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| CONTENTS                                                                              | Page              |
|---------------------------------------------------------------------------------------|-------------------|
|                                                                                  |              |
| Financial Highlights                                                                  | 1                 |
|                                                                                  |              |
| Selected Financial Data                                                               | 2                 |
|                                                                                  |              |
| Management's Discussion and Analysis of Financial Condition and Results of Operations | 3-22              |
|                                                                                  |              |
| Consolidated Financial Statements                                                     | 23-58             |
|                                                                                  |              |
| Report of Independent Registered Public Accounting Firm                               | 59                |
|                                                                                  |              |
| Board of Directors                                                                    | 60                |
|                                                                                  |              |
| Non-Director Executive Officers                                                       | 60                |
|                                                                                  |              |
| First Peoples Bank Board of Directors and Officers                                    | 61                |
|                                                                                  |              |
| General Information                                                                   | Inside Back Cover |
|                                                                                  |              |
| Common Stock Prices and Dividends                                                     | Inside Back Cover |

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Table of Contents

FINANCIAL HIGHLIGHTS

| At Year End:                                         |       2009 |      |   |       2008 |   |      | 2007   |   |
|------------------------------------------------------|-------------------------------------|-----------|--------|-------------------------------------|--------|-----------|--------|--------|
|                                                 |                                |      |   |                                |   |      |   |   |
| Assets                                               | $                                   | 248,203   |   |                                | $      | 239,173   |   |   | $ | 196,753 |   |
| Loans, net                                           | $                                   | 184,312   |   |                                | $      | 184,182   |   |   | $ | 172,251 |   |
| Securities                                           | $                                   | 31,752    |   |                                | $      | 33,239    |   |   | $ | 6,793 |   |
| Deposits                                             | $                                   | 216,374   |   |                                | $      | 200,683   |   |   | $ | 172,677 |   |
| Stockholders' equity                                 | $                                   | 14,639    |   |                                | $      | 24,896    |   |   | $ | 21,931 |   |
| Book value per common share (1)                      | $                                   | 4.50      |   |                                | $      | 9.53      |   |   | $ | 10.66 |   |
| Common shares outstanding (1)                        |                                | 2,058,047 |   |                                |   | 2,058,047 |   |   |   | 2,058,047 |   |
| Equity as a percentage of assets                     |                                | 5.90      | %      |                                |   | 10.41     | %      |   |   | 11.15 | % |
| Nonperforming assets as a percentage of total assets |                                | 9.15      | %      |                                |   | 5.05      | %      |   |   | .89 | % |
|                                                 |                                |      |   |                                |   |      |   |   |   |   |   |
| For The Year:                                        |                                |      |   |                                |   |      |   |   |   |   |   |
|                                                 |                                |      |   |                                |   |      |   |   |   |   |   |
| Interest income                                      | $                                   | 12,778    |   |                                | $      | 13,802    |   |   | $ | 13,588 |   |
| Net (loss) earnings                                  | $                                   | (9,208    | )      |                                | $      | (2,978    | )      |   | $ | 177 |   |
| (Loss) earnings per common share, basic (1)          | $                                   | (4.66     | )      |                                | $      | (1.46     | )      |   | $ | .09 |   |
| (Loss) earnings per common share, diluted (1)        | $                                   | (4.66     | )      |                                | $      | (1.46     | )      |   | $ | .09 |   |
| Return on average assets                             |                                | (3.55     | )%     |                                |   | (1.37     | )%     |   |   | .10 | % |
| Return on average equity                             |                                | (41.74    | )%     |                                |   | (13.97    | )%     |   |   | .83 | % |
| Average equity as a percentage of average assets     |                                | 8.50      | %      |                                |   | 9.79      | %      |   |   | 12.11 | % |
| Non-interest expenses to average assets              |                                | 4.04      | %      |                                |   | 3.89      | %      |   |   | 4.18 | % |
|                                                 |                                |      |   |                                |   |      |   |   |   |   |   |
| Yields and Rates:                                    |                                |      |   |                                |   |      |   |   |   |   |   |
|                                                 |                                |      |   |                                |   |      |   |   |   |   |   |
| Loan portfolio                                       |                                | 5.95      | %      |                                |   | 7.02      | %      |   |   | 8.49 | % |
| Securities                                           |                                | 4.20      | %      |                                |   | 4.95      | %      |   |   | 4.87 | % |
| Other interest-earning assets                        |                                | .26       | %      |                                |   | 2.00      | %      |   |   | 4.98 | % |
| All interest-earning assets                          |                                | 5.47      | %      |                                |   | 6.71      | %      |   |   | 8.18 | % |
| Deposits                                             |                                | 2.96      | %      |                                |   | 4.05      | %      |   |   | 4.85 | % |
| Borrowings                                           |                                | 2.16      | %      |                                |   | 2.54      | %      |   |   | 4.00 | % |
| All interest-bearing liabilities                     |                                | 2.92      | %      |                                |   | 4.04      | %      |   |   | 4.85 | % |
| Interest-rate spread (2)                             |                                | 2.55      | %      |                                |   | 2.67      | %      |   |   | 3.33 | % |
| Net yield on average interest earning assets (3)     |                                | 2.81      | %      |                                |   | 3.33      | %      |   |   | 4.53 | % |

