----

----

| Georgia                                                       | 58-1563165                              |
|---------------------------------------------------------------|-----------------------------------------|
| (State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification Number) |

| 282 Historic Highway 441 North, P. O. Box 1980, Cornelia, Georgia | 30531      |
|-------------------------------------------------------------------|------------|
| (Address of principal executive offices)                          | (Zip Code) |

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

----

----

----

|   ASSETS                                                                                                    |   | MARCH 31, 2010(unaudited) |    |   | DECEMBER 31, 2009(audited) |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|---------------------------|---------|--------|----------------------------|--------|
| Cash and due from banks                                                                                               |   | $                         | 28,856  |   |                       | $      | 42,515 |   |
| Federal funds sold                                                                                                    |   |                      | 1,680   |   |                       |   | - |   |
| Total cash and cash equivalents                                                                                       |   |                      | 30,536  |   |                       |   | 42,515 |   |
|                                                                                                                  |   |                      |    |   |                       |   |   |   |
| Investment securities available for sale                                                                              |   |                      | 76,379  |   |                       |   | 74,457 |   |
| Investment securities held to maturity (estimated fair value of $551 at March 31, 2010 and $903 at December 31, 2009) |   |                      | 533     |   |                       |   |  881 |   |
| Other investments                                                                                                     |   |                      | 2,596   |   |                       |   | 2,596 |   |
| Loans                                                                                                                 |   |                      | 264,824 |   |                       |   | 276,995 |   |
| Less allowance for loan losses                                                                                        |   |                      | (7,883  | )      |                       |   | (12,106 | ) |
| Loans, net                                                                                                            |   |                      | 256,941 |   |                       |   | 264,889 |   |
|                                                                                                                  |   |                      |    |   |                       |   |   |   |
| Premises and equipment, net                                                                                           |   |                      | 12,180  |   |                       |   | 12,606 |   |
| Bank properties held for sale                                                                                         |   |                      | 5,291   |   |                       |   | 5,062 |   |
| Accrued interest receivable                                                                                           |   |                      | 1,360   |   |                       |   | 1,587 |   |
| Other real estate                                                                                                     |   |                      | 36,932  |   |                       |   | 37,833 |   |
| Cash surrender value of life insurance                                                                                |   |                      | 10,275  |   |                       |   | 10,283 |   |
| Income tax receivable                                                                                                 |   |                      | 1,925   |   |                       |   | 1,925 |   |
| Other assets                                                                                                          |   |                      | 1,370   |   |                       |   | 1,385 |   |
| TOTAL ASSETS                                                                                                          |   | $                         | 436,318 |   |                       | $      | 456,019 |   |
|                                                                                                                  |   |                      |    |   |                       |   |   |   |
| LIABILITIES                                                                                                           |   |                      |    |   |                       |   |   |   |
| Noninterest-bearing deposits                                                                                          |   | $                         | 35,018  |   |                       | $      | 35,570 |   |
| Money market and NOW accounts                                                                                         |   |                      | 90,248  |   |                       |   | 91,687 |   |
| Savings                                                                                                               |   |                      | 39,271  |   |                       |   | 38,308 |   |
| Time deposits, $100,000 and over                                                                                      |   |                      | 97,932  |   |                       |   | 104,309 |   |
| Other time deposits                                                                                                   |   |                      | 106,936 |   |                       |   | 120,287 |   |
| Total deposits                                                                                                        |   |                      | 369,405 |   |                       |   | 390,161 |   |
|                                                                                                                  |   |                      |    |   |                       |   |   |   |
| Short-term borrowings                                                                                                 |   |                      | 385     |   |                       |   | 539 |   |
| Federal funds purchased and securities sold under repurchase agreements                                               |   |                      | 11,014  |   |                       |   | 6,317 |   |
| Federal Home Loan Bank advances                                                                                       |   |                      | 38,000  |   |                       |   | 38,000 |   |
| Accrued interest payable                                                                                              |   |                      | 2,067   |   |                       |   | 2,192 |   |
| Other liabilities                                                                                                     |   |                      | 1,185   |   |                       |   |  1,735 |   |
| TOTAL LIABILITIES                                                                                                     |   |                      | 422,056 |   |                       |   | 438,944 |   |
|                                                                                                                  |   |                      |    |   |                       |   |   |   |
| Commitments and contingencies                                                                                         |   |                      |    |   |                       |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                            |   |                      |    |   |                       |   |   |   |
| Preferred stock – 10,000,000 authorized                                                                         |   |                      |    |   |                       |   |   |   |
| Series A: No par  value; 10,000 shares authorized; no shares issued and outstanding                         |   |                      | -       |   |                       |   | - |   |
| Series B:  No par value;  4,000 shares authorized; 4,000 shares issued  and outstanding |   |                      | 3,963   |   |                       |   | 3,963 |   |
| Common Stock, $1.00 par value, 10,000,000 shares authorized; 2,818,593 shares issued and outstanding                  |   |                      | 2,819   |   |                       |   |  2,819 |   |
| Additional paid-in capital                                                                                            |   |                      | 13,490  |   |                       |   | 13,490 |   |
| Retained deficit                                                                                                      |   |                      | (6,293  | )      |                       |   | (3,822 | ) |
| Accumulated other comprehensive income                                                                                |   |                      | 283     |   |                       |   | 625 |   |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                      |   |                      | 14,262  |   |                       |   | 17,075 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                      |   | $                         | 436,318 |   |                       | $      | 456,019 |   |
|                                                                                                                  |   |                      |    |   |                       |   |   |   |

