----

| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) |
|--------------------------------------------|

| OF THE SECURITIES EXCHANGE ACT OF 1934 |
|----------------------------------------|

| For the Quarter Ended June 30, 2010 | Commission file number 000-29599 |
|-------------------------------------|----------------------------------|

| Connecticut              | 06-1559137                              |
|--------------------------|-----------------------------------------|
| (State of incorporation) | (I.R.S. Employer Identification Number) |

----

|     |                                                       | Page   |
|----------|------------------------------------------------------------|--------|
|     |                                                       |   |
| Part I   | FINANCIAL INFORMATION                                      |   |
|     |                                                       |   |
| Item 1.  | Consolidated Financial Statements                          | 3      |
|     |                                                       |   |
| Item 2.  | Management’s Discussion and Analysis of              | 29     |
|     | Financial Condition and Results of Operations              |   |
|     |                                                       |   |
| Item 3.  | Quantitative and Qualitative Disclosures about Market Risk | 46     |
|     |                                                       |   |
| Item 4.  | Controls and Procedures                                    | 49     |
|     |                                                       |   |
|     |                                                       |   |
| Part II  | OTHER INFORMATION                                          |   |
|     |                                                       |   |
| Item 1.  | Legal Proceedings                                          | 49     |
|     |                                                       |   |
| Item 1A. | Risk Factors                                               | 51     |
|     |                                                       |   |
| Item 6.  | Exhibits                                                   | 51     |

----

|                                                                                                                                 | June 30, 2010                                                                                                                                                                                           |    | December 31, 2009                                                                                                                                                                                       |    |
|--------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                                 | (Unaudited)                                                                                                                                                                                             |    |                                                                                                                                                                                                    |    |
| ASSETS                                                                                                                               |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
| Cash and due from banks:                                                                                                             |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
|    Non-interest bearing deposits and cash                                                                             |  $               9,359,050                                                                                              |    |  $             19,465,521                                                                                                         |    |
|    Interest-bearing deposits                                                                                          |                 81,324,490                                                                                              |    |                 78,070,072                                                                                              |    |
| Federal funds sold                                                                                                                   |                 10,000,000                                                                                              |    |                 10,000,000                                                                                              |    |
| Short-term investments                                                                                                               |                      357,939                                                                   |    |                      263,839                                                                   |    |
|                Cash and cash equivalents                  |               101,041,479                                                                                                         |    |               107,799,432                                                                                                         |    |
|                                                                                                                                 |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
| Available-for-sale securities (at fair value)                                                                                        |                 61,089,895                                                                                              |    |                 48,829,981                                                                                              |    |
| Federal Reserve Bank stock                                                                                                           |                   1,234,200                                                                                   |    |                   1,839,650                                                                                   |    |
| Federal Home Loan Bank stock                                                                                                         |                   4,508,300                                                                                   |    |                   4,508,300                                                                                   |    |
| Loans receivable (net of allowance for loan losses:  2010 $13,989,069;                                                     |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |
|      2009 $15,794,118)                                                                                      |               603,964,630                                                                                                         |    |               645,205,943                                                                                                         |    |
| Accrued interest and dividends receivable                                                                                            |                   2,968,306                                                                                   |    |                   3,236,252                                                                                   |    |
| Premises and equipment, net                                                                                                          |                   5,923,808                                                                                   |    |                   6,595,727                                                                                   |    |
| Cash surrender value of life insurance                                                                                               |                 20,128,565                                                                                              |    |                 19,859,732                                                                                              |    |
| Other real estate owned                                                                                                              |                   6,736,536                                                                                   |    |                 19,073,993                                                                                              |    |
| Other assets                                                                                                                         |                   8,874,717                                                                                   |    |                   9,467,911                                                                                   |    |
|                Total assets                               |  $       816,470,436                                                                                                                                            |    |  $       866,416,921                                                                                                                                            |    |
|                                                                                                                                 |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                 |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
| Liabilities                                                                                                                          |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
|      Deposits:                                                                                              |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
|           Non-interest bearing deposits                                            |  $             52,478,419                                                                                                         |    |  $             49,755,521                                                                                                         |    |
|           Interest-bearing deposits                                                |               662,764,530                                                                                                         |    |               711,578,771                                                                                                         |    |
|                Total deposits                             |            715,242,949                                                                                                                           |    |            761,334,292                                                                                                                           |    |
|                                                                                                                                 |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
|      Repurchase agreements                                                                                  |                   7,000,000                                                                                   |    |                   7,000,000                                                                                   |    |
|      Federal Home Loan Bank borrowings                                                                      |                 50,000,000                                                                                              |    |                 50,000,000                                                                                              |    |
|      Junior subordinated debt owed to unconsolidated trust                                                  |                   8,248,000                                                                                   |    |                   8,248,000                                                                                   |    |
|      Accrued expenses and other liabilities                                                                 |                   4,391,188                                                                                   |    |                   3,973,319                                                                                   |    |
|                Total liabilities                          |            784,882,137                                                                                                                           |    |            830,555,611                                                                                                                           |    |
|                                                                                                                                 |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
| Shareholders' equity                                                                                                                 |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
|      Preferred stock: no par value; 1,000,000 shares authorized; no shares issued                           |                               -    |    |                               -    |    |
|      Common stock, $2 par value: 60,000,000 shares authorized; shares issued                                |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |
|      4,774,432; shares outstanding 4,762,727.                                                               |                   9,548,864                                                                                   |    |                   9,548,864                                                                                   |    |
|      Additional paid in capital                                                                             |                 49,651,534                                                                                              |    |                 49,651,534                                                                                              |    |
|      Accumulated deficit                                                                                    |               (28,532,144                                                                                                         | )       |               (24,000,400                                                                                                         | )  |
|      Less: Treasury stock at cost:  11,705 shares                                                 |                    (160,025                                                                              | )  |                    (160,025                                                                              | )  |
|      Accumulated other comprehensive income - net unrealized                                                |                                                                                                                                                                                                    |    |                                                                                                                                                                                                    |    |
|           gain on available-for-sale securities, net of taxes                      |                   1,080,070                                                                                   |    |                      821,337                                                                   |    |
|                Total shareholders' equity                 |              31,588,299                                                                                                                |    |              35,861,310                                                                                                                |    |
|                Total liabilities and shareholders' equity |  $       816,470,436                                                                                                                                            |    |  $       866,416,921                                                                                                                                            |    |