| (1) | All per share amounts reflect the 5% stock dividends declared on May 16, 2007 and paid on June 15, 2007. |
|-----|----------------------------------------------------------------------------------------------------------|

| (2) | Average yield on all interest-earning assets less average rate paid on all interest-bearing liabilities. |
|-----|----------------------------------------------------------------------------------------------------------|

| (3) | Net interest income divided by average interest-earning assets. |
|-----|-----------------------------------------------------------------|

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Table of Contents

|   | SELECTED FINANCIAL DATA |
|--------|-------------------------|

| At Year End:                                                                                             |       2009 |        |   |       2008 |   |        |        2007 |   |   |     2006 |   |   | 2005   |            |
|----------------------------------------------------------------------------------------------------------|-------------------------------------|-------------|--------|-------------------------------------|--------|-------------|------------------------------------------------|--------|--------|-------------------------|--------|--------|--------|-----------------|
| Cash and cash equivalents                                                                                | $                                   | 12,932      |   |                                |   | 5,457       |                                           |   |   | 6,795                   |   |   |   | 5,422           |   |   |   | 12,366 |   |
| Securities                                                                                               |                                | 31,752      |   |                                |   | 33,239      |                                           |   |   | 6,793                   |   |   |   | 8,953           |   |   |   | 12,244 |   |
| Loans, net                                                                                               |                                | 184,312     |   |                                |   | 184,182     |                                           |   |   | 172,251                 |   |   |   | 130,133         |   |   |   | 95,666 |   |
| All other assets                                                                                         |                                | 19,207      |   |                                |   | 16,295      |                                           |   |   | 10,914                  |   |   |   | 8,931           |   |   |   | 7,033 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| Total assets                                                                                             | $                                   | 248,203     |   |                                |   | 239,173     |                                           |   |   | 196,753                 |   |   |   | 153,439         |   |   |   | 127,309 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| Deposit accounts                                                                                         | $                                   | 216,374     |   |                                |   | 200,683     |                                           |   |   | 172,677                 |   |   |   | 130,219         |   |   |   | 102,809 |   |
| Federal Home Loan Bank advances                                                                          |                                | 14,600      |   |                                |   | 11,100      |                                           |   |   | 100                     |   |   |   | 100             |   |   |   | 2,600 |   |
| All other liabilities                                                                                    |                                | 2,590       |   |                                |   | 2,494       |                                           |   |   | 2,045                   |   |   |   | 2,057           |   |   |   | 1,559 |   |
| Stockholders' equity                                                                                     |                                | 14,639      |   |                                |   | 24,896      |                                           |   |   | 21,931                  |   |   |   | 21,063          |   |   |   | 20,341 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| Total liabilities and stockholders' equity                                                               | $                                   | 248,203     |   |                                |   | 239,173     |                                           |   |   | 196,753                 |   |   |   | 153,439         |   |   |   | 127,309 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| For the Period:                                                                                          |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| Total interest income                                                                                    | $                                   | 12,778      |   |                                |   | 13,802      |                                           |   |   | 13,588                  |   |   |   | 10,626          |   |   |   | 7,243 |   |
| Total interest expense                                                                                   |                                |  6,215 |   |                                |   | 6,951       |                                           |   |   | 6,060                   |   |   |   | 3,976           |   |   |   | 1,939 |   |
| Net interest income                                                                                      |                                | 6,563       |   |                                |   | 6,851       |                                           |   |   | 7,528                   |   |   |   | 6,650           |   |   |   | 5,304 |   |
| Provision for loan losses                                                                                |                                |  4,959 |   |                                |   | 4,059       |                                           |   |   | 885                     |   |   |   | 429             |   |   |   | 352 |   |
| Net interest income after provision for loan losses                                                      |                                |  1,604 |   |                                |   |  2,792 |                                           |   |   |  6,643             |   |   |   |  6,221     |   |   |   |  4,952 |   |
| Non-interest income                                                                                      |                                | 1,189       |   |                                |   | 874         |                                           |   |   | 996                     |   |   |   | 824             |   |   |   | 930 |   |