----

|                                                                       |   | Three Months ended |      |
|----------------------------------------------------------------------------|--------|--------------------|-----------|
|                                                                       |   | March 31,          |      |
|                                                                       |   | 2010               |      |   | 2009 |   |
| INTEREST INCOME                                                            |   |               |      |   |   |   |
| Loans, including fees                                                      |   | $                  | 3,667     |   |   | $ | 4,516 |   |
| Taxable investment securities                                              |   |               | 666       |   |   |   | 1,013 |   |
| Tax exempt securities                                                      |   |               | 59        |   |   |   | 147 |   |
| Federal funds sold                                                         |   |               | 1         |   |   |   | 7 |   |
| Other                                                                      |   |               | 17        |   |   |   | 4 |   |
| TOTAL INTEREST INCOME                                                      |   |               | 4,410     |   |   |   | 5,687 |   |
| INTEREST EXPENSE                                                           |   |               |      |   |   |   |   |   |
| Time deposits, $100,000 and over                                           |   |               | 674       |   |   |   | 1,051 |   |
| Other deposits                                                             |   |               | 940       |   |   |   | 1,681 |   |
| Short-term and other borrowings, primarily FHLB advances                   |   |               | 372       |   |   |   | 485 |   |
| TOTAL INTEREST EXPENSE                                                     |   |               | 1,986     |   |   |   | 3,217 |   |
| NET INTEREST INCOME                                                        |   |               | 2,424     |   |   |   | 2,470 |   |
| Provision for loan losses                                                  |   |               | 2,400     |   |   |   | 1,780 |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                        |   |               |  24  |   |   |   |  690 |   |
| NONINTEREST INCOME                                                         |   |               |      |   |   |   |   |   |
| Mortgage origination income                                                |   |               | -         |   |   |   | 42 |   |
| Service charges on deposits                                                |   |               | 250       |   |   |   | 253 |   |
| Other service charges and commissions                                      |   |               | 59        |   |   |   | 59 |   |
| Net gain on investment securities available for sale                       |   |               | 305       |   |   |   | 58 |   |
| Gain on sale and impairment of other investments, net                      |   |               | -         |   |   |   | 20 |   |
| Other                                                                      |   |               | 335       |   |   |   | 492 |   |
| Total noninterest income                                                   |   |               | 949       |   |   |   | 924 |   |
| NONINTEREST EXPENSE                                                        |   |               |      |   |   |   |   |   |
| Salary and employee benefits                                               |   |               | 1,215     |   |   |   | 2,059 |   |
| Occupancy                                                                  |   |               | 416       |   |   |   | 593 |   |
| Other real estate expense                                                  |   |               | 332       |   |   |   | 414 |   |
| Computer services                                                          |   |               | 156       |   |   |   | 172 |   |
| Telephone                                                                  |   |               | 111       |   |   |   | 112 |   |
| Leased equipment                                                           |   |               | 123       |   |   |   | 128 |   |
| Other                                                                      |   |               | 1,091     |   |   |   | 986 |   |
| Total noninterest expense                                                  |   |               | 3,444     |   |   |   | 4,464 |   |
| LOSS BEFORE INCOME TAXES                                                   |   |               | (2,471    | ) |   |   | (2,850 | ) |
| Income tax benefit                                                         |   |               | -         |   |   |   | 1,195 |   |
| NET LOSS                                                                   |   |               | (2,471    | ) |   |   | (1,655 | ) |
| Preferred stock dividends                                                  |   |               | -         |   |   |   | (45 | ) |
| LOSS AVAILABLE TO COMMON STOCKHOLDERS                                      |   | $                  | (2,471    | ) |   | $ | (1,700 | ) |
| Net loss per common share – Basic                                    |   | $                  | (.88      | ) |   | $ | (.60 | ) |
| Net loss per common share – Diluted                                  |   | $                  | (.88      | ) |   | $ | (.60 | ) |
| Weighted average number of common shares outstanding                       |   |               | 2,818,593 |   |   |   | 2,818,593 |   |
| Weighted average number of common and common equivalent shares outstanding |   |               | 2,818,593 |   |   |   | 2,818,593 |   |

----

|                                                                                                                             |   | Three Months ended |           |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|----------------|
|                                                                                                                             |   | March 31,          |           |
|                                                                                                                             |   | 2010               |           |   | 2009 |   |
|                                                                                                                             |   |               |           |   |   |   |
| NET LOSS                                                                                                                         |   | $                  | (2,471         | ) |   | $ | (1,655 | ) |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME (LOSS):                                                                                               |   |               |           |   |   |   |   |   |
| Unrealized holding gains (losses) on investment securities available for sale arising during the period                          |   |               | (213           | ) |   |   | 572 |   |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| Unrealized holding gains on derivative financial instruments classified as cash flow hedges, arising during the period |   |               |   -       |   |   |   |   30 |   |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| Reclassification adjustment for realized gains on investment securities available for sale                                  |   |               | (305           | ) |   |   | (58 | ) |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| Total other comprehensive income (loss), before tax                                                                              |   |               | (518           | ) |   |   | 544 |   |
| INCOME TAXES RELATED TO OTHER COMPREHENSIVE INCOME (LOSS):                                                                       |   |               |           |   |   |   |   |   |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| Unrealized holding (gains) losses gains on investment securities available for sale arising during the period               |   |               | 72             |   |   |   | (194 | ) |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| Unrealized holding gains on derivative financial instruments classified as cash flow hedges, arising during the period |   |               |    - |   |   |   | (11 | ) |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| Reclassification adjustment for realized gains on investment securities available for sale                                  |   |               |  104      |   |   |   |  20 |   |
|                                                                                                                             |   |               |           |   |   |   |   |   |
| Total income taxes related to other comprehensive income / loss                                                             |   |               |  176      |   |   |   | (185 | ) |
| Total other comprehensive income  (loss), net of tax                                                                   |   |               | (342           | ) |   |   | 359 |   |
| Total comprehensive loss                                                                                                         |   | $                  | (2,813         | ) |   | $ | (1,296 | ) |