----

|                            |                                                                                                                                                                      |                                                                                                                                                                      | Three Months Ended June 30,                                                                            |                                                                                                                                                                      | Six Months Ended June 30,                                                                              |                                                                                                                                                                      |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |                                                                                                                                                                      |                                                                                                                                                                      | 2010                                                                                                   |                                                                                                                                                                      | 2009                                                                                                   |                                                                                                                                                                      | 2010 |   | 2009 |   |
| Interest and Dividend Income         |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |
|                                 | Interest and fees on loans                                                                                                                                                |  $          8,937,870                                                                                              |                                                                                                   |  $        10,615,251                                                                                                         |                                                                                                   |  $        18,034,359                                                                                                         |   |  $        22,390,192 |   |
|                                 | Interest on investment securities                                                                                                                                         |                 377,286                                                                   |                                                                                                   |                 265,313                                                                   |                                                                                                   |                 866,848                                                                   |   |                 793,948 |   |
|                                 | Dividends on investment securities                                                                                                                                        |                   66,421                                                        |                                                                                                   |                   84,778                                                        |                                                                                                   |                 135,706                                                                   |   |                 127,223 |   |
|                                 | Interest on federal funds sold                                                                                                                                            |                     4,486                                             |                                                                                                   |                   14,519                                                        |                                                                                                   |                     7,847                                             |   |                   27,441 |   |
|                                 | Other interest income                                                                                                                                                     |                   21,456                                                        |                                                                                                   |                   19,102                                                        |                                                                                                   |                   53,270                                                        |   |                   19,393 |   |
|                                 |                                                                                                                                                                      | Total interest and dividend income                                                                                                                                        |            9,407,519                            |                                                                                                                                                                      |          10,998,963                                       |                                                                                                                                                                      |          19,098,030 |   |          23,358,197 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
| Interest Expense                     |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |
|                                 | Interest on deposits                                                                                                                                                      |              2,948,548                                                                                   |                                                                                                   |              6,006,021                                                                                   |                                                                                                   |              6,065,864                                                                                   |   |            12,248,794 |   |
|                                 | Interest on Federal Home Loan Bank borrowings                                                                                                                             |                 423,529                                                                   |                                                                                                   |                 423,469                                                                   |                                                                                                   |                 842,404                                                                   |   |                 842,344 |   |
|                                 | Interest on subordinated debt                                                                                                                                             |                   71,031                                                        |                                                                                                   |                   89,038                                                        |                                                                                                   |                 140,364                                                                   |   |                 182,259 |   |
|                                 | Interest on other borrowings                                                                                                                                              |                   76,927                                                        |                                                                                                   |                   76,927                                                        |                                                                                                   |                 153,008                                                                   |   |                 153,008 |   |
|                                 |                                                                                                                                                                      | Total interest expense                                                                                                                                                    |            3,520,035                            |                                                                                                                                                                      |            6,595,455                            |                                                                                                                                                                      |            7,201,640 |   |          13,426,405 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
|                                 |                                                                                                                                                                      | Net interest income                                                                                                                                                       |            5,887,484                            |                                                                                                                                                                      |            4,403,508                            |                                                                                                                                                                      |          11,896,390 |   |            9,931,792 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
| Provision for Loan Losses            |                 512,000                                                                   |                                                                                                                                                                      |              5,956,000                |                                                                                                                                                                      |              1,239,000                |                                                                                                                                                                      |              7,556,000 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
|                                 |                                                                                                                                                                      | Net interest income (loss) after                                                                                                                                          |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
|                                 |                                                                                                                                                                      |      provision for loan losses                                                                                                                   |            5,375,484                            |                                                                                                                                                                      |          (1,552,492)                                      |                                                                                                                                                                      |          10,657,390 |   |            2,375,792 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
| Noninterest Income                   |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |
|                                 | Mortgage brokerage referral fees                                                                                                                                          |                   26,790                                                        |                                                                                                   |                   79,687                                                        |                                                                                                   |                   53,674                                                        |   |                   82,182 |   |
|                                 | Loan origination & processing fees                                                                                                                                    |                   39,554                                                        |                                                                                                   |                   52,057                                                        |                                                                                                   |                   75,383                                                        |   |                 121,259 |   |
|                                 | Fees and service charges                                                                                                                                                  |                 274,197                                                                   |                                                                                                   |                 248,793                                                                   |                                                                                                   |                 527,718                                                                   |   |                 494,398 |   |
|                                 | Gain on sale of investment securities                                                                                                                                     |                             - |                                                                                                   |                             - |                                                                                                   |                             - |   |                 434,333 |   |
|                                 | Earnings on cash surrender value of life insurance                                                                                                                        |                 138,722                                                                   |                                                                                                   |                 191,006                                                                   |                                                                                                   |                 268,833                                                                   |   |                 380,019 |   |
|                                 | Other income                                                                                                                                                              |                   81,363                                                        |                                                                                                   |                   95,054                                                        |                                                                                                   |                 173,486                                                                   |   |                 177,060 |   |
|                                 |                                                                                                                                                                      | Total noninterest income                                                                                                                                                  |               560,626            |                                                                                                                                                                      |               666,597            |                                                                                                                                                                      |            1,099,094 |   |            1,689,251 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
| Noninterest Expenses                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |
|                                 | Salaries and benefits                                                                                                                                                     |              3,191,355                                                                                   |                                                                                                   |              2,926,005                                                                                   |                                                                                                   |              6,552,640                                                                                   |   |              5,917,185 |   |
|                                 | Occupancy and equipment expense, net                                                                                                                                      |              1,297,900                                                                                   |                                                                                                   |              1,406,889                                                                                   |                                                                                                   |              2,836,297                                                                                   |   |              2,812,112 |   |
|                                 | Data processing expenses                                                                                                                                                  |                 291,664                                                                   |                                                                                                   |                 262,256                                                                   |                                                                                                   |                 581,827                                                                   |   |                 495,339 |   |
|                                 | Professional and other outside services                                                                                                                                   |                 702,994                                                                   |                                                                                                   |              1,177,402                                                                                   |                                                                                                   |              1,875,171                                                                                   |   |              1,983,126 |   |
|                                 | Advertising and promotional expenses                                                                                                                                      |                   71,045                                                        |                                                                                                   |                   12,984                                                        |                                                                                                   |                 154,678                                                                   |   |                   70,756 |   |
|                                 | Loan administration and processing expenses                                                                                                                               |                   71,188                                                        |                                                                                                   |                 171,490                                                                   |                                                                                                   |                 176,216                                                                   |   |                 269,219 |   |
|                                 | Regulatory assessments                                                                                                                                                    |                 689,798                                                                   |                                                                                                   |                 922,354                                                                   |                                                                                                   |              1,384,641                                                                                   |   |              1,201,727 |   |
|                                 | Insurance expenses                                                                                                                                                        |                 128,269                                                                   |                                                                                                   |                 138,008                                                                   |                                                                                                   |                 404,399                                                                   |   |                 172,773 |   |
|                                 | Other real estate operations                                                                                                                                              |                 511,453                                                                   |                                                                                                   |                             - |                                                                                                   |              1,305,627                                                                                   |   |                             - |   |
|                                 | Other noninterest expenses                                                                                                                                                |                 380,621                                                                   |                                                                                                   |                 429,574                                                                   |                                                                                                   |                 791,732                                                                   |   |                 830,624 |   |
|                                 |                                                                                                                                                                      | Total noninterest expenses                                                                                                                                                |            7,336,287                            |                                                                                                                                                                      |            7,446,962                            |                                                                                                                                                                      |          16,063,228 |   |          13,752,861 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
|                                 |                                                                                                                                                                      | Loss before income taxes                                                                                                                                                  |          (1,400,177                                       | )                                                                                                                                                                    |          (8,332,857                                       | )                                                                                                                                                                    |          (4,306,744 | )  |          (9,687,818 | )  |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
| Benefit (provision) for Income Taxes |                             - |                                                                                                                                                                      |              3,696,000                |                                                                                                                                                                      |                (225,000     | )                                                                                                                                                                    |              3,954,000 |   |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
|                                 |                                                                                                                                                                      | Net loss                                                                                                                                                                  |  $      (1,400,177                                                  | )                                                                                                                                                                    |  $      (4,636,857                                                  | )                                                                                                                                                                    |  $      (4,531,744 | )  |  $      (5,733,818 | )  |
|                                 |                                                                                                                                                                      |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |                                                                                                   |                                                                                                                                                                      |   |   |   |   |
|                                 |                                                                                                                                                                      | Basic and diluted loss per share                                                                                                                                          |  $               (0.29 | )                                                                                                                                                                    |  $               (0.98 | )                                                                                                                                                                    |  $               (0.95 | )  |  $               (1.21 | )  |

----

|                                                                    | Three Months Ended                                                                                             |   | Six Months Ended                                                                                        |
|-------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|
|                                                                    | June 30,                                                                                                       |   | June 30,                                                                                                |
|                                                                    | 2010                                                                                                           |   | 2009                                                                                                    |   | 2010 |   | 2009 |
|                                                                    |                                                                                                           |   |                                                                                                    |   |   |   |   |
| Net loss                                                                |  $         (1,400,177)                                       |   |  $         (4,636,857)                                |   |  $      (4,531,744) |   |  $      (5,733,818) |
|                                                                    |                                                                                                           |   |                                                                                                    |   |   |   |   |
| Unrealized holding (losses) gains on securities:                        |                                                                                                           |   |                                                                                                    |   |   |   |   |
|      Unrealized holding (losses) gains arising |                                                                                                           |   |                                                                                                    |   |   |   |   |
|      during the period, net of taxes           |                  (85,643) |   |                 465,715 |   |              258,733 |   |              400,233 |
|                                                                    |                                                                                                           |   |                                                                                                    |   |   |   |   |
| Comprehensive loss                                                      |  $      (1,485,820)                                                         |   |  $      (4,171,142)                                                  |   |  $   (4,273,011) |   |  $   (5,333,585) |

----

|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |  Accumulated                                                                                                                                       |    |                                                                                                   |    |
|--------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------------------------------|---------|
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |  Additional                                                                                                                                                    |                                                                                                                                                                            |    |                                                                                                                                                    |    |  Other                                                                                                                                             |    |                                                                                                   |    |
|                                                                                                               |  Number of                                                                                                                                         |  Common                                                                                                                                            |  Paid-In                                                                                                                                                       |  Accumulated                                                                                                                                                               |    |  Treasury                                                                                                                                          |    |  Comprehensive                                                                                                                                     |    |                                                                                                   |    |
|                                                                                                               |  Shares                                                                                                                                            |  Stock                                                                                                                                             |  Capital                                                                                                                                                       |  Deficit                                                                                                                                                                   |    |  Stock                                                                                                                                             |    |  (Loss) Income                                                                                                                                     |    |  Total                                                                                            |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Six months ended June 30, 2009                                                                                     |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Balance at December 31, 2008                                                                                       |        4,743,409                                                                                                     |  $    9,510,228                                                                                                                |  $   49,634,337                                                                                                                                 |  $          (119,886                                                                                                     | )  |  $      (160,025                                                                                                     | )  |  $        (90,510                                                                                          | )  |  $    58,774,144                                                              |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Comprehensive loss                                                                                                 |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|   Net loss                                                                                               |                          - |                          - |                            - |           (5,733,818                                                                                                          | )       |                          - |    |                          - |    |          (5,733,818                                       | )  |
|   Unrealized holding gain on available                                                                   |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|      for sale securities, net of taxes                                                    |                          - |                          - |                            - |                              - |    |                          - |    |            400,233                                                                               |    |              400,233                  |    |
|                Total comprehensive loss |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |         (5,333,585                                             | )  |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Issuance of common stock                                                                                           |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|      Stock issued to directors                                                            |                19,318                                                        |              38,636                                                                    |                  17,197                                                        |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                 55,833 |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Balance, June 30, 2009                                                                                             |        4,762,727                                                                                                     |  $   9,548,864                                                                                                                      |  $    49,651,534                                                                                                                           |  $     (5,853,704                                                                                                                                 | )  |  $      (160,025                                                                                                     | )  |  $       309,723                                                                                                |    |  $   53,496,392                                                                    |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Six months ended June 30, 2010                                                                                     |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Balance at December 31, 2009                                                                                       |        4,762,727                                                                                                     |  $   9,548,864                                                                                                                      |  $    49,651,534                                                                                                                           |  $  (24,000,400                                                                                                                                                  | )  |  $      (160,025                                                                                                     | )  |  $        821,337                                                                                          |    |  $     35,861,310                                                        |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Comprehensive loss                                                                                                 |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|   Net loss                                                                                               |                          - |                          - |                            - |           (4,531,744                                                                                                          | )       |                          - |    |                          - |    |          (4,531,744)                                      |    |
|   Unrealized holding gain on available                                                                   |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|       for sale securities, net of taxes                                                   |                          - |                          - |                            - |                              - |    |                          - |    |            258,733                                                                               |    |              258,733                  |    |
|                Total comprehensive loss |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |           (4,273,011                                 | )  |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
|                                                                                                               |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                |                                                                                                                                                                            |    |                                                                                                                                                    |    |                                                                                                                                                    |    |                                                                                                   |    |
| Balance, June 30, 2010                                                                                             |        4,762,727                                                                                                     |  $   9,548,864                                                                                                                      |  $    49,651,534                                                                                                                           |  $   (28,532,144                                                                                                                                            | )  |  $      (160,025                                                                                                     | )  |  $    1,080,070                                                                                                                |    |  $    31,588,299                                                              |    |