| Non-interest expenses                                                                                    |                                | 10,482      |   |                                |   | 8,464       |                                           |   |   | 7,385                   |   |   |   | 6,082           |   |   |   | 4,639 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| (Loss) earnings before income taxes                                                                      |                                | (7,689      | )      |                                |   | (4,798      | )                                              |   |   | 254                     |   |   |   | 963             |   |   |   | 1,243 |   |
| Income tax (benefit)                                                                                     |                                |  1,519 |   |                                |   | (1,820      | )                                              |   |   | 77                      |   |   |   | 332             |   |   |   | 478 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| Net (loss) earnings                                                                                      | $                                   | (9,208      | )      |                                |   | (2,978      | )                                              |   |   | 177                     |   |   |   | 631             |   |   |   | 765 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| (Loss) earnings per basic common share (1)                                                               | $                                   | (4.66       | )      |                                |   | (1.46       | )                                              |   |   | .09                     |   |   |   | .32             |   |   |   | .50 |   |
| (Loss) earnings per diluted common share (1)                                                             | $                                   | (4.66       | )      |                                |   | (1.46       | )                                              |   |   | .09                     |   |   |   | .31             |   |   |   | .49 |   |
| Weighted-average number of common shares outstanding  for basic (1)                            |                                | 2,058,047   |   |                                |   | 2,058,047   |                                           |   |   | 2,017,553               |   |   |   |  1,998,871 |   |   |   | 1,539,513 |   |
| Weighted-average number of common shares outstanding for diluted (1)                                     |                                | 2,058,047   |   |                                |   | 2,058,047   |                                           |   |   | 2,034,070               |   |   |   | 2,030,344       |   |   |   | 1,553,623 |   |
|                                                                                                     |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| Ratios and Other Data:                                                                                   |                                |        |   |                                |   |        |                                           |   |   |                    |   |   |   |            |   |   |   |   |   |
| Return on average assets                                                                                 |                                | (3.55       | )%     |                                |   | (1.37       | )%                                             |   |   | .10                     | %      |   |   | .43             | % |   |   | .64 | % |
| Return on average equity                                                                                 |                                | (41.74      | )%     |                                |   | (13.97      | )%                                             |   |   | .83                     | %      |   |   | 3.04            | % |   |   | 5.42 | % |
| Average equity as a percentage of average assets                                                         |                                | 8.50        | %      |                                |   | 9.79        | %                                              |   |   | 12.11                   | %      |   |   | 14.08           | % |   |   | 11.85 | % |
| Interest-rate spread during the period                                                                   |                                | 2.55        | %      |                                |   | 2.67        | %                                              |   |   | 3.33                    | %      |   |   | 3.82            | % |   |   | 3.79 | % |
| Net yield on average interest-earning assets                                                             |                                | 2.81        | %      |                                |   | 3.33        | %                                              |   |   | 4.53                    | %      |   |   | 4.79            | % |   |   | 4.67 | % |
| Non-interest expenses to average assets                                                                  |                                | 4.04        | %      |                                |   | 3.89        | %                                              |   |   | 4.18                    | %      |   |   | 4.12            | % |   |   | 3.89 | % |
| Ratio of average interest-earning assets to average interest-bearing liabilities                         |                                |  1.10  |   |                                |   |  1.20  |                                           |   |   |  1.33              |   |   |   |  1.34      |   |   |   |  1.51 |   |
| Nonperforming loans and foreclosed real estate as a  percentage of total assets at end of year |                                | 9.15        | %      |                                |   | 5.05        | %                                              |   |   | .89                     | %      |   |   | .22             | % |   |   |  - | % |
| Allowance for loan losses as a percentage of total loans at end of year                                  |                                | 2.49        | %      |                                |   | 1.36        | %                                              |   |   | 1.36                    | %      |   |   | 1.36            | % |   |   | 1.42 | % |
| Total number of banking offices                                                                          |                                | 6           |   |                                |   | 6           |                                           |   |   | 4                       |   |   |   | 4               |   |   |   | 3 |   |
| Total shares outstanding at end of year (1)                                                              |                                | 2,058,047   |   |                                |   | 2,058,047   |                                           |   |   | 2,058,047               |   |   |   | 2,001,513       |   |   |   | 1,996,172 |   |
| Book value per share at end of year (1)                                                                  | $                                   | 4.50        |   |                                | $      | 9.53        |                                           |   | $      | 10.66                   |   |   | $      | 10.52           |   |   | $ | 10.19 |   |

|  (1) |  All per share amounts reflect the 5% stock dividends declared on May 16, 2007 and paid on June 15, 2007. |
|-----------|----------------------------------------------------------------------------------------------------------------|