----

|                                                                                  |   |  Three Months    |    |
|---------------------------------------------------------------------------------------|--------|-----------------------|---------|
|                                                                                  |   |  Ended March 31, |    |
|                                                                                  |   | 2010                  |    |   | 2009 |   |
|                                                                                  |   |                  |    |   |   |   |
| CASH FLOWS USED BY OPERATING ACTIVITIES:                                              |   | $                     | (266    | ) |   | $ | (2,118 | ) |
|                                                                                  |   |                  |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                 |   |                  |    |   |   |   |   |   |
| Investment securities available for sale:                                             |   |                  |    |   |   |   |   |   |
| Proceeds from maturities                                                              |   |                  | 3,121   |   |   |   | 2,208 |   |
| Proceeds from sales and calls                                                         |   |                  | 30,676  |   |   |   | 6,628 |   |
| Purchases                                                                             |   |                  | (36,058 | ) |   |   | (9,960 | ) |
| Investment securities held to maturity:                                               |   |                  |    |   |   |   |   |   |
| Proceeds from maturities                                                              |   |                  | 3       |   |   |   | 3 |   |
| Proceeds from calls                                                                   |   |                  | 347     |   |   |   | - |   |
| Other investments:                                                                    |   |                  |    |   |   |   |   |   |
| Proceeds from sales                                                                   |   |                  | -       |   |   |   | 759 |   |
| Purchases                                                                             |   |                  | -       |   |   |   | (2 | ) |
| Net change in loans                                                                   |   |                  | 4,504   |   |   |   | (7,173 | ) |
| Surrender of life insurance policies                                                  |   |                  | 3,129   |   |   |   | - |   |
| Purchase of life insurance policies                                                   |   |                  | (3,037  | ) |   |   | - |   |
| Purchases of premises and equipment                                                   |   |                  | (4      | ) |   |   | (41 | ) |
| Capitalized completion costs of other real estate                                     |   |                  | -       |   |   |   | (433 | ) |
| Proceeds from sale of other real estate                                               |   |                  | 1,818   |   |   |   | 690 |   |
| Net cash provided by (used by) investing activities                                   |   |                  | 4,499   |   |   |   | (7,321 | ) |
|                                                                                  |   |                  |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                 |   |                  |    |   |   |   |   |   |
| Net change in deposits                                                                |   |                  | (20,755 | ) |   |   | 23,931 |   |
| Net change in short-term borrowings                                                   |   |                  | (155    | ) |   |   | (3 | ) |
| Net change in federal funds purchased and securities sold under repurchase agreements |   |                  | 4,698   |   |   |   | (4,880 | ) |
| Proceeds from FHLB advances                                                           |   |                  | 10,000  |   |   |   | - |   |
| Repayment of FHLB advances                                                            |   |                  | (10,000 | ) |   |   | - |   |
| Cash dividends paid                                                                   |   |                  | -       |   |   |   | (45 | ) |
| Net cash provided by (used by) financing activities                                   |   |                  | (16,212 | ) |   |   | 19,003 |   |
|                                                                                  |   |                  |    |   |   |   |   |   |
| Change in cash and cash equivalents                                                   |   |                  | (11,979 | ) |   |   | 9,564 |   |
|                                                                                  |   |                  |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS:  BEGINNING OF PERIOD                             |   |                  | 42,515  |   |   |   | 14,260 |   |
| CASH AND CASH EQUIVALENTS:  END OF PERIOD                                   |   | $                     | 30,536  |   |   | $ | 23,824 |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                    |   |                  |    |   |   |   |   |   |
| Other real estate acquired through loan foreclosures                                  |   | $                     | 1,044   |   |   | $ | 5,339 |   |
| Change in components of other comprehensive income, net                               |   | $                     | (342    | ) |   | $ | 359 |   |

----

| 1.  | Basis of Presentation |
|----------|-----------------------|

|   | The condensed consolidated financial statements contained in this report are unaudited but reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of the results of the interim periods reflected.  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to applicable rules and regulations of the Securities and Exchange Commission.  The results of operations for the interim periods reported herein are not necessarily indicative of results to be expected for the full year. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The condensed consolidated financial statements included herein should be read in conjunction with the Company's 2009 consolidated financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.  | Regulatory Oversight, Capital Adequacy, Operating Losses, Liquidity and Management’s Plans |
|----------|--------------------------------------------------------------------------------------------------|

----

| 4.  | Net Loss Per Share Basic loss per share is computed by dividing net loss less dividends paid on preferred stock by the weighted average of common shares outstanding.  Options on 74,000 and 71,250 shares were not included in the diluted loss per share computations for the three months ended March 31, 2010 and 2009, respectively, as they were antidilutive. |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                           |   |                |      |   |                |   |
|----------------------------------------------------------------|--------|---------------------|-----------|--------|---------------------|--------|
|                                                           |   | Three Months        |      |   | Three Months        |   |
|                                                           |   | ended               |      |   | ended               |   |
| (dollars in thousands, except share and and per share amounts) |   | March 31, 2010 |      |   | March 31, 2009 |   |
|                                                           |   |                |      |   |                |   |
| Net loss                                                       |   | $                   | (2,471    | )      |                | $      | (1,655 | ) |
| Less dividends on preferred stock                              |   |                | -         |   |                |   | (45 | ) |
| Net loss available to common shareholders                      |   | $                   | (2,471    | )      |                | $      | (1,700 | ) |
|                                                           |   |                |      |   |                |   |   |   |
| Weighted average common shares outstanding                     |   |                | 2,818,593 |   |                |   | 2,818,593 |   |
| Loss per share:                                                |   |                |      |   |                |   |   |   |
| Basic                                                          |   | $                   | (.88      | )      |                | $      | (.60 | ) |
| Diluted                                                        |   | $                   | (.88      | )      |                | $      | (.60 | ) |
|                                                           |   |                |      |   |                |   |   |   |
|                                                           |   |                |      |   |                |   |   |   |

| 5.  | Investment Securities Available for Sale Amortized cost, estimated fair values, and gross unrealized gains and losses of investment securities available for sale are as follows: |
|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars in thousands) March 31, 2010 |   | AmortizedCost |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
|--------------------------------------------|--------|---------------|--------|--------|----------------------|--------|--------|-----------------------|--------|--------|---------------------|--------|
| U.S. government-sponsored enterprises      |   | $             | 11,575 |   |                 |   | 82     |                  |   |   | 5                   |   |   |   | 11,652 |   |
| Mortgage-backed securities                 |   |          | 61,105 |   |                 |   | 678    |                  |   |   | 170                 |   |   |   | 61,613 |   |
| State and political subdivisions           |   |          | 3,061  |   |                 |   | 4      |                  |   |   | 138                 |   |   |   | 2,927 |   |
| Equity securities                          |   |          | 209    |   |                 |   | -      |                  |   |   | 22                  |   |   |   | 187 |   |
| Total                                      |   | $             | 75,950 |   |                 |   | 764    |                  |   |   | 335                 |   |   |   | 76,379 |   |
|   December 31, 2009              |   | AmortizedCost |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
| U.S. government-sponsored enterprises      |   | $             | 16,311 |   |                 |   | 60     |                  |   |   | 290                 |   |   |   | 16,081 |   |
| Mortgage-backed securities                 |   |          | 48,208 |   |                 |   | 1,319  |                  |   |   | 17                  |   |   |   | 49,510 |   |
| State and political subdivisions           |   |          | 8,782  |   |                 |   | 87     |                  |   |   | 189                 |   |   |   | 8,680 |   |
| Equity securities                          |   |          | 209    |   |                 |   | -      |                  |   |   | 23                  |   |   |   | 186 |   |
| Total                                      |   | $             | 73,510 |   |                 |   | 1,466  |                  |   |   | 519                 |   |   |   | 74,457 |   |