----

|                   |                                                                                        | Six Months Ended                                                                                                                                                                                  |    |
|---------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                  |                                                                                        | June 30,                                                                                                                                                                                          |    |
|                                  |                                                                                        | 2010                                                                                                                                                                                              |    | 2009 |   |
|                                  |                                                                                        |                                                                                                                                                                                              |    |   |   |
| Cash Flows from Operating Activities: |                                                                                        |                                                                                                                                                                                              |    |   |
|                                  | Net loss                                                                                    |  $            (4,531,744                                                                                                         | )  |  $            (5,733,818 | )  |
|                                  | Adjustments to reconcile net loss to net cash                                               |                                                                                                                                                                                              |    |   |   |
|                                  | used in operating activities:                                                               |                                                                                                                                                                                              |    |   |   |
|                                  | Amortization and accretion of investment premiums and discounts, net                        |                     220,040                                                                   |    |                       52,608 |   |
|                                  | Provision for loan losses                                                                   |                  1,239,000                                                                                   |    |                  7,556,000 |   |
|                                  | Gain on sale of investment securities                                                       |                              -    |    |                   (434,333 | )  |
|                                  | Amortization of core deposit intangible                                                     |                         7,950                                             |    |                         8,394 |   |
|                                  | Earnings on cash surrender value of life insurance                                          |                   (268,833)                                                                             |    |                   (380,019 | )  |
|                                  | Depreciation and amortization                                                               |                     759,658                                                                   |    |                     838,314 |   |
|                                  | Loss on disposal of bank premises and equipment                                             |                              -    |    |                            111 |   |
|                                  | Payment of fees to directors in common stock                                                |                              -    |    |                       55,833 |   |
|                                  | Loss on sale of other real estate owned                                                     |                     173,289                                                                   |    |                              -    |   |
|                                  | Impairment writedown on other real estate owned                                             |                     855,697                                                                   |    |                              -    |   |
|                                  | Deferred income taxes                                                                       |                              -    |    |                (3,679,142 | )  |
|                                  | Changes in assets and liabilities:                                                          |                                                                                                                                                                                              |    |   |   |
|                                  |      Change in deferred loan costs (fees)                          |                   (251,312)                                                                             |    |                   (381,531 | )  |
|                                  |      Decrease in accrued interest and dividends receivable         |                     267,946                                                                   |    |                  1,050,962 |   |
|                                  |      Decrease (increase) in other assets                           |                     585,244                                                                   |    |                   (876,955 | )  |
|                                  |      Increase (decrease) in accrued expenses and other liabilities |                     259,294                                                                   |    |                (1,588,205 | )  |
|                                  |      Net cash used in operating activities                         |                 (683,771                                                                                          | )  |              (3,511,781 | ) |
|                                  |                                                                                        |                                                                                                                                                                                              |    |   |   |
| Cash Flows from Investing Activities: |                                                                                        |                                                                                                                                                                                              |    |   |
|                                  | Purchases of available for sale securities                                                  |              (15,162,500                                                                                                         | )  |                (9,345,528 | )  |
|                                  | Proceeds from sales of available for sale securities                                        |                              -    |    |                19,852,541 |   |
|                                  | Principal repayments on available for sale securities                                       |                  3,099,854                                                                                   |    |                  3,100,244 |   |
|                                  | Proceeds from redemptions of available for sale securities                                  |                              -    |    |                  6,000,000 |   |
|                                  | Redemptions of Federal Reserve Bank Stock                                                   |                     605,450                                                                   |    |                              -    |   |
|                                  | Purchases of Federal Reserve Bank Stock                                                     |                              -    |    |                       (1,500 | )  |
|                                  | Net decrease in loans                                                                       |                40,253,625                                                                                              |    |                63,039,420 |   |
|                                  | Proceeds from sale of other real estate owned                                               |                11,423,342                                                                                              |    |                              -    |   |
|                                  | Capital improvements of other real estate owned                                             |                   (114,871                                                                              | )  |                              -    |   |
|                                  | Purchase of bank premises and equipment                                                     |                     (87,739                                                                   | )  |                   (330,269 | )  |
|                                  |      Net cash provided by investing activities                     |             40,017,161                                                                                                                |    |             82,314,908 |   |
|                                  |                                                                                        |                                                                                                                                                                                              |    |   |   |
| Cash Flows from Financing Activities: |                                                                                        |                                                                                                                                                                                              |    |   |
|                                  | Net (decrease) increase in demand, savings and money market deposits                        |              (10,002,369                                                                                                         | )  |                69,754,878 |   |
|                                  | Net (decrease) increase in time certificates of deposits                                    |              (36,088,974                                                                                                         | )  |                  4,801,098 |   |
|                                  | Dividends paid on common stock                                                              |                              -    |    |                   (213,454 | )  |
|                                  |      Net cash (used in) provided by financing activities           |           (46,091,343                                                                                                                           | )  |             74,342,522 |   |
|                                  |                                                                                        |                                                                                                                                                                                              |    |   |   |
|                                  |      Net (decrease) increase in cash and cash equivalents          |              (6,757,953)                                                                                                         |    |           153,145,650 |   |
|                                  |                                                                                        |                                                                                                                                                                                              |    |   |   |
| Cash and Cash Equivalents:            |                                                                                        |                                                                                                                                                                                              |    |   |
|                                  | Beginning                                                                                   |              107,799,432                                                                                                         |    |                24,602,751 |   |
|                                  | Ending                                                                                      |  $          101,041,479                                                                                                                    |    |  $          177,748,401 |   |

----

|                                                                    |                                          | Six Months Ended                                                                                                                                                                 |
|-------------------------------------------------------------------------|-----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                    |                                          | June 30,                                                                                                                                                                         |
|                                                                    |                                          | 2010                                                                                                                                                                             | 2009 |
|                                                                    |                                          |                                                                                                                                                                             |   |
| Supplemental Disclosures of Cash Flow Information                       |                                          |                                                                                                                                                                             |
|                                                                    | Cash paid for:                                |                                                                                                                                                                             |   |
|                                                                    |      Interest        |  $              7,111,982                                                                             |  $            13,459,875 |
|                                                                    |                                          |                                                                                                                                                                             |   |
|                                                                    |      Income taxes    |  $                     2,080                                       |  $              1,379,080 |
|                                                                    |                                          |                                                                                                                                                                             |   |
| Supplemental disclosures of noncash investing and financing activities: |                                          |                                                                                                                                                                             |
|                                                                    |                                          |                                                                                                                                                                             |   |
|                                                                    | Unrealized holding gain on available for sale |                                                                                                                                                                             |   |
|                                                                    | securities arising during the period          |  $                 417,308                                                             |  $                 645,536 |
|                                                                    |                                          |                                                                                                                                                                             |   |
|                                                                    | Transfer of loans to other real estate owned  |  $                            - |  $              5,436,500 |

----

----

|                                     |                                                      | Gross                                                                                                                | Gross                                                                                                                     |                                                      |
|------------------------------------------|-----------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                                     | Amortized                                                 | Unrealized                                                                                                           | Unrealized                                                                                                                | Fair                                                      |
|                                     | Cost                                                      | Gains                                                                                                                | Losses                                                                                                                    | Value                                                     |
| June 30, 2010:                           |                                                      |                                                                                                                 |                                                                                                                      |                                                      |
|                                     |                                                      |                                                                                                                 |                                                                                                                      |                                                      |
| U. S. Government agency obligations      |  $   15,038,797                       |  $         63,183                                                  |  $                  -      |  $   15,101,980                       |
| U. S. Government agency mortgage-backed  |                                                      |                                                                                                                 |                                                                                                                      |
|    securities             |       42,409,331            |           823,971                                                  |                     - |       43,233,302            |
| Money market preferred equity securities |         1,899,720 |           854,893                                                  |                     - |         2,754,613 |
| Total Available-for-Sale Securities      |  $   59,347,848                       |  $     1,742,047                                                                       |  $                  -      |  $   61,089,895                       |
|                                     |                                                      |                                                                                                                 |                                                                                                                      |                                                      |
| December 31, 2009:                       |                                                      |                                                                                                                 |                                                                                                                      |                                                      |
|                                     |                                                      |                                                                                                                 |                                                                                                                      |                                                      |
|                                     |                                                      |                                                                                                                 |                                                                                                                      |                                                      |
| U. S. Government agency obligations      |  $     5,176,712            |  $                  - |  $        (68,212)                                                           |  $     5,108,500            |
| U. S. Government agency mortgage-backed  |                                                      |                                                                                                                 |                                                                                                                      |
|    securities             |       40,428,810            |           241,520                                                  |          (166,872)                                                           |       40,503,458            |
| Money market preferred equity securities |         1,899,720 |         1,318,303                                                            |                     - |         3,218,023 |
| Total Available-for-Sale Securities      |  $   47,505,242                       |  $     1,559,823                                                                       |  $      (235,084)                                                                      |  $   48,829,981                       |

