,814,073 |   |
| November 2008 |   |                                  | 1,787  | (2)    |                               |   |  9.47 | (2)                                                                                                   |   |   | 1,787                                                                                                            |   |   |   | 1,797,154 |   |
| Total         |   |                                  | 90,504 |   |                               | $      | 13.29      |                                                                                                  |   |   | 90,504                                                                                                           |   |   | $ | 1,797,154 |   |

|   | (1) | Restated for June 2009 and 2008 stock dividends.  No shares were repurchased in any month except those listed above. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Restated for June 2009 stock dividend. |
|--------|-----|----------------------------------------|

| Plan category                                              |   | Column (a)Number of securities to be issued upon exercise of outstanding options, warrantsand rights |    |   | Weighted-average exercise price of outstanding options, warrants and rights |   |   | Number of securities remainingavailable for future issuance under equity compensation plans (excluding securitiesreflected in Column (a) |   |
|------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity compensation plans approved by security holders     |   |                                                                                                      | 121,395 |   |                                                                             | $      | 10.71  |                                                                                                                                               |   |   | 102,657 |   |
| Equity compensation plans not approved by security holders |   | None                                                                                                      |    |   | Not applicable.                                                                  |   |   | None                                                                                                                                               |   |

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| (dollars in thousands                           |   | As of and for the year ended December 31, |      |
|-------------------------------------------------|--------|-------------------------------------------|-----------|
| except per share data)                          |   | 2010                                      |      |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Statement of Income                             |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                 |   | $                                         | 16,212    |   |   | $ | 16,929 |   |   | $ | 17,784 |   |   | $ | 18,470 |   |   | $ | 16,750 |   |
| Interest expense                                |   |                                      | 2,619     |   |   |   | 4,089 |   |   |   | 5,719 |   |   |   | 7,131 |   |   |   | 5,561 |   |
| Net interest income                             |   |                                      | 13,593    |   |   |   | 12,840 |   |   |   | 12,065 |   |   |   | 11,339 |   |   |   | 11,189 |   |
| Provision for loan losses                       |   |                                      | 2,050     |   |   |   | 7,000 |   |   |   | 1,600 |   |   |   | - |   |   |   | - |   |
| Net interest income after provision for         |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loan losses                                     |   |                                      | 11,543    |   |   |   | 5,840 |   |   |   | 10,465 |   |   |   | 11,339 |   |   |   | 11,189 |   |
| Non-interest income                             |   |                                      | 1,341     |   |   |   | 2,037 |   |   |   | 1,283 |   |   |   | 1,155 |   |   |   | 996 |   |
| Non-interest expense                            |   |                                      | 9,778     |   |   |   | 9,659 |   |   |   | 9,153 |   |   |   | 8,699 |   |   |   | 7,653 |   |
| Income (loss) before income taxes (tax benefit) |   |                                      | 3,106     |   |   |   | (1,782 | ) |   |   | 2,595 |   |   |   | 3,795 |   |   |   | 4,532 |   |
| Income taxes (tax benefit)                      |   |                                      | 943       |   |   |   | (1,195 | ) |   |   | 746 |   |   |   | 1,134 |   |   |   | 1,576 |   |
| Net income (loss)                               |   |                                      | 2,163     |   |   |   | (587 | ) |   |   | 1,849 |   |   |   | 2,661 |   |   |   | 2,956 |   |
|                                            |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Share Data (4):                             |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per common share          |   | $                                         | 0.68      |   |   | $ | (0.36 | ) |   | $ | 0.71 |   |   | $ | 1.02 |   |   | $ | 1.16 |   |
| Diluted earnings (loss) per common share        |   | $                                         | 0.68      |   |   | $ | (0.36 | ) |   | $ | 0.70 |   |   | $ | 0.99 |   |   | $ | 1.10 |   |
| Book value per common share                     |   | $                                         | 11.80     |   |   | $ | 11.17 |   |   | $ | 11.60 |   |   | $ | 11.48 |   |   | $ | 10.94 |   |
| Avg. common shares outstanding-basic            |   |                                      | 2,609,714 |   |   |   | 2,602,228 |   |   |   | 2,595,128 |   |   |   | 2,600,084 |   |   |   | 2,549,134 |   |
| Avg. common shares outstanding-diluted          |   |                                      | 2,569,714 |   |   |   | 2,602,228 |   |   |   | 2,623,301 |   |   |   | 2,699,901 |   |   |   | 2,678,061 |   |
| Total common shares outstanding                 |   |                                      | 2,576,257 |   |   |   | 2,608,317 |   |   |   | 2,473,739 |   |   |   | 2,396,435 |   |   |   | 2,215,765 |   |
|                                            |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet                                   |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale                              |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| investment securities                           |   | $                                         | 50,823    |   |   | $ | 42,566 |   |   | $ | 42,018 |   |   | $ | 56,615 |   |   | $ | 55,298 |   |
| Total loans, net                                |   |                                      | 234,304   |   |   |   | 234,823 |   |   |   | 226,697 |   |   |   | 199,514 |   |   |   | 182,332 |   |
| Allowance for loan losses                       |   |                                      | 6,699     |   |   |   | 6,231 |   |   |   | 3,244 |   |   |   | 1,758 |   |   |   | 1,746 |   |
| Total assets                                    |   |                                      | 341,421   |   |   |   | 340,172 |   |   |   | 306,099 |   |   |   | 279,081 |   |   |   | 263,800 |   |
| Total deposits                                  |   |                                      | 294,278   |   |   |   | 294,282 |   |   |   | 257,323 |   |   |   | 215,386 |   |   |   | 207,576 |   |
| Total shareholders' equity                      |   |                                      | 38,750    |   |   |   | 36,869 |   |   |   | 30,140 |   |   |   | 28,873 |   |   |   | 25,448 |   |
|                                            |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Performance Ratios:                    |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return (loss) on average assets                 |   |                                      | 0.63      | % |   |   | (0.18 | %) |   |   | 0.62 | % |   |   | 0.99 | % |   |   | 1.22 | % |
| Return (loss) on average equity                 |   |                                      | 5.68      | % |   |   | (1.53 | %) |   |   | 6.30 | % |   |   | 9.83 | % |   |   | 12.59 | % |
| Net interest margin (1)                         |   |                                      | 4.41      | % |   |   | 4.43 | % |   |   | 4.52 | % |   |   | 4.71 | % |   |   | 5.15 | % |
| Average net loans as a percentage               |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of average deposits                             |   |                                      | 81.6      | % |   |   | 85.3 | % |   |   | 89.7 | % |   |   | 91.0 | % |   |   | 85.8 | % |
| Efficiency ratio                                |   |                                      | 65.5      | % |   |   | 64.9 | % |   |   | 68.6 | % |   |   | 69.6 | % |   |   | 62.8 | % |

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|                           |   | As of and for the year ended December 31, |   |
|--------------------------------|--------|-------------------------------------------|--------|
|                           |   | 2010                                      |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Selected Asset Quality Ratios: |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming assets to        |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| total assets                   |   |                                      | 2.0    | % |   |   | 2.2 | % |   |   | 1.6 | % |   |   |   | ---- (2) |   |   |   | ---- (2) |
| Nonperforming loans to         |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| total loans                    |   |                                      | 2.9    | % |   |   | 3.1 | % |   |   | 2.2 | % |   |   |   | ---- (2) |   |   |   | ---- (2) |
| Net loan charge-offs to        |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average loans                  |   |                                      | 0.7    | % |   |   | 1.7 | % |   |   | 0.1 | % |   |   |   | ---- (3) |   |   |   | ---- (3) |
| Allowance for loan losses      |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to total loans                 |   |                                      | 2.78   | % |   |   | 2.58 | % |   |   | 1.41 | % |   |   | 0.87 | % |   |   | 0.95 | % |
| Allowance for loan losses      |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to nonperforming loans         |   |                                      | 98.2   | % |   |   | 84.6 | % |   |   | 65.7 | % |   |   |   | ---- (2) |   |   |   | ---- (2) |
|                           |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                           |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage                       |   |                                      | 12.0   | % |   |   | 11.4 | % |   |   | 10.8 | % |   |   | 11.4 | % |   |   | 11.0 | % |
| Tier 1 Risk-Based              |   |                                      | 16.2   | % |   |   | 14.8 | % |   |   | 12.6 | % |   |   | 13.7 | % |   |   | 13.4 | % |
| Total Risk-Based               |   |                                      | 17.4   | % |   |   | 16.0 | % |   |   | 13.9 | % |   |   | 14.4 | % |   |   | 14.2 | % |
| Consolidated                   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage                       |   |                                      | 12.1   | % |   |   | 11.4 | % |   |   | 10.9 | % |   |   | 11.5 | % |   |   | 11.1 | % |
| Tier 1 Risk-Based              |   |                                      | 16.2   | % |   |   | 14.8 | % |   |   | 12.7 | % |   |   | 13.8 | % |   |   | 13.5 | % |
| Total Risk-Based               |   |                                      | 17.5   | % |   |   | 16.0 | % |   |   | 14.0 | % |   |   | 14.6 | % |   |   | 14.3 | % |

| Notes: | (1) | Interest income is not presented on a taxable-equivalent basis, however, the net interest margin was calculated on a taxable-equivalent basis by using a marginal tax rate of 34%                   |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (2) | There were no nonperforming assets or loans at December 31, 2007 and 2006                                                                                                                           |
|   | (3) | Less than .05%                                                                                                                                                                                      |
|   | (4) | All share and per share data has been retroactively restated to reflect the 5% stock dividends issued in June 2009, June 2008, June 2007, and May 2006. There was no stock dividend issued in 2010. |

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|                                               |   | Average balances and weighted average yields and ratesYears ended December 31, |    |
|----------------------------------------------------|--------|--------------------------------------------------------------------------------|---------|
|                                               |   | 2010                                                                           |    |   | 2009 |   |   | 2008 |   |
|                                               |   |                                                                           |    |   | Interest |   |   | Average |   |   |   |   |   | Interest |   |   | Average |   |   |   |   |   | Interest |   |   | Average |   |
|                                               |   | Average                                                                        |    |   | Income/ |   |   | Yield/ |   |   | Average |   |   | Income/ |   |   | Yield/ |   |   | Average |   |   | Income/ |   |   | Yield/ |   |
| (dollars in thousands)                             |   | Balance                                                                        |    |   | Expense |   |   | Cost |   |   | Balance |   |   | Expense |   |   | Cost |   |   | Balance |   |   | Expense |   |   | Cost |   |
| ASSETS                                             |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due from banks                                     |   | $                                                                              | 28,430  |   |   | $ | 71 |   |   |   | 0.25 | % |   | $ | 10,155 |   |   | $ | 26 |   |   |   | 0.26 | % |   | $ | - |   |   | $ | - |   |   |   | - | % |
| Federal funds sold                                 |   |                                                                           | -       |   |   |   | - |   |   |   | - | % |   |   | 4,392 |   |   |   | 10 |   |   |   | 0.23 | % |   |   | 10,921 |   |   |   | 170 |   |   |   | 1.56 | % |
| Available-for-sale investment securities:          |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                            |   |                                                                           | 29,090  |   |   |   | 720 |   |   |   | 2.48 | % |   |   | 26,477 |   |   |   | 1,196 |   |   |   | 4.52 | % |   |   | 26,238 |   |   |   | 1,305 |   |   |   | 4.97 | % |
| Exempt from Federal income taxes                   |   |                                                                           | 15,139  |   |   |   | 628 |   |   |   | 6.29 | % |   |   | 17,876 |   |   |   | 738 |   |   |   | 6.26 | % |   |   | 19,607 |   |   |   | 799 |   |   |   | 6.17 | % |
| Total securities (1)                               |   |                                                                           | 44,229  |   |   |   | 1,348 |   |   |   | 3.78 | % |   |   | 44,353 |   |   |   | 1,934 |   |   |   | 5.22 | % |   |   | 45,845 |   |   |   | 2,104 |   |   |   | 5.49 | % |
| Loans (2) (3)                                      |   |                                                                           | 243,134 |   |   |   | 14,793 |   |   |   | 6.08 | % |   |   | 239,428 |   |   |   | 14,959 |   |   |   | 6.25 | % |   |   | 219,431 |   |   |   | 15,510 |   |   |   | 7.07 | % |
| Total interest-earning assets (1)                  |   |                                                                           | 315,793 |   |   |   | 16,212 |   |   |   | 5.24 | % |   |   | 298,328 |   |   |   | 16,929 |   |   |   | 5.80 | % |   |   | 276,197 |   |   |   | 17,784 |   |   |   | 6.60 | % |
| Noninterest-earning assets,                        |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net of allowance for loan losses                   |   |                                                                           | 29,584  |   |   |   |   |   |   |   |   |   |   |   | 28,769 |   |   |   |   |   |   |   |   |   |   |   | 19,906 |   |   |   |   |   |   |   |   |   |
| Total assets                                       |   | $                                                                              | 345,377 |   |   |   |   |   |   |   |   |   |   | $ | 327,097 |   |   |   |   |   |   |   |   |   |   | $ | 296,103 |   |   |   |   |   |   |   |   |   |
|                                               |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY         |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                          |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing                                   |   | $                                                                              | 122,509 |   |   | $ | 709 |   |   |   | 0.58 | % |   | $ | 112,057 |   |   | $ | 1,269 |   |   |   | 1.13 | % |   | $ | 90,560 |   |   | $ | 1,650 |   |   |   | 1.82 | % |
| Time deposits less than $100,000                   |   |                                                                           | 24,459  |   |   |   | 339 |   |   |   | 1.39 | % |   |   | 24,982 |   |   |   | 565 |   |   |   | 2.26 | % |   |   | 24,014 |   |   |   | 836 |   |   |   | 3.48 | % |
| Time deposits $100,000 or more                     |   |                                                                           | 70,843  |   |   |   | 1,296 |   |   |   | 1.83 | % |   |   | 71,640 |   |   |   | 1,887 |   |   |   | 2.63 | % |   |   | 64,017 |   |   |   | 2,415 |   |   |   | 3.77 | % |
| Total interest-bearing deposits                    |   |                                                                           | 217,811 |   |   |   | 2,344 |   |   |   | 1.08 | % |   |   | 208,679 |   |   |   | 3,721 |   |   |   | 1.78 | % |   |   | 178,591 |   |   |   | 4,901 |   |   |   | 2.74 | % |
| FHLB advances                                      |   |                                                                           | -       |   |   |   | - |   |   |   | - | % |   |   | 1,975 |   |   |   | 11 |   |   |   | 0.56 | % |   |   | 10,915 |   |   |   | 296 |   |   |   | 2.71 | % |
| FHLB term borrowing                                |   |                                                                           | 3,078   |   |   |   | 161 |   |   |   | 5.23 | % |   |   | 4,198 |   |   |   | 227 |   |   |   | 5.41 | % |   |   | 6,290 |   |   |   | 303 |   |   |   | 4.82 | % |
| Junior subordinated deferrable interest debentures |   |                                                                           | 3,093   |   |   |   | 114 |   |   |   | 3.69 | % |   |   | 3,093 |   |   |   | 130 |   |   |   | 4.20 | % |   |   | 3,093 |   |   |   | 219 |   |   |   | 7.08 | % |
| Total interest-bearing liabilities                 |   |                                                                           | 223,982 |   |   |   | 2,619 |   |   |   | 1.17 | % |   |   | 217,945 |   |   |   | 4,089 |   |   |   | 1.88 | % |   |   | 198,889 |   |   |   | 5,719 |   |   |   | 2.88 | % |
|                                               |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest bearing deposits                       |   |                                                                           | 80,273  |   |   |   |   |   |   |   |   |   |   |   | 68,509 |   |   |   |   |   |   |   |   |   |   |   | 66,106 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                  |   |                                                                           | 3,066   |   |   |   |   |   |   |   |   |   |   |   | 2,245 |   |   |   |   |   |   |   |   |   |   |   | 1,821 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                  |   |                                                                           | 307,321 |   |   |   |   |   |   |   |   |   |   |   | 288,699 |   |   |   |   |   |   |   |   |   |   |   | 266,816 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                         |   |                                                                           | 38,056  |   |   |   |   |   |   |   |   |   |   |   | 38,398 |   |   |   |   |   |   |   |   |   |   |   | 29,287 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity   |   | $                                                                              | 345,377 |   |   |   |   |   |   |   |   |   |   | $ | 327,097 |   |   |   |   |   |   |   |   |   |   | $ | 296,103 |   |   |   |   |   |   |   |   |   |
|                                               |   |                                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income and margin (1)                 |   |                                                                           |    |   |   | $ | 13,593 |   |   |   | 4.41 | % |   |   |   |   |   | $ | 12,840 |   |   |   | 4.43 | % |   |   |   |   |   | $ | 12,065 |   |   |   | 4.52 | % |

| (1) | Interest income is not presented on a taxable-equivalent basis, however, the average yield was calculated on a taxable- equivalent basis by using a marginal tax rate of 34%.                                                                                                                                                        |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Nonaccrual loans are included in total loans.  Interest income is included on nonaccrual loans only to the extent cash payments have been received.  There was no interest received on a cash basis in 2010.   Interest received on a cash basis was $37 and $52 for 2009 and 2008, respectively. |
| (3) | Interest income includes net amortized loan fees of $564, $619, and $621 for 2010, 2009, and 2008, respectively.                                                                                                                                                                                                                     |