----

| (dollars in thousands)                      |   |   |   |   | March 31, 2010       |   |   |              |   |   | December 31, 2009 |   |
|---------------------------------------------|--------|--------|--------|--------|----------------------|--------|--------|-------------------|--------|--------|-------------------|--------|
|                                        |   | No.    |   |   | Estimated Fair Value |   |   | Unrealized Losses |   |   | No.               |   |   | Estimated Fair Value |   |   | Unrealized Losses |   |
| Unrealized loss for less than 12 months:    |   |   |   |   |                 |   |   |              |   |   |              |   |   |   |   |   |   |   |
| U.S. government-sponsored enterprises       |   |   | 1      |   |                 | $      | 511    |              |   |   | 5                 |   |   |   | 14 |   |   | $ | 11,531 |   |   |   | 289 |   |
| Mortgage-backed securities                  |   |   | 20     |   |                 |   | 23,133 |              |   |   | 170               |   |   |   | 2 |   |   |   | 2,081 |   |   |   | 17 |   |
| State and political subdivisions            |   |   | 2      |   |                 |   | 688    |              |   |   | 22                |   |   |   | 8 |   |   |   | 2,773 |   |   |   | 147 |   |
| Total (less than 12 months)                 |   |   | 23     |   |                 |   | 24,332 |              |   |   | 197               |   |   |   | 24 |   |   |   | 16,385 |   |   |   | 453 |   |
| Unrealized loss for greater than 12 months: |   |   |   |   |                 |   |   |              |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored enterprises       |   |   | 1      |   |                 |   | 49     |              |   |   | 1                 |   |   |   | 1 |   |   |   | 51 |   |   |   | 1 |   |
| Mortgage-backed securities                  |   |   | 0      |   |                 |   | -      |              |   |   | -                 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| State and political subdivisions            |   |   | 5      |   |                 |   | 1,900  |              |   |   | 115               |   |   |   | 3 |   |   |   | 1,199 |   |   |   | 42 |   |
| Equity securities                           |   |   | 1      |   |                 |   | 187    |              |   |   | 22                |   |   |   | 1 |   |   |   | 186 |   |   |   | 23 |   |
| Total (more than 12 months)                 |   |   | 7      |   |                 |   | 2,136  |              |   |   | 138               |   |   |   | 5 |   |   |   | 1,436 |   |   |   | 66 |   |
| Total                                       |   |   | 30     |   |                 | $      | 26,468 |              |   |   | 335               |   |   |   | 29 |   |   | $ | 17,821 |   |   |   | 519 |   |

----

| (dollars in thousands)                 |   | March 31,  2010 |   |   | March 31, 2010      |   |   | December 31, 2009 |   |   | December 31, 2009   |   |
|----------------------------------------|--------|---------------------------|--------|--------|---------------------|--------|--------|-------------------|--------|--------|---------------------|--------|
|                                   |   | AmortizedCost             |   |   | EstimatedFair Value |   |   | AmortizedCost     |   |   | EstimatedFair Value |   |
| Due in one year or less                |   | $                         | 77     |   |                |   | 77     |              |   |   | 132                 |   |   |   | 132 |   |
| Due after one year through five years  |   |                      | 226    |   |                |   | 232    |              |   |   | 1,696               |   |   |   | 1,711 |   |
| Due after five years through ten years |   |                      | 5,282  |   |                |   | 5,363  |              |   |   | 6,218               |   |   |   | 6,375 |   |
| Due after ten years                    |   |                      | 70,156 |   |                |   | 70,520 |              |   |   | 65,255              |   |   |   | 66,053 |   |
| Total                                  |   | $                         | 75,741 |   |                |   | 76,192 |              |   |   | 73,301              |   |   |   | 74,271 |   |

| 6.  | Investment Securities Held to Maturity |
|----------|----------------------------------------|

| (dollars in thousands) March 31, 2010 |   | AmortizedCost |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
|--------------------------------------------|--------|---------------|--------|--------|----------------------|--------|--------|-----------------------|--------|--------|---------------------|--------|
| Mortgage-backed securities                 |   | $             | 14     |   |                 |   | 1      |                  |   |   | -                   |   |   |   | 15 |   |
| State and political subdivisions           |   |          | 519    |   |                 |   | 17     |                  |   |   | -                   |   |   |   | 536 |   |
| Total                                      |   | $             | 533    |   |                 |   | 18     |                  |   |   | -                   |   |   |   | 551 |   |
|                                       |   |          |   |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
|   December 31, 2009              |   | AmortizedCost |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
| Mortgage-backed securities                 |   | $             | 17     |   |                 |   | 1      |                  |   |   | -                   |   |   |   | 18 |   |
| State and political subdivisions           |   |          | 864    |   |                 |   | 21     |                  |   |   | -                   |   |   |   | 885 |   |
| Total                                      |   | $             | 881    |   |                 |   | 22     |                  |   |   | -                   |   |   |   | 903 |   |