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Table of Contents

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Table of Contents

|   | The following table presents information regarding our total allowance for loan losses as well as the allocation of such amounts to the various categories of loans atDecember 31, (dollars in thousands): |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                   | 2009   |   |                | 2008   |   |   | 2007   |                |   | 2006   |   |   | 2005                |   |
|------------------------------------------------------------------------|--------|--------|---------------------|--------|--------|--------|--------|---------------------|--------|--------|--------|--------|---------------------|--------|
|                                                                   |   |   | Loans toTotal Loans |   |   |   |   | Loans toTotal Loans |   |   |   |   | Loans toTotal Loans |   |   |   |   | Loans toTotal Loans |   |   |   |   | Loans toTotal Loans |   |
|                                                                   |   |   |                |   |   |   |   |                |   |   |   |   |                |   |
|                                                                   | Amount |   |                | Amount |   |   | Amount |                |   | Amount |   |   | Amount              |   |
|                                                                   |   |   |                |   |   |   |   |                |   |   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                             | $      | 1,584  |                |   | 33.64  | %      |   | $                   | 1,292  |   |   | 34.04  | %                   |   | $ | 1,156 |   |   | 34.15 | % |   | $ | 811 |   |   | 38.13 | % |   | $ | 576 |   |   | 37.42 | % |
| Commercial    real estate                          |   | 2,749  |                |   | 56.30  |   |   |                | 916    |   |   | 50.54  |                |   |   | 857 |   |   | 47.31 |   |   |   | 631 |   |   | 42.24 |   |   |   | 478 |   |   | 40.79 |   |
| Construction                                                           |   | 18     |                |   | .57    |   |   |                | 113    |   |   | 5.23   |                |   |   | 145 |   |   | 6.38 |   |   |   | 65 |   |   | 4.59 |   |   |   | 53 |   |   | 4.47 |   |
| Consumer                                                               |   | 319    |                |   | 9.07   |   |   |                | 228    |   |   | 10.02  |                |   |   | 234 |   |   | 12.13 |   |   |   | 293 |   |   | 14.80 |   |   |   | 274 |   |   | 17.11 |   |
| Residential   real estate                               |   | 60     |                |   | .42    |   |   |                | 3      |   |   | .17    |                |   |   | 1 |   |   |  .03 |   |   |   | 1 |   |   |  .24 |   |   |   | 2 |   |   |  .21 |   |
|                                                                   |   |   |                |   |   |   |   |                |   |   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total allowance for loan losses                                        | $      | 4,730  |                |   | 100.00 | %      |   | $                   | 2,552  |   |   | 100.00 | %                   |   | $ | 2,393 |   |   | 100.00 | % |   | $ | 1,801 |   |   | 100.00 | % |   | $ | 1,383 |   |   | 100.00 | % |
|                                                                   |   |   |                |   |   |   |   |                |   |   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses as a percent- age of total loans outstanding |   |   |                |   | 2.49   | %      |   |                |   |   |   | 1.36   | %                   |   |   |   |   |   | 1.36 | % |   |   |   |   |   | 1.36 | % |   |   |   |   |   | 1.42 | % |

|                              | 2009   |    |      | 2008   |   |   | 2007   |      |    | 2006   |   |   | 2005      |   |
|-----------------------------------|--------|---------|-----------|--------|--------|--------|--------|-----------|---------|--------|--------|--------|-----------|--------|
|                              |   |    | % ofTotal |   |   |   |   | % ofTotal |    |   |   |   | % ofTotal |   |   |   |   | % ofTotal |   |   |   |   | % ofTotal |   |
|                              | Amount |    |      | Amount |   |   | Amount |      |    | Amount |   |   | Amount    |   |
|                              |   |    |      |   |   |   |   |      |    |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                        | $      | 63,815  |      |   | 33.64  | %      |   | $         | 63,768  |   |   | 34.04  | %         |   | $ | 59,878 |   |   | 34.15 | % |   | $ | 50,521 |   |   | 38.13 | % |   | $ | 36,510 |   |   | 37.42 | % |
| Commercial real estate            |   | 106,803 |      |   | 56.30  |   |   |      | 94,675  |   |   | 50.54  |      |   |   | 82,951 |   |   | 47.31 |   |   |   | 55,967 |   |   | 42.24 |   |   |   | 39,794 |   |   | 40.79 |   |
| Construction                      |   | 1,081   |      |   | .57    |   |   |      | 9,793   |   |   | 5.23   |      |   |   | 11,186 |   |   | 6.38 |   |   |   | 6,089 |   |   | 4.59 |   |   |   | 4,365 |   |   | 4.47 |   |
| Consumer                          |   | 17,207  |      |   | 9.07   |   |   |      | 18,762  |   |   | 10.02  |      |   |   | 21,279 |   |   | 12.13 |   |   |   | 19,618 |   |   | 14.80 |   |   |   | 16,688 |   |   | 17.11 |   |
| Residential real estate           |   | 790     |      |   | .42    |   |   |      | 324     |   |   | .17    |      |   |   | 48 |   |   | .03 |   |   |   | 315 |   |   |  .24 |   |   |   | 206 |   |   |  .21 |   |
|                              |   |    |      |   |   |   |   |      |    |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | 189,696 |      |   | 100.00 | %      |   |      | 187,322 |   |   | 100.00 | %         |   |   | 175,342 |   |   | 100.00 | % |   |   | 132,510 |   |   | 100.00 | % |   |   | 97,563 |   |   | 100.00 | % |
|                              |   |    |      |   |   |   |   |      |    |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                             |   |    |      |   |   |   |   |      |    |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred loan costs and fees, net |   | (654    | )         |   |   |   |   |      | (588    | )      |   |   |      |   |   | (698 | ) |   |   |   |   |   | (576 | ) |   |   |   |   |   | (514 | ) |   |   |   |
| Allowance for loan losses         |   | (4,730  | )         |   |   |   |   |      | (2,552  | )      |   |   |      |   |   |  (2,393 | ) |   |   |   |   |   |  (1,801 | ) |   |   |   |   |   |  (1,383 | ) |   |   |   |
|                              |   |    |      |   |   |   |   |      |    |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, net                        | $      | 184,312 |      |   |   |   |   | $         | 184,182 |   |   |   |      |   | $ | 172,251 |   |   |   |   |   | $ | 130,133 |   |   |   |   |   | $ | 95,666 |   |   |   |   |