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|                                                |   | 2010 vs 2009                          |   |   | 2009 vs 2008                          |   |
|-----------------------------------------------------|--------|---------------------------------------|--------|--------|---------------------------------------|--------|
|                                                |   | Increase (decrease) due to change in: |   |   | Increase (decrease) due to change in: |   |
|                                                |   | Average                               |   |   | Average                               |   |   |   |   |   | Average |   |   | Average |   |   |   |   |
|                                                |   | Volume                                |   |   | Rate (1)                              |   |   | Total |   |   | Volume |   |   | Rate (1) |   |   | Total |   |
|                                                |   |                                  |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (In thousands)                                      |   |                                  |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in interest income:             |   |                                  |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due from banks                                      |   | $                                     | 47     |   |                                  | $      | (2 | ) |   | $ | 45 |   |   | $ | - |   |   | $ | 26 |   |   | $ | 26 |   |
| Federal funds sold                                  |   |                                  | (10    | )      |                                  |   | - |   |   |   | (10 | ) |   |   | (102 | ) |   |   | (58 | ) |   |   | (160 | ) |
| Investment securities                               |   |                                  |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                             |   |                                  | 118    |   |                                  |   | (594 | ) |   |   | (476 | ) |   |   | 12 |   |   |   | (121 | ) |   |   | (109 | ) |
| Exempt from Federal Income taxes                    |   |                                  | (171   | )      |                                  |   | 61 |   |   |   | (110 | ) |   |   | (107 | ) |   |   | 46 |   |   |   | (61 | ) |
| Total securities                                    |   |                                  | (53    | )      |                                  |   | (533 | ) |   |   | (586 | ) |   |   | (95 | ) |   |   | (75 | ) |   |   | (170 | ) |
| Loans                                               |   |                                  | 232    |   |                                  |   | (398 | ) |   |   | (166 | ) |   |   | 1,413 |   |   |   | (1,964 | ) |   |   | (551 | ) |
| Total interest income                               |   |                                  | 216    |   |                                  |   | (933 | ) |   |   | (717 | ) |   |   | 1,216 |   |   |   | (2,071 | ) |   |   | (855 | ) |
|                                                |   |                                  |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Decrease) increase  in interest expense: |   |                                  |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                           |   |                                  | 118    |   |                                  |   | (678 | ) |   |   | (560 | ) |   |   | 392 |   |   |   | (773 | ) |   |   | (381 | ) |
| Time deposits less than $100,000                    |   |                                  | (12    | )      |                                  |   | (214 | ) |   |   | (226 | ) |   |   | 34 |   |   |   | (305 | ) |   |   | (271 | ) |
| Time certificates $100,000 or more                  |   |                                  | (21    | )      |                                  |   | (570 | ) |   |   | (591 | ) |   |   | 288 |   |   |   | (816 | ) |   |   | (528 | ) |
| Total interest-bearing deposits                     |   |                                  | 85     |   |                                  |   | (1,462 | ) |   |   | (1,377 | ) |   |   | 714 |   |   |   | (1,894 | ) |   |   | (1,180 | ) |
| FHLB advances                                       |   |                                  | (11    | )      |                                  |   | - |   |   |   | (11 | ) |   |   | (242 | ) |   |   | (43 | ) |   |   | (285 | ) |
| FHLB term borrowing                                 |   |                                  | (61    | )      |                                  |   | (5 | ) |   |   | (66 | ) |   |   | (101 | ) |   |   | 25 |   |   |   | (76 | ) |
| Junior subordinated deferrable interest debentures  |   |                                  | -      |   |                                  |   | (16 | ) |   |   | (16 | ) |   |   | - |   |   |   | (89 | ) |   |   | (89 | ) |
| Total interest expense                              |   |                                  | 13     |   |                                  |   | (1,483 | ) |   |   | (1,470 | ) |   |   | 371 |   |   |   | (2,001 | ) |   |   | (1,630 | ) |
| Increase (decrease) in net interest income          |   | $                                     | 203    |   |                                  | $      | 550 |   |   | $ | 753 |   |   | $ | 845 |   |   | $ | (70 | ) |   | $ | 775 |   |

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|                                                        |   | Years Ended December 31, |   |   | Change during year |   |
|-------------------------------------------------------------|--------|--------------------------|--------|--------|--------------------|--------|
| (in thousands)                                              |   | 2010                     |   |   | 2009               |   |   | 2008 |   |   | 2010 |   |   | 2009 |   |
| Service charges                                             |   | $                        | 768    |   |               | $      | 766 |   |   | $ | 716 |   |   | $ | 2 |   |   | $ | 50 |   |
| Gain on sale of available-for-sale investment securities    |   |                     | 34     |   |               |   | 416 |   |   |   | 46 |   |   |   | (382 | ) |   |   | 370 |   |
| Gain on sale of other real estate                           |   |                     | -      |   |               |   | 16 |   |   |   | - |   |   |   | (16 | ) |   |   | 16 |   |
| Mortgage loan brokerage fees                                |   |                     | 60     |   |               |   | 43 |   |   |   | 53 |   |   |   | 17 |   |   |   | (10 | ) |
| Earnings on cash surrender value of life insurance policies |   |                     | 295    |   |               |   | 288 |   |   |   | 253 |   |   |   | 7 |   |   |   | 35 |   |
| Officer life insurance proceeds                             |   |                     | -      |   |               |   | 317 |   |   |   | - |   |   |   | (317 | ) |   |   | 317 |   |
| Other                                                       |   |                     | 184    |   |               |   | 191 |   |   |   | 215 |   |   |   | (7 | ) |   |   | (24 | ) |
| Total non-interest income                                   |   | $                        | 1,341  |   |               | $      | 2,037 |   |   | $ | 1,283 |   |   | $ | (696 | ) |   | $ | 754 |   |

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|                                 |   |                     |   |   |               |   |
|--------------------------------------|--------|--------------------------|--------|--------|--------------------|--------|
|                                 |   | Years Ended December 31, |   |   | Change during year |   |
| (in thousands)                       |   | 2010                     |   |   | 2009               |   |   | 2008 |   |   | 2010 |   |   | 2009 |   |
| Salaries and employee benefits       |   | $                        | 5,248  |   |               | $      | 4,866 |   |   | $ | 5,128 |   |   | $ | 382 |   |   | $ | (262 | ) |
| Occupancy and equipment              |   |                     | 1,334  |   |               |   | 1,565 |   |   |   | 1,259 |   |   |   | (231 | ) |   |   | 306 |   |
| Data processing                      |   |                     | 641    |   |               |   | 617 |   |   |   | 524 |   |   |   | 24 |   |   |   | 93 |   |
| Assessment and insurance             |   |                     | 712    |   |               |   | 614 |   |   |   | 259 |   |   |   | 98 |   |   |   | 355 |   |
| Professional and legal               |   |                     | 439    |   |               |   | 549 |   |   |   | 394 |   |   |   | (110 | ) |   |   | 155 |   |
| Operations                           |   |                     | 340    |   |               |   | 455 |   |   |   | 509 |   |   |   | (115 | ) |   |   | (54 | ) |
| Telephone and postal                 |   |                     | 234    |   |               |   | 220 |   |   |   | 216 |   |   |   | 14 |   |   |   | 4 |   |
| Advertising and business development |   |                     | 203    |   |               |   | 219 |   |   |   | 273 |   |   |   | (16 | ) |   |   | (54 | ) |
| Supplies                             |   |                     | 193    |   |               |   | 159 |   |   |   | 181 |   |   |   | 34 |   |   |   | (22 | ) |
| Other real estate owned              |   |                     | -      |   |               |   | 13 |   |   |   | - |   |   |   | (13 | ) |   |   | 13 |   |
| Amortization expense                 |   |                     | -      |   |               |   | - |   |   |   | 8 |   |   |   | - |   |   |   | (8 | ) |
| Other expenses                       |   |                     | 434    |   |               |   | 382 |   |   |   | 403 |   |   |   | 52 |   |   |   | (21 | ) |
| Total non-interest expense           |   | $                        | 9,778  |   |               | $      | 9,659 |   |   | $ | 9,154 |   |   | $ | 119 |   |   | $ | 505 |   |

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|                        |   | December 31, 2010 |   |
|-----------------------------|--------|-------------------|--------|
| (in thousands)              |   | Amortized Cost    |   |   | Unrealized Gains |   |   | Unrealized Losses |   |   | FairValue |   |
| U.S. Treasury securities    |   | $                 | 3,841  |   |   | $ | 15 |   |   | $ | (56 | ) |   | $ | 3,800 |   |
| U.S. government agencies    |   |              | 5,538  |   |   |   | 56 |   |   |   | (61 | ) |   |   | 5,533 |   |
| Mortgage-backed securities: |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                  |   |              | 12,577 |   |   |   | 261 |   |   |   | (68 | ) |   |   | 12,770 |   |
| SBA MBS                     |   |              | 14,387 |   |   |   | 202 |   |   |   | (12 | ) |   |   | 14,577 |   |
| Municipal securities        |   |              | 14,550 |   |   |   | 22 |   |   |   | (429 | ) |   |   | 14,143 |   |
| Total                       |   | $                 | 50,893 |   |   | $ | 556 |   |   | $ | (626 | ) |   | $ | 50,823 |   |

|                                |   | December 31, 2009 |   |
|-------------------------------------|--------|-------------------|--------|
| (in thousands)                      |   | Amortized Cost    |   |   | Unrealized Gains |   |   | Unrealized Losses |   |   | FairValue |   |
| U.S. government  agencies |   | $                 | 2,910  |   |   | $ | 105 |   |   | $ | - |   |   | $ | 3,015 |   |
| Mortgage-backed securities:         |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                          |   |              | 8,986  |   |   |   | 295 |   |   |   | - |   |   |   | 9,281 |   |
| SBA MBS                             |   |              | 15,326 |   |   |   | 27 |   |   |   | (46 | ) |   |   | 15,307 |   |
| Municipal securities                |   |              | 15,338 |   |   |   | 49 |   |   |   | (424 | ) |   |   | 14,963 |   |
| Total                               |   | $                 | 42,560 |   |   | $ | 476 |   |   | $ | (470 | ) |   | $ | 42,566 |   |

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|                                |   | December 31, 2008 |   |
|-------------------------------------|--------|-------------------|--------|
| (in thousands)                      |   | Amortized Cost    |   |   | Unrealized Gains |   |   | Unrealized Losses |   |   | FairValue |   |
| U.S. Treasury securities            |   | $                 | 247    |   |   | $ | 33 |   |   | $ | - |   |   | $ | 280 |   |
| U.S. government  agencies |   |              | 6,753  |   |   |   | 225 |   |   |   | - |   |   |   | 6,978 |   |
| Mortgage-backed securities:         |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                          |   |              | 15,102 |   |   |   | 554 |   |   |   | (2 | ) |   |   | 15,654 |   |
| SBA MBS                             |   |              | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Municipal securities                |   |              | 19,753 |   |   |   | 98 |   |   |   | (745 | ) |   |   | 19,106 |   |
| Total                               |   | $                 | 41,855 |   |   | $ | 910 |   |   | $ | (747 | ) |   | $ | 42,018 |   |

|                              |   | Maturities of securities available for sale |   |
|-----------------------------------|--------|---------------------------------------------|--------|
|                              |   | Within one year                             |   |   | After one but within five years |   |   | After five but within ten years |   |   | After ten years |   |   | Total |   |
| (dollars in  thousands) |   | Amount                                      |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |
| U.S. Treasury securities          |   | $                                           | -      |   |   |   | - | % |   | $ | - |   |   |   | - | % |   | $ | 3,800 |   |   |   | 3.07 | % |   | $ | - |   |   |   | - | % |   | $ | 3,800 |   |   |   | 3.07 | % |
| U.S. Government agencies          |   |                                        | -      |   |   | % |   |   |   | 3,182 |   |   |   | 1.37 | % |   |   | 1,965 |   |   |   | 3.04 | % |   |   | 386 |   |   |   | 5.35 | % |   |   | 5,533 |   |   |   | 2.23 | % |
| Mortgage-backed securities:       |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                        |   |                                        | -      |   |   |   | - | % |   |   | 423 |   |   |   | 4.91 | % |   |   | 1,395 |   |   |   | 3.17 | % |   |   | 10,952 |   |   |   | 3.36 | % |   |   | 12,770 |   |   |   | 3.39 | % |
| SBA MBS                           |   |                                        | -      |   |   |   | - | % |   |   | - |   |   |   | - | % |   |   | 8,618 |   |   |   | 1.58 | % |   |   | 5,959 |   |   |   | 1.57 | % |   |   | 14,577 |   |   |   | 1.57 | % |
| Municipal securities (1)          |   |                                        | 20     |   |   |   | 7.23 | % |   |   | - |   |   |   | - | % |   |   | 2,266 |   |   |   | 6.11 | % |   |   | 11,857 |   |   |   | 5.66 | % |   |   | 14,143 |   |   |   | 5.73 | % |
| Total                             |   | $                                           | 20     |   |   |   | 7.23 | % |   | $ | 3,605 |   |   |   | 1.79 | % |   | $ | 18,044 |   |   |   | 2.74 | % |   | $ | 29,154 |   |   |   | 3.96 | % |   | $ | 50,823 |   |   |   | 3.37 | % |

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| (in thousands)                   |   | December 31, 2010 |    |   | December 31, 2009 |   |   | December 31, 2008 |   |   | December 31, 2007 |   |   | December 31, 2006 |   |
|----------------------------------|--------|-------------------|---------|--------|-------------------|--------|--------|-------------------|--------|--------|-------------------|--------|--------|-------------------|--------|
| Commercial                       |   | $                 | 46,294  |   |              |   | 19     | %                 |   | $      | 49,443            |   |   |              | 21     | % |   | $ | 58,325 |   |   |   | 25 | % |   | $ | 41,824 |   |   |   | 21 | % |   | $ | 41,104 |   |   |   | 22 | % |
| Real estate – mortgage (1) |   |              | 165,202 |   |              |   | 68     | %                 |   |   | 162,772           |   |   |              | 67     | % |   |   | 129,267 |   |   |   | 56 | % |   |   | 106,873 |   |   |   | 53 | % |   |   | 92,639 |   |   |   | 50 | % |
| Real estate – construction |   |              | 23,437  |   |              |   | 10     | %                 |   |   | 22,582            |   |   |              | 9      | % |   |   | 35,113 |   |   |   | 15 | % |   |   | 44,896 |   |   |   | 22 | % |   |   | 44,273 |   |   |   | 24 | % |
| Agricultural                     |   |              | 4,304   |   |              |   | 2      | %                 |   |   | 4,727             |   |   |              | 2      | % |   |   | 4,011 |   |   |   | 2 | % |   |   | 4,988 |   |   |   | 3 | % |   |   | 4,693 |   |   |   | 3 | % |
| Consumer and other               |   |              | 2,153   |   |              |   | 1      | %                 |   |   | 1,937             |   |   |              | 1      | % |   |   | 3,566 |   |   |   | 2 | % |   |   | 2,995 |   |   |   | 1 | % |   |   | 1,805 |   |   |   | 1 | % |
| Subtotal                         |   |              | 241,390 |   |              |   | 100    | %                 |   |   | 241,461           |   |   |              | 100    | % |   |   | 230,282 |   |   |   | 100 | % |   |   | 201,576 |   |   |   | 100 | % |   |   | 184,514 |   |   |   | 100 | % |
| Deferred loan fees, net          |   |              | (387    | )      |              |   |   |              |   |   | (407              | )      |   |              |   |   |   |   | (341 | ) |   |   |   |   |   |   | (304 | ) |   |   |   |   |   |   | (436 | ) |   |   |   |   |
| Allowance for loan losses        |   |              | (6,699  | )      |              |   |   |              |   |   | (6,231            | )      |   |              |   |   |   |   | (3,244 | ) |   |   |   |   |   |   | (1,758 | ) |   |   |   |   |   |   | (1,746 | ) |   |   |   |   |
| Total loans, net                 |   | $                 | 234,304 |   |              |   |   |              |   | $      | 234,823           |   |   |              |   |   |   | $ | 226,697 |   |   |   |   |   |   | $ | 199,514 |   |   |   |   |   |   | $ | 182,332 |   |   |   |   |   |

|   | (1) | Consists primarily of commercial mortgage loans. |
|--------|-----|--------------------------------------------------|

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|                               |   | Maturity of loans |   |
|------------------------------------|--------|-------------------|--------|
| (in thousands)                     |   | Within one year   |   |   | After one but within five years |   |   | After five years |   |   | Total |   |
|                               |   |              |   |   |   |   |   |   |   |   |   |   |
| Commercial                         |   | $                 | 25,888 |   |   | $ | 10,879 |   |   | $ | 9,527 |   |   | $ | 46,294 |   |
| Real estate – mortgage (1)   |   |              | 3,456  |   |   |   | 32,038 |   |   |   | 129,708 |   |   |   | 165,202 |   |
| Real estate – construction   |   |              | 14,894 |   |   |   | 8,189 |   |   |   | 354 |   |   |   | 23,437 |   |
| Agriculture                        |   |              | 2,578  |   |   |   | 583 |   |   |   | 1,143 |   |   |   | 4,304 |   |
| Consumer and other                 |   |              | 1,110  |   |   |   | 1,043 |   |   |   | - |   |   |   | 2,153 |   |
| Total                              |   | $                 | 47,926 |   |   | $ | 52,732 |   |   | $ | 140,732 |   |   | $ | 241,390 |   |
|                               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans with fixed interest rates    |   |              | 10,117 |   |   |   | 34,528 |   |   |   | 62,919 |   |   |   | 107,564 |   |
| Loans with floating interest rates |   |              | 37,809 |   |   |   | 18,204 |   |   |   | 77,813 |   |   |   | 133,826 |   |
| Total                              |   | $                 | 47,926 |   |   | $ | 52,732 |   |   | $ | 140,732 |   |   | $ | 241,390 |   |

|                           |   | For the Year Ended December 31, |   |
|--------------------------------|--------|---------------------------------|--------|
|                           |   | 2010                            |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                           |   | (dollars in thousands)          |   |
| Nonaccrual loans               |   | $                               | 6,823  |   |   | $ | 7,364 |   |   | $ | 4,934 |   |   | $ | - - |   |   | $ | - |   |
| Loans past due 90 days or more |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and still accruing             |   |                            | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total nonperforming loans      |   |                            | 6,823  |   |   |   | 7,364 |   |   |   | 4,934 |   |   |   | - |   |   |   | - |   |
| Other real estate owned        |   |                            | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other vehicles owned           |   |                            | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total nonperforming assets     |   | $                               | 6,823  |   |   | $ | 7,364 |   |   | $ | 4,934 |   |   | $ | - |   |   | $ | - |   |
| Interest income forgone on     |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| nonaccrual loans               |   | $                               | 743    |   |   | $ | 435 |   |   | $ | 74 |   |   | $ | - |   |   | $ | - |   |
| Interest income recorded on a  |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| cash basis on nonaccrual loans |   | $                               | -      |   |   | $ | 37 |   |   | $ | 52 |   |   | $ | - |   |   | $ | - |   |
| Nonperforming loans to total   |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loans                          |   |                            | 2.91   | % |   |   | 3.14 | % |   |   | 2.18 | % |   |   | 0.0 | % |   |   | 0.0 | % |
| Nonperforming assets to total  |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets                         |   |                            | 2.00   | % |   |   | 2.16 | % |   |   | 1.61 | % |   |   | 0.0 | % |   |   | 0.0 | % |