----

| (dollars in thousands)                 |   | March 31, 2010 |   |   | March 31, 2010 |   |   | December 31, 2009 |   |   | December 31, 2009   |   |
|----------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-------------------|--------|--------|---------------------|--------|
|                                   |   | AmortizedCost       |   |   | EstimatedFair Value |   |   | AmortizedCost     |   |   | EstimatedFair Value |   |
| Due in one year or less                |   | $                   | -      |   |                |   | -      |              |   |   | 345                 |   |   |   | 348 |   |
| Due after one year through five years  |   |                | 478    |   |                |   | 489    |              |   |   | 408                 |   |   |   | 414 |   |
| Due after five years through ten years |   |                | 51     |   |                |   | 58     |              |   |   | 124                 |   |   |   | 137 |   |
| Due after ten years                    |   |                | 4      |   |                |   | 4      |              |   |   | 4                   |   |   |   | 4 |   |
| Total                                  |   | $                   | 533    |   |                |   | 551    |              |   |   | 881                 |   |   |   | 903 |   |

|         There were no investment securities held to maturity pledged as collateral for public deposits and other deposits, as required by law at March 31, 2010 and December 31, 2009. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars in thousands)          |   | March 31, 2010 |   |   | December 31, 2009 |   |
|---------------------------------|--------|----------------|--------|--------|-------------------|--------|
| Accruing loans 90 days past due |   | $              | -      |   |              | $      | - |   |
| Nonaccrual loans                |   |           | 61,677 |   |              |   | 71,813 |   |
| Other real estate               |   |           | 36,932 |   |              |   | 37,833 |   |
| Restructured loans              |   |           | 1,275  |   |              |   | 728 |   |
| Total nonperforming assets      |   | $              | 99,884 |   |              | $      | 110,374 |   |

| 8.  | Bank Properties Held for Sale |
|----------|-------------------------------|

----

| 9.  | Regulatory Matters |
|----------|--------------------|

| 10. | Preferred Stock |
|-----|-----------------|

----

| 11. | Fair Value Measurements and Disclosures |
|-----|-----------------------------------------|

|   | Level 1 – | Valuation is based upon quoted prices for identical instruments traded in active markets. |
|--------|-----------------|-------------------------------------------------------------------------------------------|

|   | Level 2 – | Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. |
|--------|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3 – | Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
|--------|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                     |   | March 31, 2010  |   |
|------------------------------------------|--------|----------------------|--------|
| (dollars in thousands)                   |   | Total                |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Investment securities available for sale |   | $                    | 76,379 |   |   |   | 13,781 |   |   |   | 62,598 |   |   |   | - |   |

|                                     |   |  December 31, 2009 |   |
|------------------------------------------|--------|-------------------------|--------|
| (dollars in thousands)                   |   | Total                   |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Investment securities available for sale |   | $                       | 74,457 |   |   |   | 8,465 |   |   |   | 65,992 |   |   |   | - |   |

|                   |   |  March 31, 2010 |   |
|------------------------|--------|----------------------|--------|
| (dollars in thousands) |   | Total                |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Other real estate      |   | $                    | 36,932 |   |   |   | - |   |   |   | 2,209 |   |   |   | 34,723 |   |
| Loans                  |   |                 | 26,697 |   |   |   | - |   |   |   | 26,697 |   |   |   | - |   |
| Total                  |   | $                    | 63,629 |   |   |   | - |   |   |   | 28,906 |   |   |   | 34,723 |   |

|                   |   |  December 31, 2009 |   |
|------------------------|--------|-------------------------|--------|
| (dollars in thousands) |   | Total                   |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Other real estate      |   | $                       | 37,833 |   |   |   | - |   |   |   | 1,907 |   |   |   | 35,926 |   |
| Loans                  |   |                    | 26,088 |   |   |   | - |   |   |   | 26,088 |   |   |   | - |   |
| Total                  |   | $                       | 63,921 |   |   |   | - |   |   |   | 27,995 |   |   |   | 35,926 |   |

----

|                                                                    |   | March 31, 2010 |    |   | December 31, 2009 |   |
|-------------------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
| (dollars in thousands)                                                  |   | CarryingAmount |    |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Assets:                                                                 |   |           |    |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                                               |   | $              | 30,536  |   |              |   | 30,536 |   |   |   | 42,515 |   |   |   | 42,515 |   |
| Investment securities available for sale                                |   |           | 76,379  |   |              |   | 76,379 |   |   |   | 74,457 |   |   |   | 74,457 |   |
| Investment securities held to maturity                                  |   |           | 533     |   |              |   | 551 |   |   |   | 881 |   |   |   | 903 |   |
| Other investments                                                       |   |           | 2,596   |   |              |   | 2,596 |   |   |   | 2,596 |   |   |   | 2,596 |   |
| Loans, net                                                              |   |           | 256,941 |   |              |   | 256,637 |   |   |   | 264,889 |   |   |   | 264,891 |   |
| Cash surrender value of  life insurance                       |   |           | 10,275  |   |              |   | 10,275 |   |   |   | 10,283 |   |   |   | 10,283 |   |
| Liabilities:                                                            |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                |   | $              | 369,405 |   |              |   | 371,213 |   |   |   | 390,161 |   |   |   | 392,792 |   |
| Short-term borrowings                                                   |   |           | 385     |   |              |   | 385 |   |   |   | 540 |   |   |   | 540 |   |
| Federal funds purchased and securities sold under repurchase agreements |   |           | 11,014  |   |              |   | 11,014 |   |   |   | 6,317 |   |   |   | 6,317 |   |
| FHLB advances                                                           |   |           | 38,000  |   |              |   | 38,495 |   |   |   | 38,000 |   |   |   | 38,869 |   |
|                                                                    |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |

----

----

----

|     (dollars in thousands) |   | U.S. government-sponsored enterprises |   |   |  Mortgage backed securities |   |    |   Municipal bonds |   |   |   Equitysecurities |   |   |   UnrealizedGain / loss |   |   |    Total |   |
|------------------------------------------------|--------|---------------------------------------|--------|--------|----------------------------------|--------|---------|-----------------------------|--------|--------|------------------------------|--------|--------|-----------------------------------|--------|--------|-------------------------|--------|
|                                           |   |                                  |   |   |                             |   |    |                        |   |   |                         |   |   |                              |   |   |                    |   |
| December 31, 2009                              |   | $                                     | 16,311 |   |                             |   | 48,208  |                        |   |   | 8,782                        |   |   |                              | 209    |   |                    |   | 947 |   |   |   | 74,457 |   |
| Purchased                                      |   |                                  | 3,086  |   |                             |   | 32,973  |                        |   |   | -                            |   |   |                              | -      |   |                    |   | - |   |   |   | 36,059 |   |
| Calls & sales                              |   |                                  | (7,823 | )      |                             |   | (17,411 | )                           |   |   | (5,441                       | )      |   |                              | -      |   |                    |   | - |   |   |   | (30,675 | ) |
| Gain / loss                                    |   |                                  | 38     |   |                             |   | 543     |                        |   |   | (279                         | )      |   |                              | -      |   |                    |   | - |   |   |   | 302 |   |
| Payments / maturities                          |   |                                  | (24    | )      |                             |   | (3,097  | )                           |   |   | -                            |   |   |                              | -      |   |                    |   | - |   |   |   | (3,121 | ) |
| Accret / amort                                 |   |                                  | (13    | )      |                             |   | (111    | )                           |   |   | (1                           | )      |   |                              | -      |   |                    |   | - |   |   |   | (125 | ) |
| Change in unrealized gain/loss                 |   |                                  | -      |   |                             |   | -       |                        |   |   | -                            |   |   |                              | -      |   |                    |   | (518 | ) |   |   |  (518 | ) |
| March 31, 2010                                 |   | $                                     | 11,575 |   |                             |   | 61,105  |                        |   |   | 3,061                        |   |   |                              | 209    |   |                    |   | 429 |   |   |   | 76,379 |   |