----

|                                                     | Less Than 12 Months                      |                                                      | 12 Months or More |                                                                                                                       | Total                                                                                                                      |
|----------------------------------------------------------|------------------------------------------|-----------------------------------------------------------|-------------------|----------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
|                                                     | Fair                                     | Unrealized                                                |              | Fair                                                                                                                       | Unrealized                                                                                                                 |   | Fair | Unrealized |
|                                                     | Value                                    | Loss                                                      |              | Value                                                                                                                      | Loss                                                                                                                       |   | Value | Loss |
| December 31, 2009:                                       |                                     |                                                      |              |                                                                                                                       |                                                                                                                       |   |   |   |
|                                                     |                                     |                                                      |              |                                                                                                                       |                                                                                                                       |   |   |   |
| U. S. Government agency                                  |                                     |                                                      |              |                                                                                                                       |                                                                                                                       |   |   |   |
|      obligations                |  $    5,108,500 |  $       (68,212) |              |  $                -    |  $                -    |   |  $    5,108,500 |  $       (68,212) |
| U. S. Government agency                                  |                                     |                                                      |              |                                                                                                                       |                                                                                                                       |   |   |   |
|      mortgage-backed securities | 19,548,726                               | (159,918)                                                 |              | 759,207                                                                                                                    | (6,954)                                                                                                                    |   | 20,307,933 | (166,872) |
| Totals                                                   |  $  24,657,226            |  $     (228,130)            |              |  $       759,207                                                                   |  $         (6,954)                                                       |   |  $  25,416,433 |  $     (235,084) |

|   |                                                     | Amortized Cost                                 | Fair Value                                     |   |
|--------|----------------------------------------------------------|------------------------------------------------|------------------------------------------------|--------|
|   | June 30, 2010:                                           |                                           |                                           |   |
|   | Maturity:                                                |                                           |                                           |   |
|   |      > 10 years              |  $   15,038,797            |  $   15,101,980            |   |
|   |      Mortgage-backed securities |       42,409,331 |       43,233,302 |   |
|   | Total                                                    |  $   57,448,128            |  $   58,335,282            |   |

----

|   |                                        | June 30,                                                                                                                              |    | December 31,                                                                                                                          |    |
|--------|---------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------------------|---------|
|   |                                        | 2010                                                                                                                                  |    | 2009                                                                                                                                  |    |
|   | Real Estate                                 |                                                                                                                                  |    |                                                                                                                                  |    |
|   |    Commercial                |  $           225,266,974                                                  |    |  $           230,225,306                                                  |    |
|   |    Residential               |               211,566,386                                       |    |               195,571,225                                       |    |
|   |    Construction              |               108,353,067                                       |    |               154,457,082                                       |    |
|   |    Construction to permanent |                 12,129,838                            |    |                 15,989,976                            |    |
|   | Commercial                                  |                 16,288,888                            |    |                 19,298,505                            |    |
|   | Consumer home equity                        |                 42,657,141                            |    |                 44,309,265                            |    |
|   | Consumer installment                        |                   1,453,546                 |    |                   1,155,059                 |    |
|   | Total Loans                                 |               617,715,840                                       |    |               661,006,418                                       |    |
|   | Premiums on purchased loans                 |                      124,897 |    |                      131,993 |    |
|   | Net deferred loan costs (fees)              |                      112,962 |    |                     (138,350      | )  |
|   | Allowance for loan losses                   |                (13,989,069                                 | )  |                (15,794,118                                 | )  |
|   | Loans receivable, net                       |  $           603,964,630                                                  |    |  $           645,205,943                                                  |    |

|                           |   | Three months ended                                                                              |    | Six months ended                                                                     |    |
|--------------------------------|--------|-------------------------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------------|---------|
|                           |   |  June 30,                                                                                  |    |  June 30,                                                                       |    |
|                           |   | 2010                                                                                            | 2009    |                                                                                 | 2010    | 2009 |   |
|                           |   |                                                                                            |    |                                                                                 |    |   |   |   |   |
| Balance at beginning of period |   |  $   15,061,796                                                             |    |  $   16,630,905                                                  |    |  $   15,794,118 |   |  $   16,247,070 |   |
| Provision for loan losses      |   |            512,000                       |    |         5,956,000                            |    |         1,239,000 |   |         7,556,000 |   |
| Charge-offs                    |   |        (1,594,136                                            | )  |        (6,095,148                                 | )  |        (3,177,383 | )  |        (7,311,433 | )  |
| Recoveries                     |   |                9,409 |    |              72,911 |    |            133,334 |   |              73,031 |   |
| Balance at end of period       |   |  $   13,989,069                                                             |    |  $   16,564,668                                                  |    |  $   13,989,069 |   |  $   16,564,668 |   |

----

|   |                                                  | June 30,                                                         |   | December 31,                                                     |   |
|--------|-------------------------------------------------------|------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|
|   |                                                  | 2010                                                             |   | 2009                                                             |   |
|   |                                                  |                                                             |   |                                                             |   |
|   | Impaired loans receivable for which there is a        |                                                             |   |                                                             |   |
|   |    related allowance for credit losses |  $      31,463,418            |   |  $      30,968,602            |   |
|   |                                                  |                                                             |   |                                                             |   |
|   | Impaired loans receivable for which there is no       |                                                             |   |                                                             |   |
|   |    related allowance for credit losses |  $      72,402,965            |   |  $      82,568,512            |   |
|   |                                                  |                                                             |   |                                                             |   |
|   | Allowance for credit losses related to impaired loans |  $        3,727,621 |   |  $        3,942,012 |   |

----

|   |                                                                | June 30,                                                         | December 31,                                                     |   |
|--------|---------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|--------|
|   |                                                                | 2010                                                             | 2009                                                             |   |
|   |                                                                |                                                             |                                                             |   |
|   | Non-interest bearing                                                |  $      52,478,419            |  $      49,755,521            |   |
|   |                                                                |                                                             |                                                             |   |
|   | Interest bearing                                                    |                                                             |                                                             |   |
|   |      NOW                                   |          21,610,800 |          21,581,697 |   |
|   |      Savings                               |          56,527,991 |          69,766,296 |   |
|   |      Money market                          |        112,501,922            |        112,017,987            |   |
|   |      Time certificates, less than $100,000 |        283,181,923            |        305,719,484            |   |
|   |      Time certificates, $100,000 or more   |        188,941,894            |        202,493,307            |   |
|   | Total interest bearing                                              |        662,764,530            |        711,578,771            |   |
|   | Total Deposits                                                      |  $    715,242,949                       |  $    761,334,292                       |   |

----

|   | Three months ended June 30, 2010                           |                                                                                       |                                                                                    |                                                                                   |   |
|--------|------------------------------------------------------------|--------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|--------|
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       | Net Loss                                                                                   | Shares                                                                                  |   Amount                                                                          |   |
|   | Basic and Diluted Loss Per Share                           |                                                                                       |                                                                                    |                                                                                   |   |
|   |    Loss attributable to common shareholders |  $            (1,400,177) |              4,762,727 |   $            (0.29) |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   | Three months ended June 30, 2009                           |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       | Net Loss                                                                                   | Shares                                                                                  |   Amount                                                                          |   |
|   | Basic and Diluted Loss Per Share                           |                                                                                       |                                                                                    |                                                                                   |   |
|   |    Loss attributable to common shareholders |  $            (4,636,857) |              4,745,956 |   $           (0.98)       |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   | Six months ended June 30, 2010                             |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       | Net Loss                                                                                   | Shares                                                                                  |   Amount                                                                          |   |
|   | Basic and Diluted Loss Per Share                           |                                                                                       |                                                                                    |                                                                                   |   |
|   |    Loss attributable to common shareholders |  $            (4,531,744) |              4,762,727 |  $           (0.95)             |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   | Six months ended June 30, 2009                             |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       |                                                                                       |                                                                                    |                                                                                   |   |
|   |                                                       | Net Loss                                                                                   | Shares                                                                                  |   Amount                                                                          |   |
|   | Basic and Diluted Loss Per Share                           |                                                                                       |                                                                                    |                                                                                   |   |
|   |    Loss attributable to common shareholders |  $            (5,733,818) |              4,744,690 |  $           (1.21)             |   |

----

|                              | Three Months Ended                                                                                                                          |                                                                                                                                        | Six Months Ended                                                                                                                            |
|-----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                              | June 30, 2010                                                                                                                               |                                                                                                                                        | June 30, 2010                                                                                                                               |
|                              | Before Tax                                                                                                                                  |                                                                                                                                        | Net of Tax                                                                                                                                  |   |  Before Tax |   |  Net of Tax |
|                              | Amount                                                                                                                                      | Tax Effect                                                                                                                                  | Amount                                                                                                                                      |   |  Amount |  Tax Effect |  Amount |
|                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| Unrealized holding (losses) gains |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |
| arising during the period         |  $     (138,135)                                                                                              |  $         52,492                                                                         |  $       (85,643)                                                                                   |   |  $       417,308 |  $     (158,575) |  $       258,733 |
|                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| Reclassification adjustment       |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| for gains recognized in income    |                     -    |                     -    |                     -    |   |                     -    |                     -    |                     -    |
|                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| Unrealized holding (losses) gains |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |
| on available for sale securities, |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| net of taxes                      |  $     (138,135)                                                                                              |  $         52,492                                                                         |  $       (85,643)                                                                                   |   |  $       417,308 |  $     (158,575) |  $       258,733 |
|                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
|                              | Three Months Ended                                                                                                                          |                                                                                                                                        | Six Months Ended                                                                                                                            |
|                              | June 30, 2009                                                                                                                               |                                                                                                                                        | June 30, 2009                                                                                                                               |
|                              | Before Tax                                                                                                                                  |                                                                                                                                        | Net of Tax                                                                                                                                  |   |  Before Tax |   |  Net of Tax |
|                              | Amount                                                                                                                                      | Tax Effect                                                                                                                                  | Amount                                                                                                                                      |   |  Amount |  Tax Effect |  Amount |
|                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| Unrealized holding gains          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| arising during the period         |  $       751,160                                                                                    |  $     (285,445)                                                                                              |  $       465,715                                                                                    |   |  $    1,079,869 |  $     (410,350) |  $       669,519 |
|                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| Reclassification adjustment       |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| for gains recognized in income    |                     -    |                     -    |                     -    |   |         (434,333) |           165,047 |         (269,286) |
|                              |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| Unrealized holding gains          |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| on available for sale securities, |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |   |   |   |   |
| net of taxes                      |  $       751,160                                                                                    |  $     (285,445)                                                                                              |  $       465,715                                                                                    |   |  $       645,536 |  $     (245,303) |  $       400,233 |