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|   | § | specific allocation for problem graded loans, if any (“impaired loans”), |
|--------|--------|--------------------------------------------------------------------------------------|

|   | § | general or formula allocation, |
|--------|--------|--------------------------------|

|   | § | and discretionary allocation based on loan portfolio segmentation. |
|--------|--------|--------------------------------------------------------------------|

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|                                         |   | For the Year Ended December 31, |    |
|----------------------------------------------|--------|---------------------------------|---------|
|                                         |   | 2010                            |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                         |   | (dollars in thousands)          |    |
| Balance at beginning of period               |   | $                               | 6,231   |   |   | $ | 3,244 |   |   | $ | 1,758 |   |   | $ | 1,746 |   |   | $ | 1,766 |   |
| Charge-offs:                                 |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and agricultural                  |   |                            | 35      |   |   |   | 3,840 |   |   |   | 125 |   |   |   | - |   |   |   | 21 |   |
| Real estate mortgage                         |   |                            | 1,530   |   |   |   | 173 |   |   |   | 5 |   |   |   | - |   |   |   | - |   |
| Real estate construction                     |   |                            | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                     |   |                            | 28      |   |   |   | - |   |   |   | 12 |   |   |   | - |   |   |   | - |   |
| Total charge-offs                            |   |                            | 1,593   |   |   |   | 4,013 |   |   |   | 142 |   |   |   | - |   |   |   | 21 |   |
| Recoveries:                                  |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and agricultural                  |   |                            | 11      |   |   |   | - |   |   |   | 27 |   |   |   | 12 |   |   |   | - |   |
| Real estate mortgage                         |   |                            | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Real estate construction                     |   |                            | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                     |   |                            | -       |   |   |   | - |   |   |   | 1 |   |   |   | - |   |   |   | 1 |   |
| Total recoveries                             |   |                            | 11      |   |   |   | - |   |   |   | 28 |   |   |   | 12 |   |   |   | 1 |   |
| Net (charge-offs) / recoveries               |   |                            | (1,582  | ) |   |   | (4,013 | ) |   |   | (114 | ) |   |   | 12 |   |   |   | (20 | ) |
| Provision for loan losses                    |   |                            | 2,050   |   |   |   | 7,000 |   |   |   | 1,600 |   |   |   | - |   |   |   | - |   |
| Balance at end of period                     |   | $                               | 6,699   |   |   | $ | 6,231 |   |   | $ | 3,2444 |   |   | $ | 1,758 |   |   | $ | 1,746 |   |
| Net charge-offs to average loans outstanding |   |                            | 0.65    | % |   |   | 1.67 | % |   |   | .05 | % |   |   | (.01 | )% |   |   | .01 | % |
| Average loans outstanding                    |   | $                               | 243,519 |   |   | $ | 239,428 |   |   | $ | 219,431 |   |   | $ | 194,734 |   |   | $ | 166,620 |   |
| Ending allowance to total loans outstanding  |   |                            | 2.78    | % |   |   | 2.58 | % |   |   | 1.41 | % |   |   | 0.87 | % |   |   | 0.95 | % |

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|                             |   | For the Year ended December 31, |    |
|----------------------------------|--------|---------------------------------|---------|
|                             |   | 2010                            |    |   | 2009 |   |   | 2008 |   |
|                             |   |                            |    |   | Average |   |   |   |   |   | Average |   |   |   |   |   | Average |   |
|                             |   | Average                         |    |   | Yield/ |   |   | Average |   |   | Yield/ |   |   | Average |   |   | Yield/ |   |
| (dollars in thousands)           |   | Balance                         |    |   | Rate |   |   | Balance |   |   | Rate |   |   | Balance |   |   | Rate |   |
| Deposits:                        |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing deposits    |   | $                               | 80,273  |   |   |   |   |   | $ | 68,509 |   |   |   |   |   | $ | 66,106 |   |   |   |   |
| Interest-bearing deposits:       |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand deposits |   |                            | 39,534  |   |   |   | 0.53 | % |   |   | 36,689 |   |   |   | 1.37 | % |   |   | 29,324 |   |   |   | 1.74 | % |
| Money market accounts            |   |                            | 72,887  |   |   |   | 0.65 | % |   |   | 65,265 |   |   |   | 1.13 | % |   |   | 52,349 |   |   |   | 2.12 | % |
| Savings                          |   |                            | 10,088  |   |   |   | 0.25 | % |   |   | 10,103 |   |   |   | 0.25 | % |   |   | 8,887 |   |   |   | 0.37 | % |
| Time deposits                    |   |                            | 95,302  |   |   |   | 1.72 | % |   |   | 96,621 |   |   |   | 2.54 | % |   |   | 88,031 |   |   |   | 3.69 | % |
| Total interest-bearing deposits  |   |                            | 217,811 |   |   |   | 1.08 | % |   |   | 208,678 |   |   |   | 1.78 | % |   |   | 178,591 |   |   |   | 2.74 | % |
| Total deposits                   |   | $                               | 298,084 |   |   |   |   |   |   | $ | 277,187 |   |   |   |   |   |   | $ | 244,697 |   |   |   |   |   |

|                                                      |   |    |   |   |                  |   |
|-----------------------------------------------------------|--------|---------|--------|--------|-----------------------|--------|
| Maturities of certificates of deposit of $100,000 or more |   |    |   |   |
| (dollars in thousands)                                    |   | Balance |   |   | Percent of total |   |
| Three months or less                                      |   | $       | 14,473 |   |                  |   | 24 | % |
| Over three months through nine months                     |   |    | 15,783 |   |                  |   | 26 | % |
| Over nine months through twelve months                    |   |    | 19,630 |   |                  |   | 32 | % |
| Over twelve months                                        |   |    | 11,074 |   |                  |   |  18 | % |
| Total certificates of deposit of $100,000 and more        |   | $       | 60,960 |   |                  |   | 100 | % |

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|   Capital and capital adequacy ratios                     |   |
|---------------------------------------------------------------------|--------|
|                                                                |   | Year ended December 31, |   |
|                                                                |   | 2010 |   |   | 2009 |   |
| (dollars in thousands)                                              |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| Leverage Ratio                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                              |   | $ | 41,791 |   |   |   | 12.1 | % |   | $ | 39,865 |   |   |   | 11.4 | % |
| Minimum regulatory requirement                                      |   | $ | 13,859 |   |   |   | 4.0 | % |   | $ | 13,982 |   |   |   | 4.0 | % |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Business Bank                                                |   | $ | 41,663 |   |   |   | 12.0 | % |   | $ | 39,845 |   |   |   | 11.4 | % |
| Minimum requirement for “Well- Capitalized” institution |   | $ | 17,324 |   |   |   | 5.0 | % |   | $ | 17,478 |   |   |   | 5.0 | % |
| Minimum regulatory requirement                                      |   | $ | 13,854 |   |   |   | 4.0 | % |   | $ | 13,977 |   |   |   | 4.0 | % |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Risk-Based Capital Ratio                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                              |   | $ | 41,791 |   |   |   | 16.2 | % |   | $ | 39,865 |   |   |   | 14.8 | % |
| Minimum regulatory requirement                                      |   | $ | 10,323 |   |   |   | 4.0 | % |   | $ | 10,804 |   |   |   | 4.0 | % |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Business Bank                                                |   | $ | 41,663 |   |   |   | 16.2 | % |   | $ | 39,845 |   |   |   | 14.8 | % |
| Minimum requirement for “Well- Capitalized” institution |   | $ | 15,479 |   |   |   | 6.0 | % |   | $ | 16,201 |   |   |   | 6.0 | % |
| Minimum regulatory requirement                                      |   | $ | 10,319 |   |   |   | 4.0 | % |   | $ | 10,801 |   |   |   | 4.0 | % |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Risk-Based Capital Ratio                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                              |   | $ | 45,060 |   |   |   | 17.5 | % |   | $ | 43,277 |   |   |   | 16.0 | % |
| Minimum regulatory requirement                                      |   | $ | 20,645 |   |   |   | 8.0 | % |   | $ | 21,608 |   |   |   | 8.0 | % |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Business Bank                                                |   | $ | 44,931 |   |   |   | 17.4 | % |   | $ | 43,256 |   |   |   | 16.0 | % |
| Minimum requirement for “Well- Capitalized” institution |   | $ | 25,798 |   |   |   | 10.0 | % |   | $ | 27,002 |   |   |   | 10.0 | % |
| Minimum regulatory requirement                                      |   | $ | 20,639 |   |   |   | 8.0 | % |   | $ | 21,601 |   |   |   | 8.0 | % |

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TEM

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TE

|   |                                                                                                                 | Page |
|--------|----------------------------------------------------------------------------------------------------------------------|------|
| I.     | Report of Independent Registered Public Accounting Firm                                                              | 45   |
| II.    | Consolidated Balance Sheet as of December 31, 2010 and 2009                                                          | 46   |
| III.   | Consolidated Statement of Operations for the years ended December 31, 2010, 2009 and 2008                            | 47   |
| IV.    | Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2010, 2009 and 2008 | 48   |
| V.     | Consolidated Statement of Cash Flows for the years ended December 31, 2010, 2009 and 2008                            | 50   |
| VI.    | Notes to Consolidated Financial Statements                                                                           | 52   |

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|   | /s/ Perry-Smith LLP |
|--------|---------------------|

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|                                                                                    |   | 2010   |        |   | 2009   |   |
|-----------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| ASSETS                                                                                  |   |   |        |   |   |   |
|                                                                                    |   |   |        |   |   |   |
| Cash and due from banks                                                                 |   | $      | 32,667,967  |   |   | $      | 39,077,786 |   |
| Available-for-sale investment securities, at fair value (Notes 3 and 4)                 |   |   | 50,823,000  |   |   |   | 42,566,000 |   |
| Loans, less allowance for loan losses of $ 6,698,952                                    |   |   |        |   |   |   |   |   |
| in 2010 and $6,231,065 in 2009 (Notes 2, 3, 5, and 10)                                  |   |   | 234,304,310 |   |   |   | 234,822,963 |   |
| Bank premises and equipment, net (Note 6)                                               |   |   | 8,510,688   |   |   |   | 8,041,905 |   |
| Cash surrender value of bank-owned life insurance (Note 15)                             |   |   | 6,627,060   |   |   |   | 6,354,871 |   |
| Accrued interest receivable and other assets (Note 13)                                  |   |   | 8,487,803   |   |   |   | 9,307,998 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Total assets                                                                            |   | $      | 341,420,828 |   |   | $      | 340,171,523 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                              |   |   |        |   |   |   |   |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Deposits:                                                                               |   |   |        |   |   |   |   |   |
| Non-interest bearing                                                                    |   | $      | 91,202,570  |   |   | $      | 76,574,561 |   |
| Interest bearing (Note 7)                                                               |   |   | 203,075,230 |   |   |   | 217,707,492 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Total deposits                                                                          |   |   | 294,277,800 |   |   |   | 294,282,143 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Accrued interest payable and other liabilities                                          |   |   | 2,738,686   |   |   |   | 2,265,842 |   |
| FHLB term borrowing (Note 8)                                                            |   |   | 2,561,650   |   |   |   | 3,661,999 |   |
| Junior subordinated deferrable interest debentures (Note 9)                             |   |   | 3,093,000   |   |   |   | 3,093,000 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Total liabilities                                                                       |   |   | 302,671,136 |   |   |   | 303,302,984 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Commitments and contingencies (Note 10)                                                 |   |   |        |   |   |   |   |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Shareholders’ equity (Note 11):                                                   |   |   |        |   |   |   |   |   |
| Serial preferred stock – no par value; 10,000,000                                 |   |   |        |   |   |   |   |   |
| shares authorized; issued and outstanding 7,700 shares                                  |   |   |        |   |   |   |   |   |
| Class B and 385 Class C warrants in 2010 and 2009                                       |   |   | 7,821,800   |   |   |   | 7,744,800 |   |
| Common stock – no par value; 30,000,000 shares                                    |   |   |        |   |   |   |   |   |
| authorized; issued and outstanding  2,630,480                                 |   |   |        |   |   |   |   |   |
| shares in 2010 and 2,608,317 shares in 2009                                             |   |   | 26,137,158  |   |   |   | 25,953,290 |   |
| Retained earnings                                                                       |   |   | 4,831,883   |   |   |   | 3,166,732 |   |
| Accumulated other comprehensive  (loss) income, net of taxes (Notes 4 and 16) |   |   | (41,149     | )      |   |   | 3,717 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Total shareholders’ equity                                                        |   |   | 38,749,692  |   |   |   | 36,868,539 |   |
|                                                                                    |   |   |        |   |   |   |   |   |
| Total liabilities and shareholders’ equity                                        |   | $      | 341,420,828 |   |   | $      | 340,171,523 |   |

----

Table of Contents

|                                                 |   | 2010   |       |   | 2009   |   |       | 2008   |   |
|------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Interest income:                                     |   |   |       |   |   |   |       |   |   |
| Interest and fees on loans                           |   | $      | 14,792,871 |   |   | $      | 14,959,057 |   |   | $ | 15,509,954 |   |
| Interest on investment securities:                   |   |   |       |   |   |   |       |   |   |   |   |   |
| Taxable                                              |   |   | 721,086    |   |   |   | 1,222,449  |   |   |   | 1,304,535 |   |
| Exempt from Federal income taxes                     |   |   | 627,502    |   |   |   | 737,506    |   |   |   | 798,960 |   |
| Interest on Federal funds sold                       |   |   | -          |   |   |   | 9,972      |   |   |   | 170,389 |   |
| Interest on deposits in banks                        |   |   | 70,951     |   |   |   | -          |   |   |   | - |   |
| Total interest income                                |   |   | 16,212,410 |   |   |   | 16,928,984 |   |   |   | 17,783,838 |   |
| Interest expense:                                    |   |   |       |   |   |   |       |   |   |   |   |   |
| Interest on deposits (Note 7)                        |   |   | 2,343,620  |   |   |   | 3,721,414  |   |   |   | 4,900,988 |   |
| Interest on FHLB advances (Note 8)                   |   |   | -          |   |   |   | 10,560     |   |   |   | 296,170 |   |
| Interest on term borrowings (Note 8)                 |   |   | 161,088    |   |   |   | 227,463    |   |   |   | 302,670 |   |
| Interest on junior subordinated deferrable interest  |   |   |       |   |   |   |       |   |   |   |   |   |
| debentures (Note 9)                                  |   |   | 114,236    |   |   |   | 129,795    |   |   |   | 218,672 |   |
| Total interest expense                               |   |   | 2,618,944  |   |   |   | 4,089,232  |   |   |   | 5,718,500 |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Net interest income before provision for loan losses |   |   | 13,593,466 |   |   |   | 12,839,752 |   |   |   | 12,065,338 |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Provision for loan losses (Note 5)                   |   |   | 2,050,000  |   |   |   | 7,000,000  |   |   |   | 1,600,000 |   |
| Net interest income after provision for loan losses  |   |   | 11,543,466 |   |   |   | 5,839,752  |   |   |   | 10,465,338 |   |
| Non-interest income:                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Service charges                                      |   |   | 768,489    |   |   |   | 766,122    |   |   |   | 715,651 |   |
| Gain on sale of available-for-sale investment        |   |   |       |   |   |   |       |   |   |   |   |   |
| securities, net (Note 4)                             |   |   | 34,103     |   |   |   | 416,248    |   |   |   | 46,412 |   |
| Gain on sale of  other real estate         |   |   | -          |   |   |   | 16,055     |   |   |   | - |   |
| Mortgage loan brokerage fees                         |   |   | 59,702     |   |   |   | 43,224     |   |   |   | 52,535 |   |
| Earnings on cash surrender value of life insurance   |   |   |       |   |   |   |       |   |   |   |   |   |
| policies (Note 15)                                   |   |   | 294,734    |   |   |   | 288,154    |   |   |   | 252,796 |   |
| Officer life insurance benefits                      |   |   | -          |   |   |   | 317,488    |   |   |   | - |   |
| Other                                                |   |   | 183,958    |   |   |   | 189,489    |   |   |   | 215,386 |   |
| Total non-interest income                            |   |   | 1,340,986  |   |   |   | 2,036,780  |   |   |   | 1,282,780 |   |
| Non-interest expense:                                |   |   |       |   |   |   |       |   |   |   |   |   |
| Salaries and employee benefits (Note 5 and 15)       |   |   | 5,248,497  |   |   |   | 4,866,197  |   |   |   | 5,127,725 |   |
| Occupancy and equipment (Note 6 and 10)              |   |   | 1,333,948  |   |   |   | 1,565,225  |   |   |   | 1,259,491 |   |
| Other (Note 12)                                      |   |   | 3,196,039  |   |   |   | 3,227,373  |   |   |   | 2,766,313 |   |
| Total non-interest expense                           |   |   | 9,778,484  |   |   |   | 9,658,795  |   |   |   | 9,153,529 |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Income (loss) before provision for income taxes      |   |   | 3,105,968  |   |   |   | (1,782,263 | )      |   |   | 2,594,589 |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Provision for (benefit from) income taxes (Note 13)  |   |   | 943,000    |   |   |   | (1,195,000 | )      |   |   | 746,000 |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Net income (loss)                                    |   | $      | 2,162,968  |   |   | $      | (587,263   | )      |   | $ | 1,848,589 |   |
| Dividends accrued and discount accreted              |   |   |       |   |   |   |       |   |   |   |   |   |
| on preferred shares                                  |   | $      | (420,817   | )      |   | $      | (352,917   | )      |   | $ | - |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Net income (loss) available to common shareholders   |   | $      | 1,742,157  |   |   | $      | (940,180   | )      |   | $ | 1,848,589 |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic earnings (loss) per share (Note 11)            |   | $      | 0.68       |   |   | $      | (0.36      | )      |   | $ | 0.71 |   |
|                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Diluted earnings (loss) per share (Note 11)          |   | $      | 0.68       |   |   | $      | (0.36      | )      |   | $ | 0.70 |   |