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|                                | One Year or Less |        | After One Through Five Years |   | AfterFive Years |   |  Total |    |
|-------------------------------------|------------------|-------------|------------------------------|--------|-----------------|--------|-------------|---------|
|                                |             |        |                         |   |            |   |        |    |   |   |   |
| Commercial & Industrial         | $                | 13,383      |                         | $      | 19,286          |   | $           | 31,146  |   | $ | 63,815 |   |
| Commercial real estate              |             | 8,769       |                         |   | 11,430          |   |        | 86,604  |   |   | 106,803 |   |
| Construction & Development      |             | -           |                         |   | -               |   |        | 1,081   |   |   | 1,081 |   |
| Consumer                            |             | 2,413       |                         |   | 11,739          |   |        | 3,055   |   |   | 17,207 |   |
| Residential real estate             |             |  195   |                         |   |  595       |   |        |  - |   |   |  790 |   |
| Total loans                         | $                | 24,760      |                         | $      | 43,050          |   | $           | 121,886 |   | $ | 189,696 |   |
|                                |             |        |                         |   |            |   |        |    |   |   |   |   |
| Loans with a fixed interest rate    | $                | 23,623      |                         | $      | 27,334          |   | $           | 14,087  |   | $ | 65,044 |   |
| Loans with a variable interest rate |             |  1,137 |                         |   | 15,716          |   |        | 107,799 |   |   | 124,652 |   |
| Total loans                         | $                | 24,760      |                         | $      | 43,050          |   | $           | 121,886 |   | $ | 189,696 |   |

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|                                                                                                      |   |  At December 31, |     |
|-----------------------------------------------------------------------------------------------------------|--------|-----------------------|----------|
|                                                                                                      |   |  2009            |     |   |    2008 |   |   |    2007 |   |   |    2006 |   |   |  2005 |   |
| Non-accrual loans:                                                                                        |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial real estate                                                                  |   | $                     | 11,438   |   |   | $ | 6,627 |   |   | $ | 805 |   |   | $ | - |   |   | $ | - |   |
|    Commercial                                                                              |   |                  | 2,990    |   |   |   | 1,635 |   |   |   | 297 |   |   |   | 154 |   |   |   | - |   |
|    Construction and land development                                                       |   |                  | 169      |   |   |   | 1,106 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Residential                                                                             |   |                  | 173      |   |   |   | 179 |   |   |   | 272 |   |   |   | 172 |   |   |   | - |   |
|    Home equity                                                                             |   |                  | 275      |   |   |   | 446 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Other loans                                                                             |   |                  |  38 |   |   |   |  112 |   |   |   |  27 |   |   |   | 1  18 |   |   |   |  - |   |
|                                                                                                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total non-accrual loans                                               |   |                  | 15,083   |   |   |   | 10,105 |   |   |   | 1,401 |   |   |   | 344 |   |   |   | - |   |
|                                                                                                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accruing loans over 90 days delinquent:                                                                   |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial real estate                                                                  |   |                  | 888      |   |   |   | - |   |   |   | 243 |   |   |   | - |   |   |   | - |   |
|    Commercial                                                                              |   |                  | -        |   |   |   | 250 |   |   |   | 106 |   |   |   | - |   |   |   | - |   |
|    Other loans                                                                             |   |                  | 19       |   |   |   |  - |   |   |   |  - |   |   |   | - |   |   |   | - |   |
|                                                                                                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total accrual loans over 90 days delinquent                           |   |                  | 907      |   |   |   | 250 |   |   |   |  349 |   |   |   | - |   |   |   | - |   |
|                                                                                                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total nonperforming loans                                             |   |                  | 15,990   |   |   |   | 10,355 |   |   |   | 1,750 |   |   |   | 344 |   |   |   | - |   |
|                                                                                                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed assets                                                                                         |   |                  | 6,719    |   |   |   | 1,714 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total non-performing loans and foreclosed assets                      |   | $                     | 22,709   |   |   | $ | 12,069 |   |   | $ | 1,750 |   |   | $ | 344 |   |   | $ |  - |   |
|       Total non-performing loans as a percentage of  total loans  |   |                  | 8.43     | % |   |   | 5.53 | % |   |   | 1.00 | % |   |   | .26 | % |   |   | - | % |
|       Total non-performing loans as a percentage of  total assets |   |                  | 6.44     | % |   |   | 4.33 | % |   |   | .89 | % |   |   | .22 | % |   |   | - | % |
|       Total non-performing loans and foreclosed assets                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           as a percentage of total assets               |   |                  | 9.15     | % |   |   | 5.05 | % |   |   | .89 | % |   |   | .22 | % |   |   | - | % |
|                                                                                                      |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Restructured troubled debt                                            |   | $                     | 5,591    |   |   | $ | 12,279 |   |   | $ |  - |   |   | $ | - |   |   | $ | - |   |