----

|   | Commitments to extend credit:       |                                                                                              |                                                                              |
|--------|-------------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|
|   |                                | Future loan commitments                                                                           |  $         9,466,000            |   |
|   |                                | Home equity line of credit                                                                        |           24,346,837            |   |
|   |                                | Unused lines of credit                                                                            |           10,837,425            |   |
|   |                                | Undisbursed construction loans                                                                    |             3,777,551 |   |
|   | Financial standby letters of credit |                172,000 |                                                                              |
|   |                                |                                                                                              |  $       48,599,813                       |   |

----

----

|                                     |                                                   |              |                                                   |              | To Be Well                                             |
|------------------------------------------|--------------------------------------------------------|-------------------|--------------------------------------------------------|-------------------|--------------------------------------------------------|
|                                     |                                                   |              |                                                   |              | Capitalized Under                                      |
|                                     |                                                   |              | For Capital                                            | Prompt Corrective |
|                                     | Actual                                                 | Adequacy Purposes | Action Provisions                                      |
|                                     | Amount                                                 | Ratio             | Amount                                                 | Ratio             | Amount                                                 | Ratio |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| June 30, 2010                            |                                                   |              |                                                   |              |                                                   |   |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| The Company:                             |                                                   |              |                                                   |              |                                                   |   |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| Total Capital (to Risk Weighted Assets)  |  $     45,457            | 8.70%             |  $     41,800            | 8.00%             | N/A                                                    | N/A |
| Tier 1 Capital (to Risk Weighted Assets) |         38,447 | 7.36%             |         20,895 | 4.00%             | N/A                                                    | N/A |
| Tier 1 Capital (to Average Assets)       |         38,447 | 4.74%             |         32,445 | 4.00%             | N/A                                                    | N/A |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| The Bank:                                |                                                   |              |                                                   |              |                                                   |   |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| Total Capital (to Risk Weighted Assets)  |  $     45,596            | 8.73%             |  $     41,783            | 8.00%             |  $     52,229            | 10.00% |
| Tier 1 Capital (to Risk Weighted Assets) |         38,592 | 7.39%             |         20,889 | 4.00%             |         31,333 |   6.00% |
| Tier 1 Capital (to Average Assets)       |         38,592 | 4.74%             |         32,567 | 4.00%             |         40,709 |   5.00% |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| December 31, 2009                        |                                                   |              |                                                   |              |                                                   |   |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| The Company:                             |                                                   |              |                                                   |              |                                                   |   |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| Total Capital (to Risk Weighted Assets)  |  $     51,072            | 8.58%             |  $     47,894            | 8.00%             | N/A                                                    | N/A |
| Tier 1 Capital (to Risk Weighted Assets) |         42,971 | 7.22%             |         23,945 | 4.00%             | N/A                                                    | N/A |
| Tier 1 Capital (to Average Assets)       |         42,971 | 4.72%             |         36,512 | 4.00%             | N/A                                                    | N/A |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| The Bank:                                |                                                   |              |                                                   |              |                                                   |   |
|                                     |                                                   |              |                                                   |              |                                                   |   |
| Total Capital (to Risk Weighted Assets)  |  $     51,056            | 8.58%             |  $     47,821            | 8.00%             |  $     59,506            | 10.00% |
| Tier 1 Capital (to Risk Weighted Assets) |         42,960 | 7.22%             |         23,908 | 4.00%             |         35,701 |   6.00% |
| Tier 1 Capital (to Average Assets)       |         42,960 | 4.72%             |         36,454 | 4.00%             |         45,508 |   5.00% |

----

----

|   | o | Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Separate disclosure of the significant transfers in and out of Level 1 and Level 2 fair value measurements, and a description of the reasons for the transfers.  The Company had no significant transfers into, or out of, levels 1 or 2 during the three months ended June 30, 2010. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In the rollforward of activity for Level 3 fair value measurements (significant unobservable inputs), purchases, sales, issuances, and settlements should be presented separately (on a gross basis rather than as one net number). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fair value measurements and disclosures should be presented for each class of assets and liabilities within a line item in the statement of financial position. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Reporting entities should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                      | Fair Value at Reporting Date Using                                                                                                                                                    |   |                                                                        |
|-------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|
|                                      |  Quoted Prices in                                                                                                                                                                |   | Significant                                                                 |   | Significant |   |   |
|                                      |  Active Markets                                                                                                                                                                  |   | Observable                                                                  |   | Unobservable |   | Balance |
|                                      |  for Identical Assets                                                                                                                                                            | Inputs |                                                                        | Inputs |   | as of |
| June 30, 2010                             | (Level 1)                                                                                                                                                                             |   | (Level 2)                                                                   |   | (Level 3) |   | June 30, 2010 |
| U.S. Government agency obligations        |  $                           -            |   |  $      15,101,980                       |   |  $                       - |   |  $          15,101,980 |
| U.S. Government agency mortgage-          |                                                                                                                                                                                  |   |                                                                        |   |   |   |   |
|     backed securities |                               - |   |          43,233,302            |   |                           - |   |              43,233,302 |
| Money market preferred equity securities  |                               - |   |            2,754,613 |   |                           - |   |                2,754,613 |
| Securities available for sale             |  $                           -            |   |  $      61,089,895                       |   |  $                       - |   |  $          61,089,895 |
|                                      |                                                                                                                                                                                  |   |                                                                        |   |   |   |   |
|                                      |                                                                                                                                                                                  |   |                                                                        |   |   |   |   |
|                                      |  Quoted Prices in                                                                                                                                                                |   | Significant                                                                 |   | Significant |   |   |
|                                      |  Active Markets                                                                                                                                                                  |   | Observable                                                                  |   | Unobservable |   | Balance |
|                                      |  for Identical Assets                                                                                                                                                            | Inputs |                                                                        | Inputs |   | as of |
| December 31, 2009                         | (Level 1)                                                                                                                                                                             |   | (Level 2)                                                                   |   | (Level 3) |   | December 31, 2009 |
| U.S. Government agency obligations        |  $                           -            |   |  $        5,108,500            |   |  $                       - |   |  $            5,108,500 |
| U.S. Government agency mortgage-          |                                                                                                                                                                                  |   |                                                                        |   |   |   |                               - |
|     backed securities |                               - |   |          40,503,458            |   |                           - |   |              40,503,458 |
| Money market preferred equity securities  |                               - |   |            3,218,023 |   |                           - |   |                3,218,023 |
| Securities available for sale             |  $                           -            |   |  $      48,829,981                       |   |  $                       - |   |  $          48,829,981 |

----

|               |  Quoted Prices in                                                                                                                                                     | Significant                                                                                                                      | Significant                                                                          |                                                                          |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|
|               |  Active Markets                                                                                                                                                       | Observable                                                                                                                       | Unobservable                                                                         | Balance                                                                       |
|               |  for Identical Assets                                                                                                                                                 | Inputs                                                                                                                           | Inputs                                                                               | as of                                                                         |
| June 30, 2010      | (Level 1)                                                                                                                                                                  | (Level 2)                                                                                                                        | (Level 3)                                                                            | June 30, 2010                                                                 |
|               |                                                                                                                                                                       |                                                                                                                             |                                                                                 |                                                                          |
| Impaired Loans (1) |  $                           - |  $                    - |           $   37,156,757 |  $          37,156,757 |
|               |                                                                                                                                                                       |                                                                                                                             |                                                                                 |                                                                          |
|               | Quoted Prices in                                                                                                                                                           | Significant                                                                                                                      | Significant                                                                          |                                                                          |
|               | Active Markets                                                                                                                                                             | Observable                                                                                                                       | Unobservable                                                                         | Balance                                                                       |
|               | for Identical Assets                                                                                                                                                       | Inputs                                                                                                                           | Inputs                                                                               | as of                                                                         |
| December 31, 2009  | (Level 1)                                                                                                                                                                  | (Level 2)                                                                                                                        | (Level 3)                                                                            | December 31, 2009                                                             |
|               |                                                                                                                                                                       |                                                                                                                             |                                                                                 |                                                                          |
| Impaired Loans (1) |  $                           - |  $                    - |          $   49,322,844       |  $          49,322,844 |

|                    |  Quoted Prices in                                                                                                                                                     | Significant                                                                                                                      | Significant                                                       |                                                                                     |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|------------------------------------------------------------------------------------------|
|                    |  Active Markets                                                                                                                                                       | Observable                                                                                                                       | Unobservable                                                      | Balance                                                                                  |
|                    |  for Identical Assets                                                                                                                                                 | Inputs                                                                                                                           | Inputs                                                            | as of                                                                                    |
| June 30, 2010           | (Level 1)                                                                                                                                                                  | (Level 2)                                                                                                                        | (Level 3)                                                         | June 30, 2010                                                                            |
|                    |                                                                                                                                                                       |                                                                                                                             |                                                              |                                                                                     |
| Other real estate owned |  $                           - |  $                    - |      $     6,736,536 |  $            6,736,536 |
|                    |                                                                                                                                                                       |                                                                                                                             |                                                              |                                                                                     |
|                    |  Quoted Prices in                                                                                                                                                     | Significant                                                                                                                      | Significant                                                       |                                                                                     |
|                    |  Active Markets                                                                                                                                                       | Observable                                                                                                                       | Unobservable                                                      | Balance                                                                                  |
|                    |  for Identical Assets                                                                                                                                                 | Inputs                                                                                                                           | Inputs                                                            | as of                                                                                    |
| December 31, 2009       | (Level 1)                                                                                                                                                                  | (Level 2)                                                                                                                        | (Level 3)                                                         | December 31, 2009                                                                        |
|                    |                                                                                                                                                                       |                                                                                                                             |                                                              |                                                                                     |
| Other real estate owned |  $                           - |  $                    - |      $   19,073,993            |  $          19,073,993            |