----

Table of Contents

|                                |   |            |   |   |         |   |      |   |      |   |      |   |       | Accumulated |       |   |           |   |       |           |    |
|-------------------------------------|--------|-----------------|--------|--------|--------------|--------|-----------|--------|-----------|--------|-----------|--------|------------|-------------|------------|--------|----------------|--------|------------|----------------|---------|
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       | Other       |       |   |           |   |       |           |    |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       | Compre-     |       |   | Total          |   |       | Total          |    |
|                                |   | Preferred Stock |   |   | Common Stock |   |      |   |      |   | hensive   |   |       | Share-      |       |   | Compre-        |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       | Retained    |       |   | Income (Loss)  |   |       | holders’ |    |   | Hensive |   |
|                                |   | Shares          |   |   | Amount       |   |      | Shares |      |   | Amount    |   |       | Earnings    |       |   | (Net of Taxes) |   |       | Equity         |    |   | Income (Loss) |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |
| Balance, December 31, 2007          |   |            |   |   |         |   |      |   | 2,396,435 |   |      | $      | 23,511,066 |        |       | $      | 5,423,324      |   |       | $              | (61,179 | ) |   | $ | 28,873,211 |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |
| Cumulative effect of change in      |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |
| accounting principal, adoption of   |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |
| EITF 06-4 (Note 15)                 |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   | (102,116       | )      |       |           |    |   |   |   | (102,116 | ) |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |
| Comprehensive income (Note 16):     |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |
| Net income                          |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   | 1,848,589      |   |       |           |    |   |   |   | 1,848,589 |   |   | $ | 1,848,589 |   |
| Other comprehensive loss, net       |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| of tax:                             |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Net change in unrealized gains      |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| (losses) on available-for-sale      |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Investment securities               |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           | 157,399 |   |   |   | 157,399 |   |   |   | 157,399 |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Total comprehensive income          |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   | $  | 2,005,988 |   |
| Stock dividend                      |   |            |   |   |         |   |      |   | 116,919   |   |      |   | 1,519,947  |        |       |   | (1,519,947     | )      |       |           |    |   |   |   |   |   |   |   |   |   |
| Cash paid for fractional shares     |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   | (3,489         | )      |       |           |    |   |   |   | (3,489 | ) |   |   |   |   |
| Stock repurchase                    |   |            |   |   |         |   |      |   | (54,734   | )      |      |   | (534,211   | )           |       |   | (286,826       | )      |       |           |    |   |   |   | (821,037 | ) |   |   |   |   |
| Stock options exercised and related |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| tax benefit                         |   |            |   |   |         |   |      |   | 15,119    |   |      |   | 127,844    |        |       |   |           |   |       |           |    |   |   |   | 127,844 |   |   |   |   |   |
| Stock-based compensation expense    |   |            |   |   |         |   |      |   |      |   |      |   | 59,883     |        |       |   |           |   |       |           |    |   |   |   | 59,883 |   |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008          |   |            |   |   |         |   |      |   | 2,473,739 |   |      |   | 24,684,529 |        |       |   | 5,359,535      |   |       |           | 96,220  |   |   |   | 30,140,284 |   |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Comprehensive loss (Note 16):       |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Net loss                            |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   | (587,263       | )      |       |           |    |   |   |   | (587,263 | ) |   | $ | (587,263 | ) |
| Other comprehensive loss, net       |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| of tax:                             |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Net change in unrealized gains      |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| (losses) on available-for-sale      |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Investment securities               |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           | (92,503 | ) |   |   | (92,503 | ) |   |   | (92,503 | ) |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Total comprehensive loss            |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   | $ | (679,766 | ) |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| Issuance of preferred shares        |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |
| net of costs $25,783 (Note 11)      |   |            | 8,085  |   |         |   | 7,674,217 |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   | 7,674,217 |   |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |   |   |
| Dividend and accretion on           |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |   |   |
| preferred stock                     |   |            |   |   |         |   | 70,583    |   |      |   |      |   |       |        |       |   |           |   | (455,261   | )              |    |   |   |   |   |   | (384,678 | ) |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |   |   |
| Stock dividend                      |   |            |   |   |         |   |      |   |      |   | 123,410   |   |       |        | 1,147,702  |   |           |   | (1,147,702 | )              |    |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for fractional shares     |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   | (2,577     | )              |    |   |   |   |   |   | (2,577 | ) |   |   |   |   |
| Stock options exercised and related |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |   |   |
| tax benefit                         |   |            |   |   |         |   |      |   |      |   | 11,168    |   |       |        | 67,718     |   |           |   |       |           |    |   |   |   |   |   | 67,718 |   |   |   |   |   |
| Stock-based compensation expense    |   |            |   |   |         |   |      |   |      |   |      |   |       |        | 53,341     |   |           |   |       |           |    |   |   |   |   |   | 53,341 |   |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |      |   |      |   |       |        |       |   |           |   |       |           |    |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009          |   |            | 8,085  |   |         |   | 7,744,800 |   |      |   | 2,608,317 |   |       |        | 25,953,290 |   |           |   | 3,166,732  |           |    |   | 3,717 |   |   |   | 36,868,539 |   |   |   |   |   |

----

Table of Contents

|                                |   | Preferred Stock |   |   | Common Stock |   |      |   |   |   | Accumulated Other Compre-hensive |   |   | Total Share- |       |   | Total Compre-  |   |
|-------------------------------------|--------|-----------------|--------|--------|--------------|--------|-----------|--------|--------|--------|----------------------------------|--------|--------|--------------|------------|--------|----------------|--------|
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   | Retained     |       |   | Income (Loss)  |   |   | holders’ |   |   | Hensive |   |
|                                |   | Shares          |   |   | Amount       |   |      | Shares |   |   | Amount                           |   |   | Earnings     |       |   | (Net of Taxes) |   |   | Equity |   |   | Income (Loss) |   |
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |
| Balance, December 31, 2009          |   |            | 8,085  |   |         | $      | 7,744,800 |   |   |   | 2,608,317                        |   |   | $            | 25,953,290 |   |           | $      | 3,166,732 |   |   | $ | 3,717 |   |   | $ | 36,868,539 |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (Note 16):     |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                          |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   | 2,162,968 |   |   |   |   |   |   |   | 2,162,968 |   |   | $ | 2,162,968 |   |
| Other comprehensive loss, net       |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of tax:                             |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in unrealized gains      |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (losses) on available-for-sale      |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities               |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   | (44,866 | ) |   |   | (44,866 | ) |   |   | (44,866 | ) |
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income          |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   | $ | 2,118,102 |   |
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend and accretion              |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| on preferred stock                  |   |            |   |   |         |   | 77,000    |   |   |   |                             |   |   |         |       |   |           |   | (497,817 | ) |   |   |   |   |   |   | (420,817 | ) |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock options exercised and related |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tax benefit                         |   |            |   |   |         |   |      |   |   |   | 22,163                           |   |   |         | 146,808    |   |           |   |   |   |   |   |   |   |   |   | 146,808 |   |   |   |   |   |
| Stock-based compensation expense    |   |            |   |   |         |   |      |   |   |   |                             |   |   |         | 37,060     |   |           |   |   |   |   |   |   |   |   |   | 37,060 |   |   |   |   |   |
|                                |   |            |   |   |         |   |      |   |   |   |                             |   |   |         |       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010          |   |            | 8,085  |   |         | $      | 7,821,800 |   |   |   | 2,630,480                        |   |   | $            | 26,137,158 |   |           | $      | 4,831,883 |   |   | $ | (41,149 | ) |   | $ | 38,749,692 |   |   |   |   |   |

| Disclosure of other comprehensive income (loss) net of taxes (Note 16):             |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|-------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                                |   |   |    |   |   |   |    |   |   |
| Unrealized holding (losses) gains arising during the year                           |   | $      | (24,796 | )      |   | $      | 152,422 |   |   | $ | 184,713 |   |
| Less: reclassification adjustment for gains included in net income                  |   |   | 20,070  |   |   |   | 244,925 |   |   |   | 27,314 |   |
| Net change in unrealized (losses) gains on available-for-sale investment securities |   | $      | (44,866 | )      |   | $      | (92,503 | )      |   | $ | 157,399 |   |

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|                                                                  |   | 2010   |        |   | 2009   |   |        | 2008   |   |
|-----------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
|                                                                  |   |   |        |   |   |   |        |   |   |
| Cash flows from operating activities:                                 |   |   |        |   |   |   |        |   |   |
| Net income (loss)                                                     |   | $      | 2,162,968   |   |   | $      | (587,263    | )      |   | $ | 1,848,589 |   |
| Adjustments to reconcile net income (loss) to net cash                |   |   |        |   |   |   |        |   |   |   |   |   |
| provided by operating activities:                                     |   |   |        |   |   |   |        |   |   |   |   |   |
| Provision for loan losses                                             |   |   | 2,050,000   |   |   |   | 7,000,000   |   |   |   | 1,600,000 |   |
| (Decrease) increase in deferred loan origination fees, net            |   |   | (20,369     | )      |   |   | 66,049      |   |   |   | 36,969 |   |
| Depreciation                                                          |   |   | 512,359     |   |   |   | 665,066     |   |   |   | 466,069 |   |
| Amortization of intangibles                                           |   |   | -           |   |   |   | -           |   |   |   | 7,718 |   |
| Gain on sale of available-for-sale investment securities, net         |   |   | (34,103     | )      |   |   | (416,248    | )      |   |   | (46,412 | ) |
| Dividends on Federal Home Loan Bank stock                             |   |   | -           |   |   |   | (14,800     | )      |   |   | (82,100 | ) |
| Accretion (amortization) of investment securities, net                |   |   | 322,693     |   |   |   | 31,579      |   |   |   | (31,620 | ) |
| Loss on disposition of premises and equipment                         |   |   | 9,341       |   |   |   | 120         |   |   |   | 1,198 |   |
| Provision for (benefit from) deferred income taxes                    |   |   | (448,000    | )      |   |   | (1,003,000  | )      |   |   | (935,000 | ) |
| Tax benefits on stock-based compensation                              |   |   | (1,682      | )      |   |   | (7,720      | )      |   |   | (30,338 | ) |
| Tax benefit from exercise of stock options                            |   |   | (21,808     | )      |   |   | -           |   |   |   | - |   |
| Increase in cash surrender value of bank owned life insurance         |   |   | (272,189    | )      |   |   | (278,358    | )      |   |   | (237,332 | ) |
| Stock-based compensation expense                                      |   |   | 37,060      |   |   |   | 53,341      |   |   |   | 59,883 |   |
| Gain from officer life insurance benefits                             |   |   | -           |   |   |   | (317,488    | )      |   |   | - |   |
| Gain from sale of other real estate                                   |   |   | -           |   |   |   | (16,055     | )      |   |   | - |   |
| Decrease (increase) in accrued interest receivable and other assets   |   |   | 1,560,475   |   |   |   | (3,437,913  | )      |   |   | (35,637 | ) |
| Increase (decrease) in accrued interest payable and other liabilities |   |   | 475,444     |   |   |   | (27,393     | )      |   |   | 409,971 |   |
|                                                                  |   |   |        |   |   |   |        |   |   |   |   |   |
| Net cash provided by operating activities                             |   |   | 6,333,871   |   |   |   | 1,709,917   |   |   |   | 3,031,958 |   |
|                                                                  |   |   |        |   |   |   |        |   |   |   |   |   |
| Cash flows from investing activities:                                 |   |   |        |   |   |   |        |   |   |   |   |   |
| Proceeds from matured and called available-for-sale                   |   |   |        |   |   |   |        |   |   |   |   |   |
| investment securities                                                 |   |   | 1,805,000   |   |   |   | 3,864,361   |   |   |   | 10,000,000 |   |
| Proceeds from sales of available-for-sale investment securities       |   |   | 3,558,397   |   |   |   | 13,559,130  |   |   |   | 4,537,315 |   |
| Purchases of available-for-sale investment securities                 |   |   | (20,718,236 | )      |   |   | (23,798,247 | )      |   |   | (2,949,149 | ) |
| Proceeds from principal repayments from available-for-sale            |   |   |        |   |   |   |        |   |   |   |   |   |
| mortgage-backed securities                                            |   |   | 6,733,010   |   |   |   | 6,051,242   |   |   |   | 3,341,502 |   |
| Net increase in loans                                                 |   |   | (1,510,978  | )      |   |   | (15,176,119 | )      |   |   | (28,819,536 | ) |
| (Purchase of ) redemption of Federal Home Loan Bank stock, net        |   |   | (241,700    | )      |   |   | -           |   |   |   | 636,500 |   |
| Purchase of premises and equipment                                    |   |   | (990,482    | )      |   |   | (4,732,461  | )      |   |   | (1,407,299 | ) |
| Proceeds form sale of premises and equipment                          |   |   | -           |   |   |   | 215         |   |   |   | 2,250 |   |
| Proceeds from bank owned life insurance                               |   |   | -           |   |   |   | 662,838     |   |   |   | - |   |
|                                                                  |   |   |        |   |   |   |        |   |   |   |   |   |
| Net cash used in investing activities                                 |   |   | (11,364,989 | )      |   |   | (19,569,041 | )      |   |   | (14,658,417 | ) |

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|                                                     |   | 2010   |        |   | 2009   |   |            | 2008   |   |
|----------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-----------------|--------|--------|
|                                                     |   |   |        |   |   |   |            |   |   |
| Cash flows from financing activities:                    |   |   |        |   |   |   |            |   |   |
| Net increase in noninterest bearing and                  |   |   |        |   |   |   |            |   |   |
| interest-bearing deposits                                |   | $      | 12,675,112  |   |   | $      | 32,830,168      |   |   | $ | 11,873,611 |   |
| Net (decrease) increase in time deposits                 |   |   | (12,679,455 | )      |   |   | 4,128,542       |   |   |   | 30,063,754 |   |
| Proceeds from issuance of preferred stock                |   |   | -           |   |   |   | 7,674,217       |   |   |   | - |   |
| Proceeds from exercised stock options                    |   |   | 125,000     |   |   |   | 59,998          |   |   |   | 97,506 |   |
| Benefit from exercise of stock options                   |   |   | 21,808      |   |   |   | -               |   |   |   | - |   |
| Cash paid to repurchase common stock                     |   |   | -           |   |   |   | -               |   |   |   | (821,037 | ) |
| Tax benefits from stock-based compensation               |   |   |        |   |   |   | 7,720           |   |   |   | 30,338 |   |
| Cash dividends paid on preferred stock                   |   |   | (420,817    | )      |   |   | (384,678        | )      |   |   | - |   |
| Proceeds from FHLB advances                              |   |   | -           |   |   |   | -               |   |   |   | 8,000,000 |   |
| Payments on FHLB advances                                |   |   | -           |   |   |   | (8,000,000      | )      |   |   | (21,804,000 | ) |
| Net decrease in FHLB term borrowings                     |   |   | (1,100,349  | )      |   |   | (1,522,347      | )      |   |   | (2,961,703 | ) |
| Cash paid to repurchase fractional shares                |   |   | -           |   |   |   | (2,577          | )      |   |   | (3,489 | ) |
|                                                     |   |   |        |   |   |   |            |   |   |   |   |   |
| Net cash (used in) provided by financing activities      |   |   | (1,378,701  | )      |   |   | 34,791,043      |   |   |   | 24,474,980 |   |
|                                                     |   |   |        |   |   |   |            |   |   |   |   |   |
| (Decrease) increase in cash and cash equivalents         |   |   | (6,409,819  | )      |   |   | 16,931,919      |   |   |   | 12,848,521 |   |
| Cash and cash equivalents at beginning of year           |   |   | 39,077,786  |   |   |   | 22,145,867      |   |   |   | 9,297,346 |   |
|                                                     |   |   |        |   |   |   |            |   |   |   |   |   |
| Cash and cash equivalents at end of year                 |   | $      | 32,667,967  |   |   | $      | 39,077,786      |   |   | $ | 22,145,867 |   |
|                                                     |   |   |        |   |   |   |            |   |   |   |   |   |
| Supplemental disclosure of cash flow information:        |   |   |        |   |   |   |            |   |   |   |   |   |
| Cash paid during the year for:                           |   |   |        |   |   |   |            |   |   |   |   |   |
| Interest expense                                         |   | $      | 2,661,335   |   |   | $      | 4,246,023       |   |   | $ | 5,653,063 |   |
| Income taxes                                             |   | $      | 780,000     |   |   | $      | 1,475,000       |   |   | $ | 1,727,000 |   |
|                                                     |   |   |        |   |   |   |            |   |   |   |   |   |
| Non-cash investing activities:                           |   |   |        |   |   |   |            |   |   |   |   |   |
| Net change in unrealized gain/loss on available-for-sale |   |   |        |   |   |   |            |   |   |   |   |   |
| investment securities                                    |   | $      | (76,239     | )      |   | $      | (157,183        | )      |   | $ | 254,636 |   |
|                                                     |   |   |        |   |   |   |            |   |   |   |   |   |
| Non-cash Financing Activity:                             |   |   |        |   |   |   |            |   |   |   |   |   |
| Net change in accrued dividends on preferred stock       |   | $      | 1,168       |   |   | $      | 52,456          |   |   | $ |  - |   |
| Cumulative effect of adopting EITF 06-04                 |   | $      | -           |   |   | $      | -               |   |   | $ |   102,115 |   |
| Real estate owned acquired through foreclosure           |   | $      | -           |   |   | $      |  1,397,310 |   |   | $ | - |   |