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| q   | forming a real estate holding company to manage and liquidate foreclosed assets; |
|---------------|----------------------------------------------------------------------------------|

| q   | developing processes for supervising criticized and classified loans; |
|---------------|-----------------------------------------------------------------------|

| q   | adopting a specific action plan for managing and disposing OREO; |
|---------------|------------------------------------------------------------------|

| q   | performing a quarterly assessment of the Bank’s monitoring systems for timely identification of problem loans; |
|---------------|----------------------------------------------------------------------------------------------------------------------|

| q   | forming a Special Assets Committee of the Board that meets monthly to review management’s progress on all classified assets; and |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------|

| q   | creating a Special Assets Department to reduce the Bank’s underperforming credits. |
|---------------|------------------------------------------------------------------------------------------|

|                                   | Accruing and Past Due 30-89 Days |      | Non-Accrual and Past Due 90 days and Over |   | Total     |   |
|----------------------------------------|----------------------------------|-----------|-------------------------------------------|--------|-----------|--------|
|                                   | Amount                           |      | Amount                                    |   | Amount    |   |
| As of December 31, 2009                |                             |      |                                      |   |      |   |
| Commercial Real Estate                 | $                                | 548       |                                      | $      | 12,326    |   | $ | 12,874 |   |
| Commercial & Industrial            |                             | 560       |                                      |   | 2,990     |   |   | 3,550 |   |
| Construction and Land development |                             | -         |                                      |   | 169       |   |   | 169 |   |
| Residential                            |                             | 10        |                                      |   | 173       |   |   | 183 |   |
| Home Equity Lines                      |                             | -         |                                      |   | 275       |   |   | 275 |   |
| Other                                  |                             |  162 |                                      |   |  57  |   |   |  219 |   |
| Total                                  | $                                | 1,280     |                                      | $      | 15,990    |   | $ | 17,270 |   |
|                                   |                             |      |                                      |   |      |   |   |   |   |
| As of December 31, 2008                |                             |      |                                      |   |      |   |   |   |   |
| Commercial Real Estate                 | $                                | 3,781     |                                      | $      | 6,627     |   | $ | 10,408 |   |
| Commercial & Industrial            |                             | 2,010     |                                      |   | 1,885     |   |   | 3,895 |   |
| Construction and Land development |                             | -         |                                      |   | 1,106     |   |   | 1,106 |   |
| Residential                            |                             | 211       |                                      |   | 179       |   |   | 390 |   |
| Home Equity Lines                      |                             | 199       |                                      |   | 446       |   |   | 645 |   |
| Other                                  |                             |  157 |                                      |   |  112 |   |   |  269 |   |
| Total                                  | $                                | 6,358     |                                      | $      | 10,355    |   | $ | 16,713 |   |