----

----

|                                                 |                                                                  |                                                                              |                                                                  |                                                                              |
|------------------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------------------|
|                                                 | June 30, 2010                                                         | December 31, 2009                                                                 |
|                                                 |  Recorded                                              |                                                                              |  Recorded                                              |                                                                              |
|                                                 |  Book                                                            |  Fair                                                                        |  Book                                                            |  Fair                                                                        |
|                                                 |  Balance                                                         |  Value                                                                       |  Balance                                                         |  Value                                                                       |
| Financial Assets:                                    |                                                                  |                                                                              |                                                                  |                                                                              |
| Cash and noninterest bearing balances due from banks |         9,359                 |           9,359                 |       19,466                            |         19,466                            |
| Interest-bearing deposits due from banks             |       81,324                            |         81,324                            |       78,070                            |         78,070                            |
| Federal funds sold                                   |       10,000                            |         10,000                            |       10,000                            |         10,000                            |
| Short-term investments                               |            358 |              358 |            264 |              264 |
| Available-for-sale securities                        |       61,090                            |         61,090                            |       48,830                            |         48,830                            |
| Federal Reserve Bank stock                           |         1,234                 |           1,234                 |         1,840                 |           1,840                 |
| Federal Home Loan Bank stock                         |         4,508                 |           4,508                 |         4,508                 |           4,508                 |
| Loans receivable, net                                |     603,965                                       |       609,031                                       |     645,206                                       |       644,977                                       |
| Accrued interest receivable                          |         2,968                 |           2,968                 |         3,236                 |           3,236                 |
|                                                 |                                                                  |                                                                              |                                                                  |                                                                              |
| Financial Liabilities:                               |                                                                  |                                                                              |                                                                  |                                                                              |
| Demand deposits                                      |       52,478                            |         52,478                            |       49,756                            |         49,756                            |
| Savings deposits                                     |       56,528                            |         56,528                            |       69,766                            |         69,766                            |
| Money market deposits                                |     112,502                                       |       112,502                                       |     112,018                                       |       112,018                                       |
| Negotiable orders of withdrawal                      |       21,611                            |         21,611                            |       21,582                            |         21,582                            |
| Time deposits                                        |     472,124                                       |       475,435                                       |     508,213                                       |       512,524                                       |
| FHLB Borrowings                                      |       50,000                            |         52,037                            |       50,000                            |         50,270                            |
| Securities sold under repurchase agreements          |         7,000                 |           7,819                 |         7,000                 |           7,778                 |
| Subordinated debentures                              |         8,248                 |           8,248                 |         8,248                 |           8,248                 |
| Accrued interest payable                             |            595 |              595 |            505 |              505 |

----

----

----

----

|   |                                     |   | June 30,                                                                                                  |   | December 31                                                                                               |   |
|--------|------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|
|   |                                     |   | 2010                                                                                                      |   | 2009                                                                                                      |   |
|   |                                     |   |                                                                                                      |   |                                                                                                      |   |
|   | U. S. Government Agency obligations      |   |  $           15,101,980                       |   |  $             5,108,500            |   |
|   | U. S. Government Agency mortgage-backed  |   |                                                                                                      |   |                                                                                                      |   |
|   |    securities             |   |               43,233,302            |   |               40,503,458            |   |
|   | Money market preferred equity securities |   |                 2,754,613 |   |                 3,218,023 |   |
|   | Total Available for Sale Securities      |   |  $           61,089,895                       |   |  $           48,829,981                       |   |

----

|   |                                        | June 30,                                                                                                                              |    | December 31,                                                                                                                          |    |
|--------|---------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------------------|---------|
|   |                                        | 2010                                                                                                                                  |    | 2009                                                                                                                                  |    |
|   | Real Estate                                 |                                                                                                                                  |    |                                                                                                                                  |    |
|   |    Commercial                |  $           225,266,974                                                  |    |  $           230,225,306                                                  |    |
|   |    Residential               |               211,566,386                                       |    |               195,571,225                                       |    |
|   |    Construction              |               108,353,067                                       |    |               154,457,082                                       |    |
|   |    Construction to permanent |                 12,129,838                            |    |                 15,989,976                            |    |
|   | Commercial                                  |                 16,288,888                            |    |                 19,298,505                            |    |
|   | Consumer home equity                        |                 42,657,141                            |    |                 44,309,265                            |    |
|   | Consumer installment                        |                   1,453,546                 |    |                   1,155,059                 |    |
|   | Total Loans                                 |               617,715,840                                       |    |               661,006,418                                       |    |
|   | Premiums on purchased loans                 |                      124,897 |    |                      131,993 |    |
|   | Net deferred loan costs (fees)              |                      112,962 |    |                     (138,350      | )  |
|   | Allowance for loan losses                   |                (13,989,069                                 | )  |                (15,794,118                                 | )  |
|   | Loans receivable, net                       |  $           603,964,630                                                  |    |  $           645,205,943                                                  |    |

----

----

|   |                                                        | Three months ended                                                                                      |    | Six months ended                                                                             |   |
|--------|-------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------|--------|
|   |                                                        |  June 30,                                                                                          |    |  June 30,                                                                               |   |  June 30, |   |  June 30, |   |
|   | (Thousands of dollars)                                      | 2010                                                                                                    |    | 2009                                                                                         |   | 2010 |   | 2009 |   |
|   |                                                        |                                                                                                    |    |                                                                                         |   |   |   |   |   |
|   | Balance at beginning of period                              |  $     15,062                                                             |    |  $     16,631                                                  |   |  $     15,794 |   |  $     16,247 |   |
|   | Charge-offs                                                 |          (1,594                                            | )  |          (6,095                                 | )      |          (3,177 | )  |          (7,311 | )  |
|   | Recoveries                                                  |                  9 |    |                73 |   |              133 |   |                73 |   |
|   | Net Charge-offs                                             |          (1,585                                            | )  |          (6,022                                 | )      |          (3,044 | )  |          (7,238 | )  |
|   | Provision charged to operations                             |              512                       |    |           5,956                            |   |           1,239 |   |           7,556 |   |
|   | Balance at end of period                                    |  $     13,989                                                             |    |  $     16,565                                                  |   |  $     13,989 |   |  $     16,565 |   |
|   |                                                        |                                                                                                    |    |                                                                                         |   |   |   |   |   |
|   | Ratio of net charge-offs during                             |                                                                                                    |    |                                                                                         |   |   |   |   |   |
|   |      the period to average loans   |                                                                                                    |    |                                                                                         |   |   |   |   |   |
|   |      outstanding during the period | 0.25%                                                                                                   |    | 0.78%                                                                                        |   | 0.47% |   | 0.91% |   |
|   |                                                        |                                                                                                    |    |                                                                                         |   |   |   |   |   |
|   | Ratio of ALLL / Gross Loans                                 | 2.26%                                                                                                   |    | 2.27%                                                                                        |   | 2.26% |   | 2.27% |   |

----

|   |                                         | June 30,                                                                                                           | December 31,                                                                                                       |   |
|--------|----------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------|
|   | (Thousands of dollars)                       | 2010                                                                                                               | 2009                                                                                                               |   |
|   |                                         |                                                                                                               |                                                                                                               |   |
|   | Loans past due over 90 days                  |  $                 4,737 |  $                 3,571 |   |
|   |      still accruing |                                                                                                               |                                                                                                               |   |
|   | Non accruing loans                           |                 103,866            |                 113,537            |   |
|   |      Total          |  $             108,603                       |  $             117,108                       |   |
|   | % of Total Loans                             | 17.57%                                                                                                             | 17.72%                                                                                                             |   |
|   | % of Total Assets                            | 13.30%                                                                                                             | 13.52%                                                                                                             |   |

----

|   |                    | June 30,                                                                                                                                    | December 31,                                                              |   |
|--------|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------|--------|
|   |                    | 2010                                                                                                                                        | 2009                                                                      |   |
|   |                    |                                                                                                                                        |                                                                      |   |
|   | Construction            |  $     6,276,536                                                                                              |  $   13,524,597                                       |   |
|   | Commercial              |                        - |         4,934,896                 |   |
|   | Land                    |            460,000                                                                   |            614,500 |   |
|   |                    |                                                                                                                                        |                                                                      |   |
|   | Other real estate owned |  $     6,736,536                                                                                              |  $   19,073,993                                       |   |

----

|   |                                                                | June 30,                                                         | December 31,                                                     |   |
|--------|---------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|--------|
|   |                                                                | 2010                                                             | 2009                                                             |   |
|   |                                                                |                                                             |                                                             |   |
|   | Non-interest bearing                                                |  $      52,478,419            |  $      49,755,521            |   |
|   |                                                                |                                                             |                                                             |   |
|   | Interest bearing                                                    |                                                             |                                                             |   |
|   |      NOW                                   |          21,610,800 |          21,581,697 |   |
|   |      Savings                               |          56,527,991 |          69,766,296 |   |
|   |      Money market                          |        112,501,922            |        112,017,987            |   |
|   |      Time certificates, less than $100,000 |        283,181,923            |        305,719,484            |   |
|   |      Time certificates, $100,000 or more   |        188,941,894            |        202,493,307            |   |
|   | Total interest bearing                                              |        662,764,530            |        711,578,771            |   |
|   | Total Deposits                                                      |  $    715,242,949                       |  $    761,334,292                       |   |