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| 1. | THE BUSINESS OF VALLEY COMMERCE BANCORP |
|----|-----------------------------------------|

| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----|--------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

----

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| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|--------------------------------------------------------|

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| 3. | FAIR VALUE MEASUREMENTS |
|----|-------------------------|

|                           |   | December 31, 2010 |        |   | December 31, 2009 |   |
|--------------------------------|--------|-------------------|-------------|--------|-------------------|--------|
|                           |   | Carrying          |        |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                           |   | Amount            |        |   | Value             |   |   | Amount |   |   | Value |   |
|                           |   |              |        |   |              |   |   |   |   |   |   |   |
| Financial assets:              |   |              |        |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents      |   | $                 | 32,667,967  |   |              | $      | 32,667,967 |   |   | $ | 39,077,786 |   |   | $ | 39,077,786 |   |
| Investment securities          |   |              | 50,823,000  |   |              |   | 50,823,000 |   |   |   | 42,566,000 |   |   |   | 42,566,000 |   |
| Loans, net                     |   |              | 234,304,310 |   |              |   | 231,913,397 |   |   |   | 234,232,963 |   |   |   | 232,495,909 |   |
| Cash surrender value of life   |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| insurance policies             |   |              | 6,627,060   |   |              |   | 6,627,060 |   |   |   | 6,354,871 |   |   |   | 6,354,871 |   |
| Accrued interest receivable    |   |              | 1,209,657   |   |              |   | 1,209,657 |   |   |   | 1,241,412 |   |   |   | 1,241,412 |   |
| FHLB stock                     |   |              | 1,360,700   |   |              |   | 1,360,700 |   |   |   | 1,119,000 |   |   |   | 1,119,000 |   |
|                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
|                           |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:         |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                       |   | $                 | 294,277,800 |   |              | $      | 294,622,852 |   |   | $ | 294,282,143 |   |   | $ | 294,833,469 |   |
| FHLB term borrowing            |   |              | 2,561,650   |   |              |   | 2,847,132 |   |   |   | 3,661,999 |   |   |   | 2,974,335 |   |
| Junior subordinated deferrable |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| interest debentures            |   |              | 3,093,000   |   |              |   | 804,180 |   |   |   | 3,093,000 |   |   |   | 959,000 |   |
| Accrued interest payable       |   |              | 97,597      |   |              |   | 97,597 |   |   |   | 139,988 |   |   |   | 139,988 |   |

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| 3. | FAIR VALUE MEASUREMENTS (Continued) |
|----|-------------------------------------|

----

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| 3. | FAIR VALUE MEASUREMENTS (Continued) |
|----|-------------------------------------|

|                                     |   | December 31, 2010 |       |
|------------------------------------------|--------|-------------------|------------|
| Description                              |   | Fair Value        |       |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                                     |   |              |       |   |   |   |   |   |   |   |   |   |
| Available-for-sale investment securities |   |              |       |   |   |   |   |   |   |   |   |   |
| Debt securities:                         |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. Treasury securities                 |   | $                 | 3,800,000  |   |   | $ | - |   |   | $ | 3,800,000 |   |   | $ | - |   |
| U.S. Government agencies                 |   |              | 5,533,000  |   |   |   |   |   |   |   | 5,533,000 |   |   |   |   |   |
| Mortgage-backed securities:              |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                 |   |              | 12,770,000 |   |   |   | - |   |   |   | 12,770,000 |   |   |   | - |   |
| Small Business Administration            |   |              | 14,577,000 |   |   |   | - |   |   |   | 14,577,000 |   |   |   | - |   |
| Municipal securities                     |   |              | 14,143,000 |   |   |   | - |   |   |   | 14,143,000 |   |   |   | - |   |
| Total assets measured at fair value      |   | $                 | 50,823,000 |   |   | $ | - |   |   | $ | 50,823,000 |   |   | $ | - |   |

|                                     |   | December 31, 2009 |       |
|------------------------------------------|--------|-------------------|------------|
| Description                              |   | Fair Value        |       |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                                     |   |              |       |   |   |   |   |   |   |   |   |   |
| Available-for-sale investment securities |   |              |       |   |   |   |   |   |   |   |   |   |
| Debt securities:                         |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                 |   | $                 | 3,015,000  |   |   | $ | - |   |   | $ | 3,015,000 |   |   | $ | - |   |
| Mortgage-backed securities:              |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                 |   |              | 9,281,000  |   |   |   | - |   |   |   | 9,281,000 |   |   |   | - |   |
| Small Business Administration            |   |              | 15,307,000 |   |   |   | - |   |   |   | 15,307,000 |   |   |   | - |   |
| Municipal securities                     |   |              | 14,963,000 |   |   |   | - |   |   |   | 14,963,000 |   |   |   | - |   |
| Total assets measured at fair value      |   | $                 | 42,566,000 |   |   | $ | - |   |   | $ | 42,566,000 |   |   | $ | - |   |

----

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|            |   |                |      |   | Fair Value Measurements                                   |   |   |                    |   |
|-----------------|--------|---------------------|-----------|--------|-----------------------------------------------------------|--------|--------|-------------------------|--------|
|            |   |                |      |   |                                                      |   |   |                    |   |   |   |   |   |   |   |
|            |   | Total Fair Value at |      |   | Quoted Prices In Active Markets for Identical Assets |   |   | Other Observable Inputs |   |   | Significant Unobservable Inputs |   |   | Total |   |
|            |   | December 31,        |      |   | (Level 1)                                                 |   |   | (Level 2)               |   |   | (Level 3) |   |   | Losses |   |
|            |   |                |      |   |                                                      |   |   |                    |   |   |   |   |   |   |   |
| Assets:         |   |                |      |   |                                                      |   |   |                    |   |   |   |   |   |   |   |
| Impaired loans: |   |                |      |   |                                                      |   |   |                    |   |   |   |   |   |   |   |
| 2010            |   | $                   | 7,387,000 |   |                                                      | $      | -      |                    |   | $ | 5,317,000 |   |   | $ | 2,070,000 |   |   | $ | (696,000 | ) |
| 2009            |   | $                   | 7,784,000 |   |                                                      | $      | -      |                    |   | $ | - |   |   | $ | 7,784,000 |   |   | $ | (2,227,000 | ) |

| 4. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES |
|----|------------------------------------------|

|                          |   | 2010      |       |
|-------------------------------|--------|-----------|------------|
|                          |   |      |       |   | Gross |   |   | Gross |   |   | Estimated |   |
|                          |   | Amortized |       |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                          |   | Cost      |       |   | Gains |   |   | Losses |   |   | Value |   |
|                          |   |      |       |   |   |   |   |   |   |   |   |   |
| Debt securities:              |   |      |       |   |   |   |   |   |   |   |   |   |
| U.S. Treasury securities      |   | $         | 3,841,257  |   |   | $ | 14,597 |   |   | $ | (55,854 | ) |   | $ | 3,800,000 |   |
| U.S. Government agencies      |   |      | 5,538,062  |   |   |   | 56,069 |   |   |   | (61,131 | ) |   |   | 5,533,000 |   |
| Mortgage-backed securities:   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies      |   |      | 12,576,534 |   |   |   | 260,768 |   |   |   | (67,302 | ) |   |   | 12,770,000 |   |
| Small Business Administration |   |      | 14,387,246 |   |   |   | 201,758 |   |   |   | (12,004 | ) |   |   | 14,577,000 |   |
| Municipal securities          |   |      | 14,549,823 |   |   |   | 22,643 |   |   |   | (429,466 | ) |   |   | 14,143,000 |   |
|                          |   | $         | 50,892,922 |   |   | $ | 555,835 |   |   | $ | (625,757 | ) |   | $ | 50,823,000 |   |

----

Table of Contents

| 4. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES (Continued) |
|----|------------------------------------------------------|

|                          |   | 2009      |       |
|-------------------------------|--------|-----------|------------|
|                          |   |      |       |   | Gross |   |   | Gross |   |   | Estimated |   |
|                          |   | Amortized |       |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                          |   | Cost      |       |   | Gains |   |   | Losses |   |   | Value |   |
|                          |   |      |       |   |   |   |   |   |   |   |   |   |
| Debt securities:              |   |      |       |   |   |   |   |   |   |   |   |   |
|                          |   |      |       |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies      |   | $         | 2,909,941  |   |   | $ | 105,059 |   |   | $ | - |   |   | $ | 3,015,000 |   |
| Mortgage-backed securities:   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies      |   |      | 8,985,716  |   |   |   | 295,386 |   |   |   | (102 | ) |   |   | 9,281,000 |   |
| Small Business Administration |   |      | 15,326,055 |   |   |   | 27,173 |   |   |   | (46,228 | ) |   |   | 15,307,000 |   |
| Municipal securities          |   |      | 15,337,972 |   |   |   | 48,855 |   |   |   | (423,826 | ) |   |   | 14,963,000 |   |
|                          |   | $         | 42,559,683 |   |   | $ | 476,473 |   |   | $ | (470,156 | ) |   | $ | 42,566,000 |   |

----

Table of Contents

| 4. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES (Continued) |
|----|------------------------------------------------------|

|                 |   | Less than 12 Months |       |   | 12 Months or More |   |     | Total  |   |
|----------------------|--------|---------------------|------------|--------|-------------------|--------|----------|--------|--------|
|                 |   | Fair                |       |   | Unrealized        |   |     | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                 |   | Value               |       |   | Losses            |   |     | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
|                 |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:     |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasuries      |   | $                   | 2,857,000  |   |              | $      | (55,854  | )      |   | $ | - |   |   | $ | - |   |   | $ | 2,857,000 |   |   | $ | (55,854 | ) |
| U.S. Agencies        |   |                | 2,079,000  |   |              |   | (61,131  | )      |   |   | - |   |   |   | - |   |   |   | 2,079,000 |   |   |   | (61,131 | ) |
| Mortgage-backed      |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities:          |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency               |   |                | 5,007,000  |   |              |   | (67,302  | )      |   |   | - |   |   |   | - |   |   |   | 5,007,000 |   |   |   | (67,302 | ) |
| SBA                  |   |                | 1,936,000  |   |              |   | (10,413  | )      |   |   | 821,000 |   |   |   | (1,591 | ) |   |   | 2,757,000 |   |   |   | (12,004 | ) |
| Municipal securities |   |                | 8,712,000  |   |              |   | (172,566 | )      |   |   | 2,174,000 |   |   |   | (256,900 | ) |   |   | 10,886,000 |   |   |   | (429,466 | ) |
|                 |   | $                   | 20,591,000 |   |              | $      | (367,266 | )      |   | $ | 2,995,000 |   |   | $ | (258,491 | ) |   | $ | 23,586,000 |   |   | $ | (625,757 | ) |

|                 |   | Less than 12 Months |       |   | 12 Months or More |   |     | Total  |   |
|----------------------|--------|---------------------|------------|--------|-------------------|--------|----------|--------|--------|
|                 |   | Fair                |       |   | Unrealized        |   |     | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                 |   | Value               |       |   | Losses            |   |     | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
|                 |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:     |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed      |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| securities:          |   |                |       |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Agency               |   | $                   | 132,000    |   |              | $      | (102     | )      |   | $ | - |   |   | $ | - |   |   | $ | 132,000 |   |   | $ | (102 | ) |
| SBA                  |   |                | 9,567,000  |   |              |   | (46,228  | )      |   |   | - |   |   |   | - |   |   |   | 9,567,000 |   |   |   | (46,228 | ) |
| Municipal securities |   |                | 6,449,000  |   |              |   | (179,228 | )      |   |   | 2,789,000 |   |   |   | (244,024 | ) |   |   | 9,238,000 |   |   |   | (423,826 | ) |
|                 |   | $                   | 16,148,000 |   |              | $      | (226,132 | )      |   | $ | 2,789,000 |   |   | $ | (244,024 | ) |   | $ | 18,937,000 |   |   | $ | (470,156 | ) |

----

Table of Contents

| 4. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES (Continued) |
|----|------------------------------------------------------|

|                                      |   |      |       |   | Estimated |   |
|-------------------------------------------|--------|-----------|------------|--------|-----------|--------|
|                                      |   | Amortized |       |   | Fair      |   |
|                                      |   | Cost      |       |   | Value     |   |
|                                      |   |      |       |   |      |   |
| Within one year                           |   | $         | 19,928     |   |      | $      | 20,000 |   |
| After one year through five years         |   |      | 4,175,630  |   |      |   | 4,154,000 |   |
| After five years through ten years        |   |      | 7,171,063  |   |      |   | 7,060,000 |   |
| After ten years                           |   |      | 12,562,521 |   |      |   | 12,242,000 |   |
|                                      |   |      | 23,929,142 |   |      |   | 23,476,000 |   |
|                                      |   |      |       |   |      |   |   |   |
|                                      |   |      |       |   |      |   |   |   |
|                                      |   |      |       |   |      |   |   |   |
| Investment securities not due at a single |   |      |       |   |      |   |   |   |
| maturity date:                            |   |      |       |   |      |   |   |   |
| Mortgage-backed securities                |   |      | 26,963,780 |   |      |   | 27,347,000 |   |
|                                      |   | $         | 50,892,922 |   |      | $      | 50,823,000 |   |

----

Table of Contents

| 5. | LOANS AND THE ALLOWANCE FOR LOAN LOSSES |
|----|-----------------------------------------|

|                         |   | December 31, |        |
|------------------------------|--------|--------------|-------------|
|                         |   |         |        |   |   |   |
|                         |   | 2010         |        |   | 2009 |   |
|                         |   |         |        |   |   |   |
| Commercial                   |   | $            | 46,293,872  |   |   | $ | 49,442,490 |   |
| Real estate – mortgage |   |         | 165,202,316 |   |   |   | 162,772,435 |   |
| Real estate - construction   |   |         | 23,437,082  |   |   |   | 22,581,964 |   |
| Agricultural                 |   |         | 4,303,655   |   |   |   | 4,727,349 |   |
| Consumer and other           |   |         | 2,152,766   |   |   |   | 1,936,588 |   |
|                         |   |         | 241,389,691 |   |   |   | 241,460,826 |   |
|                         |   |         |        |   |   |   |   |   |
| Deferred loan fees, net      |   |         | (386,429    | ) |   |   | (406,798 | ) |
| Allowance for loan losses    |   |         | (6,698,952  | ) |   |   | (6,231,065 | ) |
|                         |   | $            | 234,304,310 |   |   | $ | 234,822,963 |   |

|                            |   | Year Ended December 31, |       |
|---------------------------------|--------|-------------------------|------------|
|                            |   |                    |       |   |   |   |   |   |   |
|                            |   | 2010                    |       |   | 2009 |   |   | 2008 |   |
|                            |   |                    |       |   |   |   |   |   |   |
| Balance, beginning of year      |   | $                       | 6,231,065  |   |   | $ | 3,244,454 |   |   | $ | 1,757,591 |   |
| Provision charged to operations |   |                    | 2,050,000  |   |   |   | 7,000,000 |   |   |   | 1,600,000 |   |
| Losses charged to allowance     |   |                    | (1,592,753 | ) |   |   | (4,013,611 | ) |   |   | (141,456 | ) |
| Recoveries                      |   |                    | 10,640     |   |   |   | 222 |   |   |   | 28,319 |   |
|                            |   |                    |       |   |   |   |   |   |   |   |   |   |
| Balance, end of year            |   | $                       | 6,698,952  |   |   | $ | 6,231,065 |   |   | $ | 3,244,454 |   |