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|                                                                                  |   |  Year Ended December 31, |       |
|---------------------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                                  |   | 2009                          |       |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Allowance at beginning of year                                                        |   | $                             | 2,552      |   |   | $ | 2,393 |   |   | $ | 1,801 |   |   | $ | 1,383 |   |   | $ | 1,097 |   |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Charge-offs:                                                                          |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate loans                                                                     |   |                          | 925        |   |   |   | 2,898 |   |   |   | 123 |   |   |   | - |   |   |   | - |   |
| Consumer loans                                                                        |   |                          | 306        |   |   |   | 394 |   |   |   | 49 |   |   |   | 19 |   |   |   | 17 |   |
| Construction                                                                          |   |                          | 841        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                                                |   |                          | 140        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial                                                                            |   |                          |  786  |   |   |   |  631 |   |   |   | 128 |   |   |   | 14 |   |   |   | 55 |   |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total charge-offs                                                                     |   |                          | 2,998      |   |   |   | 3,923 |   |   |   | 300 |   |   |   | 33 |   |   |   | 72 |   |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                                           |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate loans                                                                     |   |                          | 15         |   |   |   | 10 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer loans                                                                        |   |                          | 29         |   |   |   | 6 |   |   |   | 6 |   |   |   | 10 |   |   |   | 1 |   |
| Construction                                                                          |   |                          | 135        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial and all other loans                                                        |   |                          |  38   |   |   |   |  7 |   |   |   | 1 |   |   |   | 12 |   |   |   | 5 |   |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total recoveries                                                                      |   |                          | 217        |   |   |   | 23 |   |   |   | 7 |   |   |   | 22 |   |   |   | 6 |   |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses charged to operations                                       |   |                          | 4,959      |   |   |   | 4,059 |   |   |   | 885 |   |   |   | 429 |   |   |   | 352 |   |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance at end of year                                                              |   | $                             | 4,730      |   |   | $ | 2,552 |   |   | $ | 2,393 |   |   | $ | 1,801 |   |   | $ | 1,383 |   |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of net charge-offs during the year to average loans outstanding during the year |   |                          | 1.47       | % |   |   |  2.11 | % |   |   |  .19 | % |   |   |  .01 | % |   |   |  .08 | % |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses as a percentage of total loans at end of year               |   |                          |  2.49 | % |   |   | 1.36 | % |   |   | 1.36 | % |   |   |  1.36 | % |   |   |  1.42 | % |
|                                                                                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses as a percentage of non-performing loans                     |   |                          | 29.58      | % |   |   | 24.65 | % |   |   | 136.74 | % |   |   | 523.55 | % |   |   | - | % |

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|                                   |  Actual |   |   | MinimumFor Capital Adequacy  Purposes |   |   | Minimum To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |   |
|----------------------------------------|--------------|--------|--------|-------------------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|
| As of December 31, 2009:               | Amount       |   | %      |                                            |   | Amount |                                                                       | %      |   |   | Amount |   | % |   |
|                                   |         |   |   |                                            |   |   |                                                                       |   |   |   |   |   |   |   |
| Total Capital to Risk-Weighted Assets  | $            | 17,324 |   | 8.96                                            | %      |   | $                                                                          | 15,461 |   | 8.00 | % |   | $ | 19,326 |   | 10.00 | % |
| Tier 1 Capital to Risk-Weighted Assets |         | 14,880 |   | 7.70                                            |   |   |                                                                       | 7,730  |   | 4.00 |   |   |   | 11,596 |   | 6.00 |   |
| Tier 1 Capital to Total Assets         |         | 14,880 |   | 5.65                                            |   |   |                                                                       | 10,538 |   | 4.00 |   |   |   | 13,172 |   | 5.00 |   |

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|                                                                    |     2009 |    |   2008 |   |    2007 |   |
|-------------------------------------------------------------------------|-------------------------|---------|-------------|--------|-------------------|--------|
| Securities available for sale:                                          |                    |    |        |   |              |   |
| U.S. Government agency securities                                       | $                       | 14,332  |        | $      | 16,375            |   | $ | 6,061 |   |
| Mortgage-backed securities                                              |                    | 5,087   |        |   | 16,863            |   |   | 728 |   |
| Asset-backed securities                                                 |                    | 6,097   |        |   | -                 |   |   | - |   |
| CMO securities                                                          |                    | 6,236   |        |   |  -           |   |   |  - |   |
|                                                                    |                    | 31,752  |        |   | 33,238            |   |   | 6,789 |   |
| Securities held to maturity:                                            |                    |    |        |   |              |   |   |   |   |
| U.S. Government agency securities                                       |                    | -       |        |   | -                 |   |   | - |   |
| Mortgage-backed securities                                              |                    |  - |        |   |  1           |   |   | 4 |   |
|                                                                    |                    |  - |        |   |  1           |   |   | 4 |   |
|                                                                    |                    |    |        |   |              |   |   |   |   |
|            Total | $                       | 31,752  |        | $      | 33,239            |   | $ | 6,793 |   |