----

| Summary of Loans By Category            |   |
|-----------------------------------------|--------|
|                                    |   |
|                                    |   | March 31, 2010 |   |   | December 31, 2009 |   |
|                                    |   |   |   |   | Percent of Loans |   |   |   |   |   | Percent of Loans |   |
| Secured by real estate:                 |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 family residential                  |   | $ | 42,430 |   |   |   | 16 | % |   | $ | 43,702 |   |   |   | 16 | % |
| Commercial real estate and multi-family |   |   | 76,295 |   |   |   | 29 | % |   |   | 71,832 |   |   |   | 26 | % |
| Construction                            |   |   | 95,949 |   |   |   | 36 | % |   |   | 107,718 |   |   |   | 39 | % |
| Home equity line of credit              |   |   | 27,034 |   |   |   | 10 | % |   |   | 27,749 |   |   |   | 10 | % |
| Total real estate                       |   |   | 241,708 |   |   |   | 91 | % |   |   | 251,001 |   |   |   | 91 | % |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other loans:                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                              |   |   | 12,534 |   |   |   | 5 | % |   |   | 13,763 |   |   |   | 5 | % |
| Loans to individuals                    |   |   | 10,581 |   |   |   | 4 | % |   |   | 12,231 |   |   |   | 4 | % |
| Total other loans                       |   |   | 23,115 |   |   |   | 9 | % |   |   | 25,994 |   |   |   | 9 | % |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                             |   | $ | 264,823 |   |   |   | 100 | % |   | $ | 276,995 |   |   |   | 100 | % |

----

| (In thousands)                            |   | Core Retail Deposits |    |   | National Market Deposits |   |   | Brokered Deposits |   |   | Total Deposits |   |
|-------------------------------------------|--------|----------------------|---------|--------|-------------------------------|--------|--------|-------------------|--------|--------|----------------|--------|
| Noninterest-bearing demand deposits       |   | $                    | 35,018  |   |                          | $      | -      |              |   | $      | -              |   |   | $ | 35,018 |   |
| Interest-bearing demand deposits          |   |                 | 90,248  |   |                          |   | -      |              |   |   | -              |   |   |   | 90,248 |   |
| Savings deposits                          |   |                 | 39,271  |   |                          |   | -      |              |   |   | -              |   |   |   | 39,271 |   |
| Certificates of deposit $100,000 and over |   |                 | 76,759  |   |                          |   | 21,173 |              |   |   | -              |   |   |   | 97,932 |   |
| Other time deposits                       |   |                 | 87,127  |   |                          |   | 12,712 |              |   |   | 7,097          |   |   |   | 106,936 |   |
|                                      |   | $                    | 328,423 |   |                          | $      | 33,885 |              |   | $      | 7,097          |   |   | $ | 369,405 |   |

| (In thousands)                            |   | Core Retail Deposits |    |   | National Market Deposits |   |   | Brokered Deposits |   |   | Total Deposits |   |
|-------------------------------------------|--------|----------------------|---------|--------|-------------------------------|--------|--------|-------------------|--------|--------|----------------|--------|
| Noninterest-bearing demand deposits       |   | $                    | 35,570  |   |                          | $      | -      |              |   | $      |           |   |   | $ | 35,570 |   |
| Interest-bearing demand deposits          |   |                 | 91,687  |   |                          |   | -      |              |   |   |           |   |   |   | 91,687 |   |
| Savings deposits                          |   |                 | 38,308  |   |                          |   | -      |              |   |   |           |   |   |   | 38,308 |   |
| Certificates of deposit $100,000 and over |   |                 | 82,853  |   |                          |   | 21,456 |              |   |   |           |   |   |   | 104,309 |   |
| Other time deposits                       |   |                 | 92,863  |   |                          |   | 17,362 |              |   |   | 10,062         |   |   |   | 120,287 |   |
|                                      |   | $                    | 341,281 |   |                          | $      | 38,818 |              |   | $      | 10,062         |   |   | $ | 390,161 |   |

|                    |   | Three Months ended March 31, |   |
|-------------------------|--------|------------------------------|--------|
|                    |   | 2010                         |   |   | 2009 |   |
| INTEREST YIELDS EARNED: |   |                         |   |   |   |   |
| Loans                   |   |                         | 5.46   | % |   |   | 5.64 | % |
| Investment securities   |   |                         | 4.16   | % |   |   | 4.87 | % |
| Federal funds sold      |   |                         | .25    | % |   |   | .34 | % |
|                    |   |                         |   |   |   |   |   |   |
| INTEREST RATES PAID:    |   |                         |   |   |   |   |   |   |
| Deposits                |   |                         | 1.94   | % |   |   | 2.93 | % |
| Borrowings              |   |                         | 3.20   | % |   |   | 3.68 | % |
|                    |   |                         |   |   |   |   |   |   |