----

Table of Contents

| 5. | LOANS AND THE ALLOWANCE FOR LOAN LOSSES (continued) |
|----|-----------------------------------------------------|

|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |
|------------------------------|--------|------------|------------|--------|----------|--------|-------------|--------------|--------|--------|------------|--------|--------|--------------|-----------|--------|-------------|--------|-----------|--------|--------|
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |
|                         |   |       |       |   | Real     |   |        | Real         |   |   | Consumer   |   |   |         |      |   |        |   |      |   |   |
|                         |   |       |       |   | Estate - |   |        | Estate -     |   |   | And        |   |   |         |      |   |        |   |      |   |   |
|                         |   | Commercial |       |   | Mortgage |   |        | Construction |   |   | Other      |   |   | Agricultural |      |   | Unallocated |   |      | Total  |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |
| Allowance for Credit Losses  |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |
| Ending balance allocated     |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |
| to portfolio segments        |   | $          | 2,641,107  |   |     | $      | 608,792     |         |   | $      | 3,327,863  |   |   | $            | 40,409    |   |        | $      | 80,782    |   |   | $ | - |   |   | $ | 6,698,952 |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| Ending balance: individually |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| evaluated for impairment     |   | $          | 1,430,562  |   |     | $      | 92,658      |         |   | $      | 260,283    |   |   | $            | -         |   |        | $      | -         |   |   | $ | - |   |   | $ | 1,783,503 |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| Ending balance: collectively |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| evaluated for impairment     |   | $          | 1,210,545  |   |     | $      | 516,134     |         |   | $      | 3,067,580  |   |   | $            | 40,409    |   |        | $      | 80,782    |   |   | $ | - |   |   | $ | 4,915,449 |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| Loans                        |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| Ending balance               |   | $          | 46,293,872 |   |     | $      | 165,202,316 |         |   | $      | 23,437,082 |   |   | $            | 2,152,766 |   |        | $      | 4,303,655 |   |   | $ | - |   |   | $ | 241,389,691 |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| Ending balance: individually |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| evaluated for impairment     |   | $          | 3,112,068  |   |     | $      | 1,776,842   |         |   | $      | 6,595,040  |   |   | $            | -         |   |        | $      | -         |   |   | $ | - |   |   | $ | 11,483,950 |   |
|                         |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| Ending balance: collectively |   |       |       |   |     |   |        |         |   |   |       |   |   |         |      |   |        |   |      |   |   |   |   |   |   |   |   |   |
| evaluated for impairment     |   | $          | 43,181,804 |   |     | $      | 163,425,474 |         |   | $      | 16,842,042 |   |   | $            | 2,152,766 |   |        | $      | 4,303,655 |   |   | $ | - |   |   | $ | 229,905,741 |   |

----

Table of Contents

|            |   | Commercial Credit Exposure                       |       |
|-----------------|--------|--------------------------------------------------|------------|
|            |   | Credit Risk Profile by Internally Assigned Grade |       |
|            |   |                                             |       |   | Real Estate - |   |   | Real Estate - |   |   |   |   |   |   |   |   |   |   |
|            |   | Commercial                                       |       |   | Mortgage |   |   | Construction |   |   | Consumer |   |   | Agriculture |   |   | Total |   |
|            |   |                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Grade:          |   |                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pass            |   | $                                                | 31,512,542 |   |   | $ | 132,778,115 |   |   | $ | 7,246,462 |   |   | $ | 1,967,364 |   |   | $ | 4,116,617 |   |   | $ | 177,621,100 |   |
| Watch           |   |                                             | 3,908,958  |   |   |   | 6,672,747 |   |   |   | 7,052,354 |   |   |   | 148,659 |   |   |   | 187,038 |   |   |   | 17,969,756 |   |
| Special Mention |   |                                             | 5,240,543  |   |   |   | 8,589,322 |   |   |   | 1,439,667 |   |   |   | - |   |   |   | - |   |   |   | 15,269,532 |   |
| Substandard     |   |                                             | 5,631,829  |   |   |   | 17,162,132 |   |   |   | 7,698,599 |   |   |   | 36,743 |   |   |   | - |   |   |   | 30,529,303 |   |
| Doubtful        |   |                                             | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total           |   | $                                                | 46,293,872 |   |   | $ | 165,202,316 |   |   | $ | 23,437,082 |   |   | $ | 2,152,766 |   |   | $ | 4,303,655 |   |   | $ | 241,389,691 |   |

|                                 |   | 30-89 Days Past Due |    |   | 90 Days and Still Accruing |   |   | Nonaccrual |   |   | Total Past Due |   |   | Current |      |   | Total  |   |
|--------------------------------------|--------|---------------------|---------|--------|----------------------------|--------|--------|------------|--------|--------|----------------|--------|--------|---------|-----------|--------|--------|--------|
|                                 |   |                |    |   |                       |   |   |       |   |   |           |   |   |    |      |   |   |   |
| Commercial:                          |   |                |    |   |                       |   |   |       |   |   |           |   |   |    |      |   |   |   |
| Commercial and  industrial |   | $                   | 51,135  |   |                       | $      | -      |       |   | $      | -              |   |   | $       | 51,135    |   |   | $      | 22,283,620 |   |   | $ | 22,334,755 |   |
| Commercial lines                     |   |                | -       |   |                       |   | -      |       |   |   | 747,054        |   |   |    | 747,054   |   |   |   | 21,806,591 |   |   |   | 22,553,645 |   |
| Commercial guaranteed                |   |                | 556     |   |                       |   | -      |       |   |   | -              |   |   |    | 556       |   |   |   | 1,404,916 |   |   |   | 1,405,472 |   |
| Agricultural:                        |   |                |    |   |                       |   |   |       |   |   |           |   |   |    |      |   |   |   |   |   |   |   |   |   |
| Agricultural                         |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 3,630,210 |   |   |   | 3,630,210 |   |
| Agricultural Capital assets     |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 673,445 |   |   |   | 673,445 |   |
| Real Estate-Construction:            |   |                |    |   |                       |   |   |       |   |   |           |   |   |    |      |   |   |   |   |   |   |   |   |   |
| Construction                         |   |                | -       |   |                       |   | -      |       |   |   | 905,246        |   |   |    | 905,246   |   |   |   | 13,298,945 |   |   |   | 14,204,191 |   |
| Construction 1-4 family              |   |                | 197,544 |   |                       |   | -      |       |   |   | -              |   |   |    | 197,544   |   |   |   | 3,441,631 |   |   |   | 3,639,175 |   |
| Construction loan others             |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 5,593,716 |   |   |   | 5,593,716 |   |
| Real Estate-Mortgage:                |   |                |    |   |                       |   |   |       |   |   |           |   |   |    |      |   |   |   |   |   |   |   |   |   |
| Mortgage 1-4 family                  |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 12,792,286 |   |   |   | 12,792,286 |   |
| Real Estate                          |   |                | 4,924   |   |                       |   | -      |       |   |   | 5,170,238      |   |   |    | 5,175,162 |   |   |   | 141,864,623 |   |   |   | 147,039,785 |   |
| Real Estate - Ag                     |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 1,726,232 |   |   |   | 1,726,232 |   |
| Home Equity loans                    |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 3,644,013 |   |   |   | 3,644,013 |   |
| Consumer:                            |   |                |    |   |                       |   |   |       |   |   |           |   |   |    |      |   |   |   |   |   |   |   |   |   |
| Auto                                 |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 160,201 |   |   |   | 160,201 |   |
| Consumer                             |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 446,960 |   |   |   | 446,960 |   |
| Other                                |   |                | -       |   |                       |   | -      |       |   |   | -              |   |   |    | -         |   |   |   | 1,545,605 |   |   |   | 1,545,605 |   |
| Total                                |   | $                   | 254,159 |   |                       | $      | -      |       |   | $      | 6,822,538      |   |   | $       | 7,076,697 |   |   | $      | 234,312,994 |   |   | $ | 241,389,691 |   |

----

Table of Contents

|                                |   | Recorded Investment |      |   | Unpaid Principal Balance |   |      | Related Allowance |   |   | Average Recorded Investment |   |   | Interest Income Recognized |      |
|-------------------------------------|--------|---------------------|-----------|--------|--------------------------|--------|-----------|-------------------|--------|--------|-----------------------------|--------|--------|----------------------------|-----------|
|                                |   |                |      |   |                     |   |      |              |   |   |                        |   |   |                       |      |
| With no related allowance recorded: |   |                |      |   |                     |   |      |              |   |   |                        |   |   |                       |      |
| Commercial                          |   | $                   | 790,042   |   |                     | $      | 884,488   |              |   | $      | -                           |   |   | $                          | 981,444   |   |   | $ | 3,111 |   |
| Agriculture                         |   |                | -         |   |                     |   | -         |              |   |   | -                           |   |   |                       | -         |   |   |   | - |   |
| Real estate - construction          |   |                | 764,604   |   |                     |   | 1,854,589 |              |   |   | -                           |   |   |                       | 1,857,234 |   |   |   | 103,874 |   |
| Real estate - mortgage              |   |                | 4,219,223 |   |                     |   | 5,182,771 |              |   |   | -                           |   |   |                       | 5,226,383 |   |   |   | 119,642 |   |
| Consumer and other                  |   |                | -         |   |                     |   | -         |              |   |   | -                           |   |   |                       | -         |   |   |   | - |   |
|                                |   |                |      |   |                     |   |      |              |   |   |                        |   |   |                       |      |   |   |   |   |   |
| With an allowance recorded:         |   |                |      |   |                     |   |      |              |   |   |                        |   |   |                       |      |   |   |   |   |   |
| Commercial                          |   | $                   | 2,322,025 |   |                     | $      | 2,322,025 |              |   | $      | 1,013,683                   |   |   | $                          | 2,394,814 |   |   | $ | 139,083 |   |
| Agriculture                         |   |                | -         |   |                     |   | -         |              |   |   | -                           |   |   |                       | -         |   |   |   | - |   |
| Real estate – construction    |   |                | 1,012,238 |   |                     |   | 1,050,946 |              |   |   | 260,283                     |   |   |                       | 1,077,766 |   |   |   | 24,756 |   |
| Real estate – mortgage        |   |                | 2,375,818 |   |                     |   | 2,411,734 |              |   |   | 509,537                     |   |   |                       | 2,428,367 |   |   |   | 88,045 |   |
| Consumer and other                  |   |                | -         |   |                     |   | -         |              |   |   | -                           |   |   |                       | -         |   |   |   | - |   |
|                                |   |                |      |   |                     |   |      |              |   |   |                        |   |   |                       |      |   |   |   |   |   |
| Total:                              |   |                |      |   |                     |   |      |              |   |   |                        |   |   |                       |      |   |   |   |   |   |
| Commercial                          |   | $                   | 3,112,067 |   |                     | $      | 3,206,513 |              |   | $      | 1,013,683                   |   |   | $                          | 3,376,258 |   |   | $ | 142,194 |   |
| Agriculture                         |   |                | -         |   |                     |   | -         |              |   |   | -                           |   |   |                       | -         |   |   |   | - |   |
| Real estate – construction    |   |                | 1,776,842 |   |                     |   | 2,905,535 |              |   |   | 260,283                     |   |   |                       | 2,935,000 |   |   |   | 128,630 |   |
| Real estate – mortgage        |   |                | 6,595,041 |   |                     |   | 7,594,505 |              |   |   | 509,537                     |   |   |                       | 7,654,750 |   |   |   | 207,687 |   |
| Consumer and other                  |   |                | -         |   |                     |   | -         |              |   |   | -                           |   |   |                       | -         |   |   |   | - |   |

----

Table of Contents

| 6. | PREMISES AND EQUIPMENT |
|----|------------------------|

|                          |   | December 31, |       |
|-------------------------------|--------|--------------|------------|
|                          |   |         |       |   |   |   |
|                          |   | 2010         |       |   | 2009 |   |
|                          |   |         |       |   |   |   |
| Furniture and equipment       |   | $            | 2,646,895  |   |   | $ | 2,955,097 |   |
| Construction in progress      |   |         | -          |   |   |   | 4,567,346 |   |
| Premises                      |   |         | 6,581,464  |   |   |   | 2,095,490 |   |
| Leasehold improvements        |   |         | 207,342    |   |   |   | 550,548 |   |
| Land                          |   |         | 1,461,379  |   |   |   | 605,060 |   |
|                          |   |         | 10,897,080 |   |   |   | 10,773,541 |   |
|                          |   |         |       |   |   |   |   |   |
| Less accumulated depreciation |   |         |       |   |   |   |   |   |
| and amortization              |   | $            | (2,386,393 | ) |   | $ | (2,731,636 | ) |
|                          |   | $            | 8,510,687  |   |   | $ | 8,041,905 |   |

| 7. | INTEREST-BEARING DEPOSITS |
|----|---------------------------|

|                            |   | December 31, |        |
|---------------------------------|--------|--------------|-------------|
|                            |   |         |        |   |   |   |
|                            |   | 2010         |        |   | 2009 |   |
|                            |   |         |        |   |   |   |
| Savings                         |   | $            | 10,630,278  |   |   | $ | 10,602,996 |   |
| Money market                    |   |         | 71,798,494  |   |   |   | 67,290,689 |   |
| NOW accounts                    |   |         | 37,017,185  |   |   |   | 43,505,079 |   |
| Time, $100,000 or more          |   |         | 51,798,317  |   |   |   | 53,258,559 |   |
| Brokered time, $100,000 or more |   |         | 9,162,000   |   |   |   | 17,849,000 |   |
| Other time                      |   |         | 22,668,956  |   |   |   | 25,201,169 |   |
|                            |   |         |        |   |   |   |   |   |
|                            |   | $            | 203,075,230 |   |   | $ | 217,707,492 |   |

| Year Ending  |   |   |       |
|--------------|--------|--------|------------|
| December 31, |   |   |       |
|         |   |   |       |
| 2011         |   | $      | 71,484,945 |   |
| 2012         |   |   | 2,797,289  |   |
| 2013         |   |   | 174,737    |   |
| 2014         |   |   | 2,873,302  |   |
| 2015         |   |   | 6,299,000  |   |
|         |   | $      | 83,629,273 |   |

----

Table of Contents

| 7. | INTEREST-BEARING DEPOSITS (Continued) |
|----|---------------------------------------|

|                            |   | Year Ended December 31, |      |
|---------------------------------|--------|-------------------------|-----------|
|                            |   |                    |      |   |   |   |   |   |   |
|                            |   | 2010                    |      |   | 2009 |   |   | 2008 |   |
|                            |   |                    |      |   |   |   |   |   |   |
| Savings                         |   | $                       | 24,718    |   |   | $ | 24,680 |   |   | $ | 32,431 |   |
| Money market                    |   |                    | 473,263   |   |   |   | 739,665 |   |   |   | 1,108,286 |   |
| NOW accounts                    |   |                    | 210,841   |   |   |   | 504,533 |   |   |   | 510,100 |   |
| Time $100,000 or more           |   |                    | 735,741   |   |   |   | 1,154,220 |   |   |   | 1,832,627 |   |
| Brokered time, $100,000 or more |   |                    | 559,056   |   |   |   | 732,786 |   |   |   | 581,972 |   |
| Other time                      |   |                    | 340,001   |   |   |   | 565,530 |   |   |   | 835,572 |   |
|                            |   |                    |      |   |   |   |   |   |   |   |   |   |
|                            |   | $                       | 2,343,620 |   |   | $ | 3,721,414 |   |   | $ | 4,900,988 |   |

| 8. | BORROWING ARRANGEMENTS |
|----|------------------------|

----

Table of Contents

| 8. | BORROWING ARRANGEMENTS (Continued) |
|----|------------------------------------|

| 2010   |      |   | 2009   |
|--------|-----------|--------|--------|
|   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amount |      |   | Rate   |   |   | Maturity Date |   |   | Amount |   |   | Rate |   | Maturity Date |
|   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $      | -         |   |   |   | - | % |   |   | - |   |   | $ | 897,995 |   |   |   | 7.41 | % | June 22, 2010 |
|   | 100,000   |   |   |   | 5.09 | % |   | May 12, 2011 |   |   |   | 100,000 |   |   |   | 5.09 | % | May 12, 2011 |
|   | 211,650   |   |   |   | 4.01 | % |   | December 6, 2011 |   |   |   | 414,004 |   |   |   | 4.01 | % | December 6, 2011 |
|   | 1,250,000 |   |   |   | 4.44 | % |   | December 6, 2011 |   |   |   | 1,250,000 |   |   |   | 4.44 | % | December 6, 2011 |
|   | 1,000,000 |   |   |   | 6.02 | % |   | January 2, 2012 |   |   |   | 1,000,000 |   |   |   | 6.02 | % | January 2, 2012 |
|   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $      | 2,561,650 |   |   |   |   |   |   |   |   |   |   | $ | 3,661,999 |   |   |   |   |   |   |

| Year Ending  |   |   |      |
|--------------|--------|--------|-----------|
| December 31, |   |   |      |
|         |   |   |      |
| 2011         |   | $      | 1,561,650 |   |
| 2012         |   |   | 1,000,000 |   |
|         |   | $      | 2,561,650 |   |

| 9. | JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES |
|----|----------------------------------------------------|

----

Table of Contents

| 10. | COMMITMENTS AND CONTINGENCIES |
|-----|-------------------------------|

| Year Ending  |   |   |    |
|--------------|--------|--------|---------|
| December 31, |   |   |    |
|         |   |   |    |
| 2011         |   | $      | 94,942  |   |
| 2012         |   |   | 99,828  |   |
| 2013         |   |   | 114,488 |   |
| 2014         |   |   | 114,488 |   |
| 2015         |   |   | 114,488 |   |
| Thereafter   |   |   | 200,355 |   |
|         |   | $      | 738,589 |   |

----

Table of Contents

| 10. | COMMITMENTS AND CONTINGENCIES (Continued) |
|-----|-------------------------------------------|

|                         |   | December 31, |       |
|------------------------------|--------|--------------|------------|
|                         |   | 2010         |       |   | 2009 |   |
|                         |   |         |       |   |   |   |
| Commitments to extend credit |   | $            | 29,847,134 |   |   | $ | 41,181,467 |   |
| Standby letters of credit    |   | $            | 275,000    |   |   | $ | 72,163 |   |