----

----

|                               | Three months ended June 30,                                 |
|------------------------------------|-------------------------------------------------------------|
|                               |                                                        |   | 2010 |   |   |   |   | 2009 |   |
|                               |                                                        |   | Interest |   |   |   |   | Interest |   |
|                               | Average                                                     |   | Income/ | Average |   | Average |   | Income/ | Average |
|                               | Balance                                                     |   | Expense | Rate |   | Balance |   | Expense | Rate |
|                               | (dollars in thousands)                                      |
| Interest earning assets:           |                                                        |   |   |   |   |   |   |   |   |
| Loans                              |  $   634,250                            |   |  $      8,938 | 5.64% |   |  $   775,845 |   |  $   10,615 | 5.47% |
| Investments                        |        69,458            |   |            444 | 2.56% |   |        36,759 |   |           350 | 3.81% |
| Interest bearing deposits in banks |        41,761            |   |              21 | 0.20% |   |        59,418 |   |             19 | 0.13% |
| Federal funds sold                 |        10,000            |   |                4 | 0.16% |   |        49,670 |   |             15 | 0.12% |
| Total interest                     |                                                        |   |   |   |   |   |   |   |   |
|   earning assets         |      755,469                       |   |          9,407 | 4.98% |   |      921,692 |   |       10,999 | 4.77% |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Cash and due from banks            |        20,826            |   |   |   |   |        26,182 |   |   |   |
| Premises and equipment, net        |          5,929 |   |   |   |   |          7,392 |   |   |   |
| Allowance for loan losses          |       (14,997                 | )  |   |   |   |       (16,778 | )  |   |   |
| Other assets                       |        46,492            |   |   |   |   |        37,407 |   |   |   |
| Total Assets                       |  $   813,719                            |   |   |   |   |  $   975,895 |   |   |   |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:      |                                                        |   |   |   |   |   |   |   |   |
| Deposits                           |  $   662,308                            |   |  $      2,949 | 1.78% |   |  $   802,738 |   |  $     6,006 | 2.99% |
| FHLB advances                      |        50,000            |   |            424 | 3.39% |   |        50,011 |   |           423 | 3.38% |
| Subordinated debt                  |          8,248 |   |              70 | 3.39% |   |          8,248 |   |             89 | 4.32% |
| Other borrowings                   |          7,000 |   |              77 | 4.40% |   |          7,000 |   |             77 | 4.40% |
| Total interest                     |                                                        |   |   |   |   |   |   |   |   |
|   bearing liabilities    |      727,556                       |   |          3,520 | 1.94% |   |      867,997 |   |         6,595 | 3.04% |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Demand deposits                    |        48,640            |   |   |   |   |        47,062 |   |   |   |
| Accrued expenses and               |                                                        |   |   |   |   |   |   |   |   |
|   other liabilities      |          4,858 |   |   |   |   |          3,822 |   |   |   |
| Shareholders' equity               |        32,665            |   |   |   |   |        57,014 |   |   |   |
| Total liabilities and equity       |  $   813,719                            |   |   |   |   |  $   975,895 |   |   |   |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Net interest income                |                                                        |   |  $      5,887 |   |   |   |   |  $     4,404 |   |
| Interest margin                    |                                                        |   |   | 3.12% |   |   |   |   | 1.91% |
| Interest spread                    |                                                        |   |   | 3.04% |   |   |   |   | 1.73% |

----

|                               | Six months ended June 30,                                   |
|------------------------------------|-------------------------------------------------------------|
|                               |                                                        |   | 2010 |   |   |   |   | 2009 |   |
|                               |                                                        |   | Interest |   |   |   |   | Interest |   |
|                               | Average                                                     |   | Income/ | Average |   | Average |   | Income/ | Average |
|                               | Balance                                                     |   | Expense | Rate |   | Balance |   | Expense | Rate |
|                               | (dollars in thousands)                                      |
| Interest earning assets:           |                                                        |   |   |   |   |   |   |   |   |
| Loans                              |  $   644,093                            |   |  $    18,034 | 5.60% |   |  $   792,495 |   |  $   22,390 | 5.65% |
| Investments                        |        68,077            |   |          1,003 | 2.95% |   |        46,073 |   |           922 | 4.00% |
| Interest bearing deposits in banks |        42,171            |   |              53 | 0.25% |   |        31,099 |   |             19 | 0.12% |
| Federal funds sold                 |        10,000            |   |                8 | 0.16% |   |        41,978 |   |             27 | 0.13% |
| Total interest                     |                                                        |   |   |   |   |   |   |   |   |
|   earning assets         |      764,341                       |   |        19,098 | 5.00% |   |      911,645 |   |       23,358 | 5.12% |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Cash and due from banks            |        21,088            |   |   |   |   |        21,425 |   |   |   |
| Premises and equipment, net        |          6,086 |   |   |   |   |          7,510 |   |   |   |
| Allowance for loan losses          |       (15,456                 | )  |   |   |   |       (16,715 | )  |   |   |
| Other assets                       |        48,039            |   |   |   |   |        34,006 |   |   |   |
| Total Assets                       |  $   824,098                            |   |   |   |   |  $   957,871 |   |   |   |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:      |                                                        |   |   |   |   |   |   |   |   |
| Deposits                           |  $   670,832                            |   |  $      6,066 | 1.81% |   |  $   783,287 |   |  $   12,249 | 3.13% |
| FHLB advances                      |        50,000            |   |            843 | 3.37% |   |        50,005 |   |           842 | 3.37% |
| Subordinated debt                  |          8,248 |   |            140 | 3.39% |   |          8,248 |   |           182 | 4.41% |
| Other borrowings                   |          7,000 |   |            153 | 4.37% |   |          7,000 |   |           153 | 4.37% |
| Total interest                     |                                                        |   |   |   |   |   |   |   |   |
|   bearing liabilities    |      736,080                       |   |          7,202 | 1.96% |   |      848,540 |   |       13,426 | 3.16% |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Demand deposits                    |        49,280            |   |   |   |   |        46,952 |   |   |   |
| Accrued expenses and               |                                                        |   |   |   |   |   |   |   |   |
|   other liabilities      |          4,770 |   |   |   |   |          4,394 |   |   |   |
| Shareholders' equity               |        33,968            |   |   |   |   |        57,985 |   |   |   |
| Total liabilities and equity       |  $   824,098                            |   |   |   |   |  $   957,871 |   |   |   |
|                               |                                                        |   |   |   |   |   |   |   |   |
| Net interest income                |                                                        |   |  $    11,896 |   |   |   |   |  $     9,932 |   |
| Interest margin                    |                                                        |   |   | 3.11% |   |   |   |   | 2.18% |
| Interest spread                    |                                                        |   |   | 3.04% |   |   |   |   | 1.96% |

----

|                               | Three months ended June 30,                                                                 |    | Six months ended June 30,                                                                   |    |
|------------------------------------|---------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------|---------|
|                               | 2010 vs 2009                                                                                |    | 2010 vs 2009                                                                                |    |
|                               | Increase (decrease) in Interest                                                             |    | Increase (decrease) in Interest                                                             |    |
|                               | Income/Expense                                                                              |    | Income/Expense                                                                              |    |
|                               | Due to change in:                                                                           |    | Due to change in:                                                                           |    |
|                               | Volume                                                                                      |    | Rate                                                                                        |    | Total |   | Volume |   | Rate |   | Total |   |
|                               | (dollars in thousands)                                                                      |    | (dollars in thousands)                                                                      |    |
| Interest earning assets:           |                                                                                        |    |                                                                                        |    |   |   |   |   |   |   |   |   |
| Loans                              |  $    (1,987                                                       | )  |  $        310                                  |    |  $    (1,677 | )  |  $       (4,160 | )  |  $          (196 | )  |  $       (4,356 | )  |
| Investments                        |            236                       |    |          (142                                  | )  |              94 |   |               365 |   |              (284 | )  |                 81 |   |
| Interest bearing deposits in banks |              (5            | )  |               7       |    |               2 |   |                   9 |   |                 25 |   |                 34 |   |
| Federal funds sold                 |            (15                       | )  |               4       |    |            (11 | )  |               (24 | )  |                   5 |   |               (19 | )  |
| Total interest                     |                                                                                        |    |                                                                                        |    |   |   |   |   |   |   |   |   |
|   earning assets         |        (1,771                                            | )  |            179                       |    |        (1,592 | ) |           (3,810 | )  |              (450 | )  |           (4,260 | )  |
|                               |                                                                                        |    |                                                                                        |    |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:      |                                                                                        |    |                                                                                        |    |   |   |   |   |   |   |   |   |
| Deposits                           |  $       (922                                       | )  |  $    (2,135                                                       | )  |  $    (3,057 | ) |  $       (1,570 | )  |  $       (4,613 | )  |  $       (6,183 | )  |
| FHLB advances                      |                - |    |               1       |    |               1 |   |                   - |   |                   1 |   |                   1 |   |
| Subordinated debt                  |                - |    |            (19                       | )  |            (19 | )  |                   - |   |               (42 | )  |               (42 | )  |
| Other borrowings                   |                - |    |                - |    |                - |   |                   - |   |  - |   |                   - |   |
| Total interest                     |                                                                                        |    |                                                                                        |    |   |   |   |   |   |   |   |   |
|   bearing liabilities    |          (922                                  | )  |        (2,153                                            | )  |        (3,075 | )  |           (1,570 | )  |           (4,654 | )  |           (6,224 | )  |
|                               |                                                                                        |    |                                                                                        |    |   |   |   |   |   |   |   |   |
| Net interest income                |  $       (849                                       | )  |  $      2,332                                            |    |  $      1,483 |   |  $       (2,240 | )  |  $         4,204 |   |  $         1,964 |   |

----

----

----

|   |                      | June 30, 2010 |   | December 31, 2009 |   |
|--------|---------------------------|---------------|--------|-------------------|--------|
|   | Total Risk-based Capital  | 8.70%         |   | 8.58%             |   |
|   | Tier 1 Risk-based Capital | 7.36%         |   | 7.22%             |   |
|   | Tier 1 Leverage Capital   | 4.74%         |   | 4.72%             |   |

|   |                      | June 30, 2010 |   | December 31, 2009 |   |
|--------|---------------------------|---------------|--------|-------------------|--------|
|   | Total Risk-based Capital  | 8.73%         |   | 8.58%             |   |
|   | Tier 1 Risk-based Capital | 7.39%         |   | 7.22%             |   |
|   | Tier 1 Leverage Capital   | 4.74%         |   | 4.72%             |   |