----

|                                                         |   | March 31, 2010 |   |   | March 31, 2009 |   |   | Increase/(Decrease) |   |
|--------------------------------------------------------------|--------|----------------|--------|--------|----------------|--------|--------|---------------------|--------|
|                                                         |   |           |   |   |           |   |   |                |   |
| Mortgage origination income                                  |   | $              | -      |   |           | $      | 42     |                |   | $ | (42 | ) |
| Service charges on deposits                                  |   |           | 250    |   |           |   | 253    |                |   |   | (3 | ) |
| Other service charges and commissions                        |   |           | 59     |   |           |   | 59     |                |   |   | - |   |
| Net gain on sale of investment securities available for sale |   |           | 305    |   |           |   | 58     |                |   |   | 247 |   |
| Gain on sale and impairment of other investments, net        |   |           | -      |   |           |   | 20     |                |   |   | (20 | ) |
| Income from life insurance                                   |   |           | 85     |   |           |   | 97     |                |   |   | (12 | ) |
| Trust service fees                                           |   |           | 110    |   |           |   | 111    |                |   |   | (1 | ) |
| Other income                                                 |   |           | 140    |   |           |   | 284    |                |   |   | (144 | ) |
|                                                         |   | $              | 949    |   |           | $      | 924    |                |   | $ | 25 |   |

----

|                           |   | March 31, 2010 |   |   | March 31, 2009 |   |   | Increase/(Decrease) |   |
|--------------------------------|--------|----------------|--------|--------|----------------|--------|--------|---------------------|--------|
|                           |   |           |   |   |           |   |   |                |   |
| Salaries and employee benefits |   | $              | 1,215  |   |           | $      | 2,059  |                |   | $ | (844 | ) |
| Occupancy expenses             |   |           | 416    |   |           |   | 593    |                |   |   | (177 | ) |
| Other real estate expense      |   |           | 332    |   |           |   | 414    |                |   |   | (82 | ) |
| Computer services              |   |           | 156    |   |           |   | 172    |                |   |   | (16 | ) |
| Telephone                      |   |           | 111    |   |           |   | 112    |                |   |   | (1 | ) |
| Leased equipment expense       |   |           | 123    |   |           |   | 128    |                |   |   | (5 | ) |
| Other expense                  |   |           | 1,091  |   |           |   | 986    |                |   |   | 105 |   |
|                           |   | $              | 3,444  |   |           | $      | 4,464  |                |   | $ | (1,020 | ) |

----

|                                   |   | March 31, 2010 |   |   | December 31, 2009    |   |
|----------------------------------------|--------|----------------|--------|--------|----------------------|--------|
| (In Thousands)                         |   | Amount         |   |   | % ofLoans inCategory |   |   | Amount |   |   | % ofLoans inCategory |   |
| Commercial, financial and agricultural |   | $              | 418    |   |                 |   | 4.41 | % |   | $ | 460 |   |   |   | 4.78 | % |
| Real estate - construction             |   |           | 3,774  |   |                 |   | 36.33 | % |   |   | 1,236 |   |   |   | 15.17 | % |
| Real estate                            |   |           | 2,698  |   |                 |   | 55.26 | % |   |   | 10,122 |   |   |   | 75.59 | % |
| Consumer                               |   |           | 217    |   |                 |   | 4.00 | % |   |   | 285 |   |   |   | 4.46 | % |
| Unallocated                            |   |           | 775    |   |                 |   | - |   |   |   | 3 |   |   |   | - |   |
| Total                                  |   | $              | 7,882  |   |                 |   | 100.00 | % |   | $ | 12,106 |   |   |   | 100.00 | % |

----

| (dollars in thousands) |   | No.    |   |   | March 31, 2010 |   |   | No.    |   |   | March 31, 2009 |   |
|------------------------|--------|--------|--------|--------|---------------------|--------|--------|--------|--------|--------|----------------|--------|
| Charge-offs:           |   |   |   |   |                |   |   |   |   |   |           |   |
| Commercial             |   |   | 3      |   |                | $      | 106    |   |   |   | 4              |   |   | $ | 359 |   |
| Real Estate            |   |   | 21     |   |                |   | 6,318  |   |   |   | 5              |   |   |   | 2,308 |   |
| Consumer               |   |   | 20     |   |                |   | 252    |   |   |   | 16             |   |   |   | 99 |   |
| Total Charge-offs      |   |   | 44     |   |                |   | 6,676  |   |   |   | 25             |   |   |   | 2,766 |   |
|                   |   |   |   |   |                |   |   |   |   |   |           |   |   |   |   |   |
| Recoveries:            |   |   |   |   |                |   |   |   |   |   |           |   |   |   |   |   |
| Commercial             |   |   |   |   |                |   | 19     |   |   |   |           |   |   |   | 3 |   |
| Real Estate            |   |   |   |   |                |   | 1      |   |   |   |           |   |   |   | 21 |   |
| Consumer               |   |   |   |   |                |   | 32     |   |   |   |           |   |   |   | 18 |   |
| Total Recoveries       |   |   |   |   |                |   | 52     |   |   |   |           |   |   |   | 42 |   |
|                   |   |   |   |   |                |   |   |   |   |   |           |   |   |   |   |   |
| Net Charge-offs        |   |   |   |   |                | $      | 6,624  |   |   |   |           |   |   | $ | 2,724 |   |

| (dollars in thousands)          |   | March 31, 2010 |   |   | December 31, 2009 |   |
|---------------------------------|--------|----------------|--------|--------|-------------------|--------|
| Accruing loans 90 days past due |   | $              | -      |   |              | $      | - |   |
| Nonaccrual loans                |   |           | 61,677 |   |              |   | 71,813 |   |
| Other real estate               |   |           | 36,932 |   |              |   | 37,833 |   |
| Restructured loans              |   |           | 1,275  |   |              |   | 728 |   |
| Total nonperforming assets      |   | $              | 99,884 |   |              | $      | 110,374 |   |

| (dollars in thousands)                                  |   |   |   |
|---------------------------------------------------------|--------|--------|--------|
| Balance at December 31, 2009                            |   | $      | 71,813 |   |
| Loans reclassified to nonaccrual status in 2010         |   |   | 367    |   |
| Advances                                                |   |   | 132    |   |
| Payments received on nonaccrual loans during 2010       |   |   | (3,040 | ) |
| Nonaccrual loans charged-off during 2010                |   |   | (6,577 | ) |
| Nonaccrual loans reclassified to other real estate      |   |   | (988   | ) |
| Nonaccrual loans reclassified to repossessions          |   |   | -      |   |
| Nonaccrual loans reclassified to accrual status in 2010 |   |   | (30    | ) |
| Balance at March 31, 2010                               |   | $      | 61,677 |   |