----

Table of Contents

| 10. | COMMITMENTS AND CONTINGENCIES (Continued) |
|-----|-------------------------------------------|

| 11. | SHAREHOLDERS' EQUITY |
|-----|----------------------|

----

Table of Contents

| 11. | SHAREHOLDERS' EQUITY (Continued) |
|-----|----------------------------------|

|                             |   |          |      |   | Less               |   |     | Net           |   |   | Weighted         |   |   |   |      |
|----------------------------------|--------|---------------|-----------|--------|--------------------|--------|----------|---------------|--------|--------|------------------|--------|--------|--------|-----------|
|                             |   |          |      |   | Preferred          |   |     | Income (loss) |   |   | Average Per |   |   |   |      |
|                             |   |          |      |   | Stock              |   |     | Available to  |   |   | Number of        |   |   | Common |      |
|                             |   | Net           |      |   | Dividends          |   |     | Common        |   |   | Shares           |   |   | Share  |      |
|                             |   | Income (loss) |      |   | And Accretion |   |     | Shareholders  |   |   | Outstanding      |   |   | Amount |      |
| December 31, 2010                |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |
| Basic earnings per share         |   | $             | 2,162,968 |   |               | $      | (386,069 | )             |   | $      | 1,776,899        |   |   |   | 2,569,714 |   |   | $ | 0.68 |   |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Effect of dilutive stock options |   |          |      |   |               |   |     |          |   |   |             |   |   |   | 6,543     |   |   |   |   |   |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Diluted earnings per share       |   | $             | 2,162,968 |   |               | $      | (386,069 | )             |   | $      | 1,776,899        |   |   |   | 2,576,257 |   |   | $ | 0.68 |   |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| December 31, 2009                |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Basic loss per share             |   | $             | (587,263  | )      |               | $      | (352,917 | )             |   | $      | (940,180         | )      |   |   | 2,602,228 |   |   | $ | (0.36 | ) |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| December 31, 2008                |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Basic earnings per share         |   | $             | 1,848,589 |   |               | $      | -        |          |   | $      | 1,848,589        |   |   |   | 2,595,128 |   |   | $ | 0.71 |   |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Effect of dilutive stock options |   |          |      |   |               |   |     |          |   |   |             |   |   |   | 28,173    |   |   |   |   |   |
|                             |   |          |      |   |               |   |     |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Diluted earnings per share       |   | $             | 1,848,589 |   |               | $      | -        |          |   | $      | 1,848,589        |   |   |   | 2,623,301 |   |   | $ | 0.70 |   |

----

Table of Contents

| 11. | SHAREHOLDERS' EQUITY (Continued) |
|-----|----------------------------------|

----

Table of Contents

| 11. | SHAREHOLDERS' EQUITY (Continued) |
|-----|----------------------------------|

|                                                    |   | For the Years Ended December 31, 2010, 2009 and 2008 |    |
|---------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |
|                                                    |   | Shares                                                    |    |   | WeightedAverage Exercise Price |   | Weighted Average Remaining Contractual Term |   | Aggregate Intrinsic Value |   |
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |
| Incentive:                                              |   |                                                      |    |   |   |   |   |   |   |   |
| Options outstanding at January 1, 2008                  |   |                                                      | 79,215  |   |   | $ | 10.50 |   |   |   |   |   |
| Options granted                                         |   |                                                      | -       |   |   |   | - |   |   |   |   |   |
| Options exercised                                       |   |                                                      | (380    | ) |   |   | 10.45 |   |   |   |   |   |
| Options cancelled                                       |   |                                                      | (3,956  | ) |   |   | 13.09 |   |   |   |   |   |
| Options outstanding at December 31, 2008                |   |                                                      | 74,879  |   |   |   | 10.36 |   |   |   |   |   |
| Options granted                                         |   |                                                      | -       |   |   |   |   |   |   |   |   |   |
| Options exercised                                       |   |                                                      | -       |   |   |   |   |   |   |   |   |   |
| Options cancelled                                       |   |                                                      | (522    | ) |   |   | 13.15 |   |   |   |   |   |
| Options outstanding at December 31, 2009                |   |                                                      | 74,537  |   |   |   | 10.34 |   |   |   |   |   |
| Options granted                                         |   |                                                      | -       |   |   |   | - |   |   |   |   |   |
| Options transferred to nonstatutory                     |   |                                                      | (12,803 | ) |   |   | 9.49 |   |   |   |   |   |
| Options exercised                                       |   |                                                      | -       |   |   |   | - |   |   |   |   |   |
| Options cancelled                                       |   |                                                      | (3,787  | ) |   |   | 12.81 |   |   |   |   |   |
| Options outstanding at December 31, 2010                |   |                                                      | 57,766  |   |   |   | 10.37 |   | 4.35  years |   | $ |   41,131 | (1) |
| Options vested or expected to vest at December 31, 2010 |   |                                                      | 49,250  |   |   | $ | 10.11 |   | 4.22 years |   | $ |   41,131 | (1) |
| Options exercisable at December 31, 2010                |   |                                                      | 46,084  |   |   | $ | 9.66 |   |  3.65 years |   | $ |  41,131 | (1) |
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |
| Nonstatutory:                                           |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |
| Options outstanding at January 1, 2008                  |   |                                                      | 114,645 |   |   | $ | 8.26 |   |   |   |   |   |   |
| Options granted                                         |   |                                                      | -       |   |   |   | - |   |   |   |   |   |   |
| Options exercised                                       |   |                                                      | (15,513 | ) |   |   | 5.59 |   |   |   |   |   |   |
| Options cancelled                                       |   |                                                      | -       |   |   |   | - |   |   |   |   |   |   |
| Options outstanding at December 31, 2008                |   |                                                      | 99,132  |   |   |   | 8.67 |   |   |   |   |   |   |
| Options granted                                         |   |                                                      | -       |   |   |   | - |   |   |   |   |   |   |
| Options exercised                                       |   |                                                      | (11,168 | ) |   |   | 5.37 |   |   |   |   |   |   |
| Options cancelled                                       |   |                                                      | -       |   |   |   | - |   |   |   |   |   |   |
| Options outstanding at December 31, 2009                |   |                                                      | 87,964  |   |   |   | 9.10 |   |   |   |   |   |   |
| Options granted                                         |   |                                                      | -       |   |   |   | - |   |   |   |   |   |   |
| Options transferred from incentive                      |   |                                                      | 12,803  |   |   |   | 9.49 |   |   |   |   |   |   |
| Options exercised                                       |   |                                                      | (22,163 | ) |   |   | 5.64 |   |   |   |   |   |   |
| Options cancelled                                       |   |                                                      | (14,975 | ) |   |   | 6.35 |   |   |   |   |   |   |
| Options outstanding at December 31, 2010                |   |                                                      | 63,629  |   |   |   | 11.02 |   |  3.58 years |   | $ |  13,878 | (2) |
| Options vested or expected to vest at December 31, 2010 |   |                                                      | 62,483  |   |   |   | 11.02 |   | 3.43 years |   | $ |  13,878 | (2) |
| Options exercisable at December 31, 2010                |   |                                                      | 61,425  |   |   |   | 10.95 |   | 3.43 years |   | $ |  13,878 | (2) |

| (1) | 57,296 options are excluded from intrinsic value because they are not in the money. |
|-----|-------------------------------------------------------------------------------------|

| (2) | 42,571 options are excluded from intrinsic value because they are not in the money. |
|-----|-------------------------------------------------------------------------------------|

----

Table of Contents

| 11. | SHAREHOLDERS' EQUITY (Continued) |
|-----|----------------------------------|

----

Table of Contents

| 11. | SHAREHOLDERS' EQUITY (Continued) |
|-----|----------------------------------|

|                                                   |   | December 31, |
|--------------------------------------------------------|--------|--------------|
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | 2010         |   |   | 2009 |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | Amount       |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |
| Leverage Ratio                                         |   |         |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                 |   | $            | 41,791,000 |   |   |   | 12.1 | % |   | $ | 39,865,000 |   |   |   | 11.4 | % |
| Minimum regulatory requirement                         |   | $            | 13,859,000 |   |   |   | 4.0 | % |   |   | 13,982,000 |   |   |   | 4.0 | % |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Business Bank                                   |   | $            | 41,663,000 |   |   |   | 12.0 | % |   | $ | 39,845,000 |   |   |   | 11.4 | % |
| Minimum requirement for “Well-Capitalized” |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| institution                                            |   | $            | 17,324,000 |   |   |   | 5.0 | % |   | $ | 17,472,000 |   |   |   | 5.0 | % |
| Minimum regulatory requirement                         |   | $            | 13,854,000 |   |   |   | 4.0 | % |   | $ | 13,977,000 |   |   |   | 4.0 | % |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Risk-Based Capital Ratio                        |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                 |   | $            | 41,791,000 |   |   |   | 16.2 | % |   | $ | 39,865,000 |   |   |   | 14.8 | % |
| Minimum regulatory requirement                         |   | $            | 10,323,000 |   |   |   | 4.0 | % |   | $ | 10,804,000 |   |   |   | 4.0 | % |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Business Bank                                   |   | $            | 41,663,000 |   |   |   | 16.2 | % |   | $ | 39,845,000 |   |   |   | 14.8 | % |
| Minimum requirement for “Well-Capitalized” |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| institution                                            |   | $            | 15,479,000 |   |   |   | 6.0 | % |   | $ | 16,201,000 |   |   |   | 6.0 | % |
| Minimum regulatory requirement                         |   | $            | 10,319,000 |   |   |   | 4.0 | % |   | $ | 10,801,000 |   |   |   | 4.0 | % |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Risk-Based Capital Ratio                         |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                 |   | $            | 45,060,000 |   |   |   | 17.5 | % |   | $ | 43,227,000 |   |   |   | 16.0 | % |
| Minimum regulatory requirement                         |   | $            | 20,645,000 |   |   |   | 8.0 | % |   | $ | 21,608,000 |   |   |   | 8.0 | % |
|                                                   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Valley Business Bank                                   |   | $            | 44,931,000 |   |   |   | 17.4 | % |   | $ | 43,256,000 |   |   |   | 16.0 | % |
| Minimum requirement for “Well-Capitalized” |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| institution                                            |   | $            | 25,798,000 |   |   |   | 10.0 | % |   | $ | 27,002,000 |   |   |   | 10.0 | % |
| Minimum regulatory requirement                         |   | $            | 20,639,000 |   |   |   | 8.0 | % |   | $ | 21,601,000 |   |   |   | 8.0 | % |

----

Table of Contents

| 11. | SHAREHOLDERS' EQUITY (Continued) |
|-----|---------------------------------------|

----

Table of Contents

| 11. | SHAREHOLDERS' EQUITY (Continued) |
|-----|---------------------------------------|

| 12. | OTHER EXPENSES |
|-----|----------------|

|                     |   | Year Ended December 31, |      |
|--------------------------|--------|-------------------------|-----------|
|                     |   |                    |      |   |   |   |   |   |   |
|                     |   | 2010                    |      |   | 2009 |   |   | 2008 |   |
|                     |   |                    |      |   |   |   |   |   |   |
| Data processing          |   | $                       | 631,596   |   |   | $ | 617,112 |   |   | $ | 523,943 |   |
| Assessment and insurance |   |                    | 711,565   |   |   |   | 614,101 |   |   |   | 258,843 |   |
| Professional and legal   |   |                    | 412,688   |   |   |   | 526,152 |   |   |   | 393,924 |   |
| Operations               |   |                    | 339,754   |   |   |   | 455,032 |   |   |   | 508,533 |   |
| Telephone and postal     |   |                    | 234,139   |   |   |   | 220,316 |   |   |   | 215,689 |   |
| Promotional              |   |                    | 229,451   |   |   |   | 242,140 |   |   |   | 273,259 |   |
| Supplies                 |   |                    | 193,515   |   |   |   | 158,569 |   |   |   | 180,925 |   |
| Other expenses           |   |                    | 443,331   |   |   |   | 393,951 |   |   |   | 411,197 |   |
|                     |   |                    |      |   |   |   |   |   |   |   |   |   |
| Total                    |   | $                       | 3,196,039 |   |   | $ | 3,227,373 |   |   | $ | 2,766,313 |   |

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Table of Contents

| 13. | INCOME TAXES |
|-----|--------------|

|                       |   | Federal |      |   | State  |   |     | Total  |   |
|----------------------------|--------|---------|-----------|--------|--------|--------|----------|--------|--------|
| 2010                       |   |    |      |   |   |   |     |   |   |
|                       |   |    |      |   |   |   |     |   |   |
| Current                    |   | $       | 992,000   |   |   | $      | 399,000  |   |   | $ | 1,391,000 |   |
| Deferred                   |   |    | (342,000  | )      |   |   | (106,000 | )      |   |   | (448,000 | ) |
| Provision for income taxes |   | $       | 650,000   |   |   | $      | 293,000  |   |   | $ | 943,000 |   |
|                       |   |    |      |   |   |   |     |   |   |   |   |   |
| 2009                       |   |    |      |   |   |   |     |   |   |   |   |   |
|                       |   |    |      |   |   |   |     |   |   |   |   |   |
| Current                    |   | $       | (240,000  | )      |   | $      | 48,000   |   |   | $ | (192,000 | ) |
| Deferred                   |   |    | (693,000  | )      |   |   | (310,000 | )      |   |   | (1,003,000 | ) |
| Benefit from income taxes  |   | $       | (933,000  | )      |   | $      | (262,000 | )      |   | $ | (1,195,000 | ) |
|                       |   |    |      |   |   |   |     |   |   |   |   |   |
| 2008                       |   |    |      |   |   |   |     |   |   |   |   |   |
|                       |   |    |      |   |   |   |     |   |   |   |   |   |
| Current                    |   | $       | 1,206,000 |   |   | $      | 475,000  |   |   | $ | 1,681,000 |   |
| Deferred                   |   |    | (707,000  | )      |   |   | (228,000 | )      |   |   | (935,000 | ) |
| Provision for income taxes |   | $       | 499,000   |   |   | $      | 247,000  |   |   | $ | 746,000 |   |

|                                             |   | December 31, |      |
|--------------------------------------------------|--------|--------------|-----------|
|                                             |   | 2010         |      |   | 2009 |   |
|                                             |   |         |      |   |   |   |
| Deferred tax assets:                             |   |         |      |   |   |   |
| Allowance for loan losses                        |   | $            | 3,008,000 |   |   | $ | 2,569,000 |   |
| Deferred compensation                            |   |         | 923,000   |   |   |   | 822,000 |   |
| Intangible assets                                |   |         | 39,000    |   |   |   | 58,000 |   |
| Premises and equipment                           |   |         | -         |   |   |   | 133,000 |   |
| Unrealized loss on available-for-sale investment |   |         |      |   |   |   |   |   |
| securities                                       |   |         | 29,000    |   |   |   | - |   |
|                                             |   |         |      |   |   |   |   |   |
| Total deferred tax assets                        |   |         | 3,999,000 |   |   |   | 3,582,000 |   |
|                                             |   |         |      |   |   |   |   |   |
| Deferred tax liabilities:                        |   |         |      |   |   |   |   |   |
| Loan costs                                       |   |         | (304,000  | ) |   |   | (334,000 | ) |
| Unrealized gain on available-for-sale            |   |         |      |   |   |   |   |   |
| investment securities                            |   |         | -         |   |   |   | (3,000 | ) |
| Future liability of state tax benefit            |   |         | (160,000  | ) |   |   | (258,000 | ) |
| Other                                            |   |         | (99,000   | ) |   |   | (31,000 | ) |
|                                             |   |         |      |   |   |   |   |   |
| Total deferred tax liabilities                   |   |         | (563,000  | ) |   |   | (626,000 | ) |
|                                             |   |         |      |   |   |   |   |   |
| Net deferred tax assets                          |   | $            | 3,436,000 |   |   | $ | 2,956,000 |   |

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| 13. | INCOME TAXES (Continued) |
|-----|--------------------------|

|                                            |   | Year Ended December 31, |   |
|-------------------------------------------------|--------|-------------------------|--------|
|                                            |   |                    |   |   |   |   |   |   |   |
|                                            |   | 2010                    |   |   | 2009 |   |   | 2008 |   |
|                                            |   |                    |   |   |   |   |   |   |   |
|                                            |   | Rate                    |   |   | Rate |   |   | Rate |   |
| Federal income tax, at statutory rate           |   |                    | 34.0   | % |   |   | 34.0 | % |   |   | 34.0 | % |
| State franchise tax, net of Federal tax effect  |   |                    | 7.2    | % |   |   | 7.2 | % |   |   | 6.4 | % |
| Interest on obligations of states and political |   |                    |   |   |   |   |   |   |   |   |   |   |
| subdivisions                                    |   |                    | (7.7   | %) |   |   | 13.5 | % |   |   | (8.6 | )% |
| Net increase in cash surrender value of         |   |                    |   |   |   |   |   |   |   |   |   |   |
| bank-owned life insurance                       |   |                    | (3.0   | %) |   |   | 5.2 | % |   |   | (3.1 | )% |
| Life insurance proceeds                         |   |                    | -      |   |   |   | 6.1 | % |   |   | - |   |
| Other                                           |   |                    | (0.1   | %) |   |   | 1.1 | % |   |   | (0.1 | )% |
|                                            |   |                    |   |   |   |   |   |   |   |   |   |   |
| Total income tax (benefit) expense              |   |                    | 30.4   | % |   |   | 67.1 | % |   |   | 28.8 | % |

| 14. | RELATED PARTY TRANSACTIONS |
|-----|----------------------------|

| Balance, January 1, 2010           |   | $      | 10,601,037 |   |
|------------------------------------|--------|--------|------------|--------|
|                               |   |   |       |   |
| Disbursements                      |   |   | 3,370,115  |   |
| Amounts repaid                     |   |   | (2,020,372 | )      |
|                               |   |   |       |   |
| Balance, December 31, 2010         |   | $      | 11,950,780 |   |
|                               |   |   |       |   |
| Undisbursed commitments to related |   |   |       |   |
| parties, December 31, 2010         |   | $      | 420,514    |   |