----

----

----

|   |                 | Basis      | Interest Rate   | June 30, | December 31, |   |
|--------|----------------------|------------|-----------------|----------|--------------|--------|
|   |                 | Points     | Risk Guidelines | 2010     | 2009         |   |
|   |                 |       |            |     |         |   |
|   | GAP percentage total |       | +/- 10%         | -6.62%   | 3.98%        |   |
|   | Net interest income  |   200 | +/- 10%         | -8.19%   | 4.67%        |   |
|   |                 | -200       | +/- 10%         | 4.81%    | 5.12%        |   |
|   | Net portfolio value  |   200 | +/- 20%         | -4.57%   | -8.93%       |   |
|   |                 | -200       | +/- 20%         | 7.81%    | -7.42%       |   |

----

| Net Interest Income and Economic Value |
|----------------------------------------|
| Summary Performance                    |
|                                   |
| June 30, 2010                          |
|                                   | Net Interest Income |   |  Net Portfolio Value |
| Projected Interest                     | Estimated | $ Change | % Change |   | Estimated | $ Change | % Change |
| Rate Scenario                          | Value | from Base | from Base |   | Value | from Base | from Base |
| + 200                                  |       23,320 |       (2,079) | -8.19% |   |       34,790 |       (1,665) | -4.57% |
| + 100                                  |       24,386 |       (1,013) | -3.99% |   |       35,866 |          (589) | -1.62% |
| BASE                                   |       25,399 |   |   |   |       36,455 |   |   |
| - 100                                  |       27,129 |         1,730 | 6.81% |   |       36,931 |            476 | 1.31% |
| - 200                                  |       26,621 |         1,222 | 4.81% |   |       39,303 |         2,849 | 7.81% |
|                                   |   |   |   |   |   |   |   |
| December 31, 2009                      |
|                                   |  Net Interest Income |   |  Net Portfolio Value |
| Projected Interest                     | Estimated | $ Change | % Change |   | Estimated | $ Change | % Change |
| Rate Scenario                          | Value | from Base | from Base |   | Value | from Base | from Base |
| + 200                                  |       20,750 |            925 | 4.67% |   |       49,704 |       (4,872) | -8.93% |
| + 100                                  |       20,113 |            288 | 1.45% |   |       51,762 |       (2,814) | -5.16% |
| BASE                                   |       19,825 |                - |                - |   |       54,576 |                - |                - |
| - 100                                  |       20,557 |            732 | 3.69% |   |       54,945 |            369 | 0.68% |
| - 200                                  |       20,841 |         1,016 | 5.12% |   |       50,525 |       (4,051) | -7.42% |

----

----

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| Item 6: | Exhibits |                                                                                                                                                                                                                                                                                     |
|---------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |     |                                                                                                                                                                                                                                                                                     |
|    | No.      | Description                                                                                                                                                                                                                                                                              |
|    |     |                                                                                                                                                                                                                                                                                     |
|    | 2        | Agreement and Plan of Reorganization dated as of June 28, 1999 between Bancorp and the Bank (incorporated by reference to Exhibit 2 to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).                                     |
|    |     |                                                                                                                                                                                                                                                                                     |
|    | 3(i)     | Certificate of Incorporation of Bancorp, (incorporated by reference to Exhibit 3(i) to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).                                                                                          |
|    |     |                                                                                                                                                                                                                                                                                     |
|    | 3(i)(A)  | Certificate of Amendment of Certificate of Incorporation of Patriot National Bancorp, Inc. dated July 16, 2004 (incorporated by reference to Exhibit 3(i)(A) to Bancorp's Annual Report on Form 10-KSB for the year ended December 31, 2004 (Commission File No. 000-29599)).       |
|    |     |                                                                                                                                                                                                                                                                                     |
|    | 3(i)(B)  | Certificate of Amendment of Certificate of Incorporation of Patriot National Bancorp, Inc. dated June 15, 2006 (incorporated by reference to Exhibit 3(i)(B) to Bancorp’s Quarterly Report of Form 10-Q for the quarter ended September 30, 2006 (commission File No. 000-29599)). |
|    |     |                                                                                                                                                                                                                                                                                     |
|    | 3(ii)    | Amended and Restated By-laws of Bancorp (incorporated by reference to Exhibit 3.2 to Bancorp’s Current Report on Form  8 - K dated December 26, 2007 (Commission File No. 1-32007)).                                                                           |

----

|   | No.       | Description                                                                                                                                                                                                                                                                                                                          |
|--------|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |      |                                                                                                                                                                                                                                                                                                                                 |
|   | 10(a)(1)  | 2001 Stock Appreciation Rights Plan of Bancorp (incorporated by reference to Exhibit 10(a)(1) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2001 (Commission File No. 000-29599)).                                                                                                       |
|   |      |                                                                                                                                                                                                                                                                                                                                 |
|   | 10(a)(3)  | Employment Agreement, dated as of October 23, 2000, as amended by a First Amendment, dated as of March 21, 2001, among the Bank, Bancorp and Charles F. Howell (incorporated by reference to Exhibit 10(a)(4) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2000 (Commission File No. 000-29599)). |
|   |      |                                                                                                                                                                                                                                                                                                                                 |
|   | 10(a)(4)  | Change of Control Agreement, dated as of January 1, 2007 among Angelo De Caro, and Patriot National Bank and Bancorp (incorporated by reference to Exhibit 10(a)(4) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).                         |
|   |      |                                                                                                                                                                                                                                                                                                                                 |
|   | 10(a)(5)  |  Employment Agreement dated as of January 1, 2008 among Patriot National Bank, Bancorp and Robert F. O’Connell (incorporated by reference to Exhibit 10(a)(5) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2007 (Commission File No. 000-29599)).                    |
|   |      |                                                                                                                                                                                                                                                                                                                                 |
|   | 10(a)(6)  | Change of Control Agreement, dated as of January 1, 2007 among Robert F. O’Connell, Patriot National Bank and Bancorp (incorporated by reference to Exhibit 10(a)(6) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).                       |
|   |      |                                                                                                                                                                                                                                                                                                                                 |
|   | 10(a)(9)  | License agreement dated July 1, 2003 between Patriot National Bank and L. Morris Glucksman (incorporated by reference to Exhibit 10(a)(9) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2003 (Commission File No. 000-29599)).                                                                |
|   |      |                                                                                                                                                                                                                                                                                                                                 |
|   | 10(a)(10) | Employment Agreement dated as of January 1, 2007 among Patriot National Bank, Bancorp and Charles F. Howell (incorporated by reference to Exhibit 10(a)(10) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).                                      |

----

|   | No.       | Description                                                                                                                                                                                                                                                                                               |
|--------|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(a)(11) | Change of Control Agreement, dated as of January 1, 2007 among Charles F. Howell, Patriot National Bank and Bancorp (incorporated by reference to Exhibit 10(a)(11) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).   |
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(a)(12) | 2005 Director Stock Award Plan (incorporated by reference to Exhibit 10(a)(12) to Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (Commission File No. 000 - 295999)).                                                                                   |
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(a)(13) | Change of Control Agreement, dated as of January 1, 2007 between Martin G. Noble and Patriot National Bank (incorporated by reference to Exhibit 10(a)(13) to Bancorp’s Annual Report on Form 10-K for the year ended December  31, 2006 (Commission File No. 000-29599)).      |
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(a)(14) | Change of Control Agreement, dated as of January 1, 2007 among Philip W. Wolford, Patriot National Bank and Bancorp (incorporated by reference to Exhibit 10(a)(14) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).   |
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(a)(15) | Formal Written Agreement between Patriot National Bank and the Office of the Comptroller of the Currency (incorporated by reference to Exhibit 10(a)(15) to Bancorp’s Current Report on Form 8-K dated February 9, 2009 (Commission File No. 000-29599)).                                           |
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(a)(16) | Securities Purchase Agreement by and among Patriot National Bancorp, Inc., Patriot National Bank and PNBK Holdings LLC dated as of December 16, 2009 (incorporated by reference to Exhibit 10.1 to Bancorp’s Current Report on Form 8-K dated December 17, 2009 (Commission File No. 000-29599)).   |
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(a)(17) | First Amendment to Securities Purchase Agreement by and among Patriot National Bancorp, Inc., Patriot National Bank and PNBK Holdings LLC dated as of May 3, 2010 (incorporated by reference to Exhibit 10(a) to Bancorp's Current Report on Form 8-K dated May 3, 2010 (Commission File No. 000-29599)). |
|   |      |                                                                                                                                                                                                                                                                                                      |
|   | 10(c)     | 1999 Stock Option Plan of the Bank (incorporated by reference to Exhibit 10(c) to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).                                                                                                                     |

----

|   | No.    | Description                                                                                                                                                                                                                   |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                          |
|   | 14     | Code of Conduct for Senior Financial Officers (incorporated by reference to Exhibit 14 to Bancorp’s Annual Report on Form 10 - KSB for the year ended December 31, 2004 (Commission File No. 000-29599). |
|   |   |                                                                                                                                                                                                                          |
|   | 21     | Subsidiaries of Bancorp (incorporated by reference to Exhibit 21 to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 1999 (Commission File No. 000-29599)).                                       |
|   |   |                                                                                                                                                                                                                          |
|   | 31(1)  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                          |
|   | 31(2)  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                          |
|   | 32     | Section 1350 Certifications                                                                                                                                                                                                   |

----

|   | Patriot National Bancorp, inc.                                |
|--------|---------------------------------------------------------------|
|   | (Registrant)                                                  |
|   |                                                          |
|   |                                                          |
|   | By:   /s/  Robert F. O’Connell |
|   | Robert F. O’Connell,                                    |
|   | Senior Executive Vice President                               |
|   | Chief Financial Officer                                       |
|   |                                                          |
|   | (On behalf of the registrant and as                           |
|   | chief financial officer)                                      |

----