----

| (dollars in thousands)                                   |   | Number |   |   | March 31, 2010 |   |
|----------------------------------------------------------|--------|--------|--------|--------|----------------|--------|
| Real Estate – construction & development loans |   |   |   |   | $              | -      |   |
| Real Estate – residential loans                    |   |   | 1      |   |           |   | 53 |   |
| Real Estate – home equity                          |   |   | 1      |   |           |   | 79 |   |
| Real Estate – commercial property                  |   |   | 1      |   |           |   | 207 |   |
| Consumer loans                                           |   |   | 7      |   |           |   | 28 |   |
| Total additions to nonaccrual loans                      |   |   | 10     |   |           | $      | 367 |   |

|  (dollars in thousands)                             |   | Number of Properties |   |   | March 31, 2010 |   |   | Number of Properties |   |   | December 31, 2009 |   |
|----------------------------------------------------------|--------|----------------------|--------|--------|----------------|--------|--------|----------------------|--------|--------|-------------------|--------|
| Real Estate – construction & development loans |   |                 | 45     |   |           | $      | 50,518 |                 |   |   | 50                |   |   | $ | 59,863 |   |
| Real Estate – residential loans                    |   |                 | 18     |   |           |   | 4,758  |                 |   |   | 23                |   |   |   | 4,967 |   |
| Real Estate – commercial                           |   |                 | 8      |   |           |   | 6,222  |                 |   |   | 8                 |   |   |   | 6,549 |   |
| Commercial loans                                         |   |                 | 1      |   |           |   | 151    |                 |   |   | 3                 |   |   |   | 217 |   |
| Consumer loans                                           |   |                 | 7      |   |           |   | 28     |                 |   |   | 11                |   |   |   | 217 |   |
| Total nonaccrual loans                                   |   |                 | 79     |   |           | $      | 61,677 |                 |   |   | 95                |   |   | $ | 71,813 |   |

|  (dollars in thousands)               |   | Number of Properties |   |   | March 31, 2010 |   |   | Number of Properties |   |   | December 31, 2009 |   |
|--------------------------------------------|--------|----------------------|--------|--------|---------------------|--------|--------|----------------------|--------|--------|-------------------|--------|
| Residential properties – spec houses |   |                 | 35     |   |                | $      | 11,207 |                 |   |   | 33                |   |   | $ | 12,412 |   |
| Commercial properties                      |   |                 | 12     |   |                |   | 4,311  |                 |   |   | 13                |   |   |   | 5,117 |   |
| Vacant lots                                |   |                 | 211    |   |                |   | 20,554 |                 |   |   | 223               |   |   |   | 19,462 |   |
| Mobile home and lot                        |   |                 | 1      |   |                |   | 52     |                 |   |   | 1                 |   |   |   | 51 |   |
| Residential construction properties        |   |                 | 4      |   |                |   | 808    |                 |   |   | 2                 |   |   |   | 791 |   |
| Total other real estate                    |   |                 | 263    |   |                | $      | 36,932 |                 |   |   | 272               |   |   | $ | 37,833 |   |

| (dollars in thousands)               |   |   |   |
|--------------------------------------|--------|--------|--------|
| Balance at December 31, 2009         |   | $      | 37,833 |   |
| Foreclosed property                  |   |   | 1,044  |   |
| Losses on sales                      |   |   | (127   | ) |
| Sales of other real estate           |   |   | (1,818 | ) |
| Balance  at March 31, 2010 |   | $      | 36,932 |   |

----

| (dollars in thousands)               |   | March 31, 2010 |   |   | December 31, 2009 |   |
|--------------------------------------|--------|---------------------|--------|--------|-------------------|--------|
|                                 |   |                |   |   |              |   |
| Residential loans – 1-4 Family |   | $                   | 1,035  |   |              | $      | 478 |   |
| Real Estate – unimproved land  |   |                | 96     |   |              |   | 96 |   |
| Commercial loans                     |   |                | 75     |   |              |   | 80 |   |
| Consumer loans                       |   |                | 69     |   |              |   | 74 |   |
| Total                                |   | $                   | 1,275  |   |              | $      | 728 |   |

|                    |   | March 31, 2010 |   |   | December 31, 2009 |   |
|-------------------------|--------|---------------------|--------|--------|-------------------|--------|
| (dollars in thousands)  |   | Total Available     |   |   | Total Available   |   |
| Federal discount window |   | $                   | 8,550  |   |              |   | 8,672 |   |

|                                        |   | March 31, 2010 |   |   | December 31, 2009 |   |
|---------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
| Liquidity as a percent of deposits          |   |           | 21.26  | %      |              |   | 22.38 | % |
| Liquidity as a percent of total liabilities |   |           | 18.62  | %      |              |   | 20.04 | % |

----

|                      |   |   March 31, 2010 |   |
|---------------------------|--------|----------------------------|--------|
|                      |   |                       |   |   |   |   |
|                      |   | Habersham                  |   |   | Habersham |   |
|                      |   | Bank                       |   |   | Bancorp |   |
| Tier 1 Leverage           |   |                       | 3.00%  |   |   |   | 3.08% |   |
| Tier 1 Risk-based Capital |   |                       | 4.23%  |   |   |   | 4.36% |   |
| Total Risk-based Capital  |   |                       | 5.49%  |   |   |   | 5.62% |   |

|                      |   |  December 31, 2009 |   |
|---------------------------|--------|-------------------------|--------|
|                      |   |                    |   |   |   |   |
|                      |   | Habersham               |   |   | Habersham |   |
|                      |   | Bank                    |   |   | Bancorp |   |
| Tier 1 Leverage           |   |                    | 3.08%  |   |   |   | 3.39% |   |
| Tier 1 Risk-based Capital |   |                    | 4.41%  |   |   |   | 4.87% |   |
| Total Risk-based Capital  |   |                    | 5.69%  |   |   |   | 6.15% |   |

----

31.1

31.2

32

| Date May 11, 2010 | /s/ Annette Banks                                                                                   |   |
|-------------------|-----------------------------------------------------------------------------------------------------|--------|
|              | Chief Financial Officer                                                                             |   |
|              | (for the Registrant and as the Registrant’s principal financial and  accounting officer) |

----