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| 15. | EMPLOYEE BENEFIT PLANS |
|-----|------------------------|

| 16. | COMPREHENSIVE INCOME |
|-----|----------------------|

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Table of Contents

| 16. | COMPREHENSIVE INCOME (Continued) |
|-----|----------------------------------|

|                                       |   |   |     |   | Tax       |   |     |   |   |
|--------------------------------------------|--------|--------|----------|--------|-----------|--------|----------|--------|--------|
|                                       |   | Before |     |   | Benefit   |   |     | After  |   |
|                                       |   | Tax    |     |   | (Expense) |   |     | Tax    |   |
|                                       |   |   |     |   |      |   |     |   |   |
| For the Year Ended December 31, 2010       |   |   |     |   |      |   |     |   |   |
|                                       |   |   |     |   |      |   |     |   |   |
| Other comprehensive loss:                  |   |   |     |   |      |   |     |   |   |
| Unrealized holding losses                  |   | $      | (42,135  | )      |      | $      | 17,339   |   |   | $ | (24,796 | ) |
| Less reclassification adjustment for gains |   |   |     |   |      |   |     |   |   |   |   |   |
| included in net income                     |   |   | 34,103   |   |      |   | (14,033  | )      |   |   | 20,070 |   |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
| Total other comprehensive loss             |   | $      | (76,238  | )      |      | $      | 31,372   |   |   | $ | (44,866 | ) |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
| For the Year Ended December 31, 2009       |   |   |     |   |      |   |     |   |   |   |   |   |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
| Other comprehensive loss:                  |   |   |     |   |      |   |     |   |   |   |   |   |
| Unrealized holding gains                   |   | $      | 259,065  |   |      | $      | (106,643 | )      |   | $ | 152,422 |   |
| Less reclassification adjustment for gains |   |   |     |   |      |   |     |   |   |   |   |   |
| included in net income                     |   |   | 416,248  |   |      |   | (171,323 | )      |   |   | 244,925 |   |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
| Total other comprehensive loss             |   | $      | (157,183 | )      |      | $      | 64,680   |   |   | $ | (92,503 | ) |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
| For the Year Ended December 31, 2008       |   |   |     |   |      |   |     |   |   |   |   |   |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
| Other comprehensive income:                |   |   |     |   |      |   |     |   |   |   |   |   |
| Unrealized holding gains                   |   | $      | 301,048  |   |      | $      | (116,335 | )      |   | $ | 184,713 |   |
| Less reclassification adjustment for gains |   |   |     |   |      |   |     |   |   |   |   |   |
| included in net income                     |   |   | 46,412   |   |      |   | (19,098  | )      |   |   | 27,314 |   |
|                                       |   |   |     |   |      |   |     |   |   |   |   |   |
| Total other comprehensive income           |   | $      | 254,636  |   |      | $      | (97,237  | )      |   | $ | 157,399 |   |

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| 17. | PARENT ONLY FINANCIAL STATEMENTS |
|-----|----------------------------------|

|                                             |   | 2010   |       |   | 2009   |   |
|--------------------------------------------------|--------|--------|------------|--------|--------|--------|
| ASSETS                                           |   |   |       |   |   |   |
|                                             |   |   |       |   |   |   |
| Cash and due from banks                          |   | $      | 139,821    |   |   | $      | 53,072 |   |
| Investment in bank subsidiary                    |   |   | 41,621,984 |   |   |   | 39,849,030 |   |
| Other assets                                     |   |   | 209,335    |   |   |   | 193,055 |   |
|                                             |   |   |       |   |   |   |   |   |
| Total assets                                     |   | $      | 41,971,140 |   |   | $      | 40,095,157 |   |
|                                             |   |   |       |   |   |   |   |   |
|                                             |   |   |       |   |   |   |   |   |
| LIABILITIES AND                                  |   |   |       |   |   |   |   |   |
| SHAREHOLDERS’ EQUITY                       |   |   |       |   |   |   |   |   |
|                                             |   |   |       |   |   |   |   |   |
| Other liabilities                                |   | $      | 128,448    |   |   | $      | 133,618 |   |
| Junior subordinated debentures due to subsidiary |   |   |       |   |   |   |   |   |
| Grantor trust                                    |   |   | 3,093,000  |   |   |   | 3,093,000 |   |
|                                             |   |   |       |   |   |   |   |   |
| Total liabilities                                |   |   | 3,221,448  |   |   |   | 3,226,618 |   |
|                                             |   |   |       |   |   |   |   |   |
| Shareholders’ equity:                      |   |   |       |   |   |   |   |   |
| Preferred stock                                  |   |   | 7,821,800  |   |   |   | 7,744,800 |   |
| Common stock                                     |   |   | 26,137,158 |   |   |   | 25,953,290 |   |
| Retained earnings                                |   |   | 4,831,883  |   |   |   | 3,166,732 |   |
| Accumulated other comprehensive (loss) income,   |   |   |       |   |   |   |   |   |
| net of taxes                                     |   |   | (41,149    | )      |   |   | 3,717 |   |
|                                             |   |   |       |   |   |   |   |   |
| Total shareholders’ equity                 |   |   | 38,749,692 |   |   |   | 36,868,539 |   |
|                                             |   |   |       |   |   |   |   |   |
| Total liabilities and shareholders’ equity |   | $      | 41,971,140 |   |   | $      | 40,095,157 |   |

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| 17. | PARENT ONLY FINANCIAL STATEMENTS (Continued) |
|-----|----------------------------------------------|

|                                                |   | 2010   |      |   | 2009   |   |     | 2008   |   |
|-----------------------------------------------------|--------|--------|-----------|--------|--------|--------|----------|--------|--------|
|                                                |   |   |      |   |   |   |     |   |   |
| Income:                                             |   |   |      |   |   |   |     |   |   |
| Dividends declared by bank subsidiary               |   | $      | 740,000   |   |   | $      | 350,000  |   |   | $ | 1,000,000 |   |
| Earnings from investment in Valley Commerce         |   |   |      |   |   |   |     |   |   |   |   |   |
| Trust 1                                             |   |   | 3,435     |   |   |   | 3,903    |   |   |   | 6,575 |   |
| Miscellaneous other income                          |   |   | -         |   |   |   | -        |   |   |   | 96 |   |
| Total income                                        |   |   | 743,435   |   |   |   | 353,903  |   |   |   | 1,006,671 |   |
|                                                |   |   |      |   |   |   |     |   |   |   |   |   |
| Expenses:                                           |   |   |      |   |   |   |     |   |   |   |   |   |
| Interest on junior subordinated deferrable interest |   |   |      |   |   |   |     |   |   |   |   |   |
| debentures                                          |   |   | 114,236   |   |   |   | 129,795  |   |   |   | 218,672 |   |
| Other expenses                                      |   |   | 502,558   |   |   |   | 543,516  |   |   |   | 483,637 |   |
|                                                |   |   |      |   |   |   |     |   |   |   |   |   |
| Total expenses                                      |   |   | 616,794   |   |   |   | 673,311  |   |   |   | 702,309 |   |
|                                                |   |   |      |   |   |   |     |   |   |   |   |   |
| Income (loss) before equity in undistributed        |   |   |      |   |   |   |     |   |   |   |   |   |
| Income (loss) of subsidiary                         |   |   | 126,641   |   |   |   | (319,408 | )      |   |   | 304,362 |   |
|                                                |   |   |      |   |   |   |     |   |   |   |   |   |
| Undistributed equity in (excess distributions of)   |   |   |      |   |   |   |     |   |   |   |   |   |
| income of subsidiary                                |   |   | 1,789,327 |   |   |   | (536,855 | )      |   |   | 1,264,227 |   |
|                                                |   |   |      |   |   |   |     |   |   |   |   |   |
| Income (loss) before income taxes                   |   |   | 1,915,968 |   |   |   | (856,263 | )      |   |   | 1,568,589 |   |
|                                                |   |   |      |   |   |   |     |   |   |   |   |   |
| Income tax benefit                                  |   |   | 247,000   |   |   |   | 269,000  |   |   |   | 280,000 |   |
|                                                |   |   |      |   |   |   |     |   |   |   |   |   |
| Net income (loss)                                   |   | $      | 2,162,968 |   |   | $      | (587,263 | )      |   | $ | 1,848,589 |   |

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| 17. | PARENT ONLY FINANCIAL STATEMENTS (Continued) |
|-----|----------------------------------------------|

|                                                        |   | 2010   |       |   | 2009   |   |       | 2008   |   |
|-------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                                        |   |   |       |   |   |   |       |   |   |
| Cash flows from operating activities:                       |   |   |       |   |   |   |       |   |   |
| Net income (loss)                                           |   | $      | 2,162,968  |   |   | $      | (587,263   | )      |   | $ | 1,848,589 |   |
| Adjustments to reconcile net income to net cash             |   |   |       |   |   |   |       |   |   |   |   |   |
| Provided by operating activities:                           |   |   |       |   |   |   |       |   |   |   |   |   |
| (Undistributed equity in) excess distributions of           |   |   |       |   |   |   |       |   |   |   |   |   |
| Income of subsidiary                                        |   |   | (1,789,327 | )      |   |   | 536,855    |   |   |   | (1,264,227 | ) |
| Stock-based compensation expense                            |   |   | 8,566      |   |   |   | 21,995     |   |   |   | 17,152 |   |
| Tax benefits on stock-based compensation                    |   |   | (21,808    | )      |   |   | (7,720     | )      |   |   | (30,338 | ) |
| Decrease (increase) in other assets                         |   |   | 5,530      |   |   |   | 102,095    |   |   |   | (42,135 | ) |
| (Increase) decrease  in other liabilities         |   |   | (5,170     | )      |   |   | 24,599     |   |   |   | (3,300 | ) |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Net cash provided by operating activities                   |   |   | 360,759    |   |   |   | 90,561     |   |   |   | 525,741 |   |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash flows from investing activities:                       |   |   |       |   |   |   |       |   |   |   |   |   |
| Investment in Bank subsidiary                               |   |   | -          |   |   |   | (7,600,000 | )      |   |   | - |   |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash flows from financing activities:                       |   |   |       |   |   |   |       |   |   |   |   |   |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Proceeds from issuance of preferred stock                   |   |   | -          |   |   |   | 7,674,217  |   |   |   | - |   |
| Cash paid for fractional shares                             |   |   | -          |   |   |   | (2,577     | )      |   |   | (3,489 | ) |
| Proceeds from the exercise of stock options                 |   |   | 125,000    |   |   |   | 59,998     |   |   |   | 97,506 |   |
| Tax benefits from stock-based compensation                  |   |   | 21,808     |   |   |   | 7,720      |   |   |   | 30,338 |   |
| Cash paid to repurchase common stock                        |   |   | -          |   |   |   | -          |   |   |   | (821,037 | ) |
| Cash dividends paid on preferred stock                      |   |   | (420,818   | )      |   |   | (384,678   | )      |   |   | - |   |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Net cash (used in) provided by financing activities         |   |   | (274,010   | )      |   |   | 7,354,680  |   |   |   | (696,682 | ) |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Increase (decrease)  in cash and cash equivalents |   |   | 86,749     |   |   |   | (154,759   | )      |   |   | (170,941 | ) |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash and cash equivalents at beginning of year              |   |   | 53,072     |   |   |   | 207,831    |   |   |   | 378,772 |   |
|                                                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash and cash equivalents at end of year                    |   | $      | 139,821    |   |   | $      | 53,072     |   |   | $ | 207,831 |   |

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EM

ITEM 9A 

TE

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EM

EM

ITEM

TEM

EM

TEM

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SIGN

|   | VALLEY COMMERCE BANCORP |
|--------|-------------------------|
|   |                    |
|   | By:                     | /s/ Allan W. Stone |
|   |                    |   |
|   |                    | Allan W. Stone |
|   |                    | President and Chief Executive Officer |
|   |                    |   |
|   | By:                     | /s/ Roy O. Estridge |
|   |                    |   |
|   |                    | Roy O. Estridge |
|   |                    | Executive Vice President, Chief Financial Officer and Chief Operating Officer |
|   |                    |   |
|   | Date:                   |  March 31, 2011 |

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| Signature                  |   | Title                                                          |   | Date           |
|----------------------------|--------|----------------------------------------------------------------|--------|----------------|
| /s/ Allan W. Stone         |   | Director and Chief Executive                                   |   | March 31, 2011 |
| Allan W. Stone             |   | Officer (Principal Executive Officer)                          |   |           |
|                       |   |                                                           |   |           |
| /s/ Roy O. Estridge        |   | Chief Financial Officer                                        |   | March 31, 2011 |
| Roy O. Estridge            |   | (Principal Financial Officer and Principal Accounting Officer) |   |           |
| /s/ Walter A. Dwelle       |   |                                                           |   | March 31, 2011 |
| Walter A. Dwelle           |   | Chairman and Director                                          |   |           |
|                       |   |                                                           |   |           |
| /s/ Thomas A. Gaebe        |   |                                                           |   | March 31, 2011 |
| Thomas A. Gaebe            |   | Director                                                       |   |           |
|                       |   |                                                           |   |           |
| /s/ Donald A. Gilles       |   |                                                           |   | March 31, 2011 |
| Donald A. Gilles           |   | Director                                                       |   |           |
|                       |   |                                                           |   |           |
| /s/ Philip R. Hammond, Jr. |   |                                                           |   | March 31, 2011 |
| Philip R. Hammond, Jr.     |   | Director                                                       |   |           |
|                       |   |                                                           |   |           |
| /s/ Russell F. Hurley      |   |                                                           |   | March 31, 2011 |
| Russell F. Hurley          |   | Vice Chairman and Director                                     |   |           |
|                       |   |                                                           |   |           |
| /s/ Fred P. LoBue, Jr.     |   |                                                           |   | March 31, 2011 |
| Fred P. LoBue, Jr.         |   | Secretary and Director                                         |   |           |
|                       |   |                                                           |   |           |
| /s/ Kenneth H. Macklin     |   |                                                           |   | March 31, 2011 |
| Kenneth H. Macklin         |   | Director                                                       |   |           |
|                       |   |                                                           |   |           |
| /s/ Barry R. Smith         |   |                                                           |   | March 31, 2011 |
| Barry R. Smith             |   | Director                                                       |   |           |

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| Exhibit     | Description of Document                                                                                                                                                                                                  |
|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1         | Articles of Incorporation of the Company, as amended (1)                                                                                                                                                                 |
| 3.2         | Bylaws of the Company (1)                                                                                                                                                                                                |
| 4.3         | Specimen Stock Certificate (2)                                                                                                                                                                                           |
| 4.4         | Certificates of Determination of Fixed Rate Cumulative Perpetual Preferred Stock, Series B and C (6)                                                                                                                     |
| 10.1        | Valley Commerce Bancorp Amended and Restated 1997 Stock Option Plan (1,3)                                                                                                                                                |
| 10.2        | Lease of premises at 200 South Court Street, Visalia (1)                                                                                                                                                                 |
| 10.3        | Executive Supplemental Compensation Agreement with Donald A. Gilles  (1,3)                                                                                                                                     |
| 10.4        | Executive Supplemental Compensation Agreement with Roy O. Estridge (1,3)                                                                                                                                                 |
| 10.5        | Executive Supplemental Compensation Agreement with Allan W. Stone (1,3)                                                                                                                                                  |
| 10.7        | Valley Commerce Bancorp 2007 Equity Incentive Plan (4)                                                                                                                                                                   |
| 10.8        | Indenture between Valley Commerce Bancorp and Wells Fargo Bank National Association as Trustee, Junior Subordinated Debt Securities Due April 7, 2033 (1)                                                                |
| 10.9        | Junior Subordinated Debt Security Due 2003 of Valley Commerce Bancorp (1)                                                                                                                                                |
| 10.10       | Guaranty Agreement of Valley Commerce Bancorp in favor of Wells Fargo Bank National Association as Trustee (1)                                                                                                           |
| 10.12       | Letter Agreement dated January 30, 2009 by and between Valley Commerce Bancorp, Inc. and the United States Department of the Treasury and Securities Purchase Agreement – Standard Terms attached thereto (6)      |
| 10.13       | Side Letter Agreement between Valley Commerce Bancorp and the United States Department of the Treasury regarding authorized number of directors and amended Section 2.2 of Valley Commerce Bancorp by-laws (6)           |
| 10.14       | Specimen form of Incentive Stock Option Agreement under the 2007 Equity Incentive Plan is included as Exhibit 10.7 to the Registrant’s 10-Q for December 31, 2007, which is incorporated by this reference herein. |
| 10.15  | Specimen form of Long Term Restricted Share Award Agreement is included as Exhibit 10.1 to the Registrant’s Form 8-K for March 30, 2011, which is incorporated by this reference herein (3)              |
| 21          | Subsidiaries of the Company (1)                                                                                                                                                                                          |
| 23.2        | Consent of Independent Registered Public Accounting Firm dated March 30, 2011 (5)                                                                                                                                        |
| 24          | Powers of Attorney (included on signature pages)                                                                                                                                                                         |
| 31          | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                  |
| 32          | Section 1350 Certifications                                                                                                                                                                                              |
| 99.1        | CEO TARP Certification                                                                                                                                                                                                   |
| 99.2        | CFO TARP Certification                                                                                                                                                                                                   |

| (1) | Incorporated by reference to the same-numbered exhibit to the Company’s Registration Statement on Form SB-2, filed September 9, 2004. |
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| (2) | Incorporated by reference to the same-numbered exhibit to the Company’s Registration Statement on Form SB-2/A, filed October 27, 2004. |
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| (3) | Management contract or compensatory plan or arrangement. |
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| (4) | Incorporated by reference to the Company’s definitive proxy statement for its 2007 annual meeting of shareholders, filed on April 18, 2007. |
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| (5) | Incorporated by reference to the same-numbered exhibit to the Company’s Registration Statement on Form S-8, filed on March 27, 2009. |
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| (6) | Incorporated by reference to the exhibits included with the Form 8-K that was filed by the Company on February 5, 2009. |
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