|                                            | Due in                                                      |    |    | From One Year                                                       |    |                                                  | From Five Years                                               |                                       |   | Due in More Than                                                       |                                       |   |                                 |   |
|-------------------------------------------------|-------------------------------------------------------------|---------|---------|---------------------------------------------------------------------|---------|-------------------------------------------------------|---------------------------------------------------------------|--------------------------------------------|--------|------------------------------------------------------------------------|--------------------------------------------|--------|--------------------------------------|--------|
|                                            |         One Year or Less |    |    |          to Five Years |    |                                                  |          to Ten Years |                                       |   |            Ten Years |                                       |   |  Total                          |   |
|                                            |   Carrying                                             |    | Average |                                                                |    |      Carrying                     |                                                          |     Average                 |   |                                                                   |    Carrying                      |   |     Average           |   |   |    Carrying |   |     Average |   |   |      Carrying |   |     Average |   |
|                                            | Value                                                       |    | Yield   |                                                                |    |         Value |                                                          |        Yield |   |                                                                   |        Value |   |       Yield |   |   |    Value |   |       Yield |   |   |         Value |   |       Yield |   |
| December 31,  2009:                   |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency securities               | $                                                           | -       |    |                                                                | -       | %                                                     |                                                          | $                                          | -      |                                                                   |                                       | -      | %                                    |   | $ | 5,766 |   |   | 3.97 | % |   | $ | 8,566 |   |   | 4.51 | % |   | $ | 14,332 |   |   | 4.21 | % |
| Mortgage-backed securities                      |                                                        |  - |    |                                                                |  - |                                                  |                                                          |                                       | -      |                                                                   |                                       | -      |                                 |   |   | - |   |   |  - |   |   |   |  - |   |   |  - |   |   |   |  5,087 |   |   | 4.07 | % |
|     Asset-backed securities |                                                        |  - |    |                                                                |  - |                                                  |                                                          |                                       | -      |                                                                   |                                       | -      |                                 |   |   | - |   |   |  - |   |   |   |  - |   |   |  - |   |   |   |  6,097 |   |   | 4.35 | % |
|  CMO securities                            |                                                        | -       |    |                                                                |  - |                                                  |                                                          |                                       | -      |                                                                   |                                       | -      |                                 |   |   | - |   |   |  - |   |   |   | - |   |   |  - |   |   |   |   6,236 |   |   | 4.05 | % |
|                                            |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                           |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 31,752 |   |   | 4.18 | % |
|                                            |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2008:                              |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency securities               | $                                                           | 1,000   |    |                                                                | 2.46    | %                                                     |                                                          | $                                          | 1,002  |                                                                   |                                       | 4.32   | %                                    |   | $ | 3,577 |   |   | 4.94 | % |   | $ | 10,796 |   |   | 5.39 | % |   | $ | 16,375 |   |   | 5.05 | % |
| Mortgage-backed securities                      |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 16,864 |   |   | 5.49 |   |
|                                            |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                           |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 33,239 |   |   | 5.27 | % |
|                                            |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2007:                              |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency securities               | $                                                           | 1,499   |    |                                                                | 4.26    | %                                                     |                                                          | $                                          | 1,003  |                                                                   |                                       | 5 00   | %                                    |   | $ | 3,559 |   |   | 5.71 | % |   |   | - |   |   | - |   |   | $ | 6,061 |   |   | 5.24 | % |
| Mortgage-backed securities                      |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 732 |   |   |  4.03 |   |
|                                            |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                           |                                                        |    |    |                                                                |    |                                                  |                                                          |                                       |   |                                                                   |                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 6,793 |   |   | 5.11 | % |

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|                                 |                                                     |         |   | More       |   |          |   More                  |   |   |      |   |   |   |    |
|--------------------------------------|----------------------------------------------------------|--------------|--------|------------|--------|---------------|------------------------------|--------|--------|-----------|--------|--------|--------|---------|
|                                 |                                                     |         |   | than One   |   |          |     than Five |   |   |      |   |   |   |    |
|                                 |                                                     |         |   | Year and   |   |          |    Years and       |   |   | Over      |   |   |   |    |
|                                 |        One Year            |         |   | Less than  |   |          |     Less than |   |   | Fifteen   |   |   |   |    |
|                                 |          or Less |         |   | Five Years |   |          | Fifteen years                |   |   | Years     |   |   | Total  |    |
| Mortgage and commercial loans (1):   |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |
| Commercial                           | $                                                        | 28,041       |   |       | $      | 30,131        |                         |   | $      | 5,643     |   |   | $      | -       |   |   | $ | 63,815 |   |
| Commercial real estate               |                                                     | 16,443       |   |       |   | 72,932        |                         |   |   | 16,501    |   |   |   | 927     |   |   |   | 106,803 |   |
| Construction                         |                                                     | -            |   |       |   | -             |                         |   |   | 497       |   |   |   | 584     |   |   |   | 1,081 |   |
| Consumer                             |                                                     | 2,275        |   |       |   | 11,372        |                         |   |   | 3,420     |   |   |   | 140     |   |   |   | 17,207 |   |
| Residential mortgage                 |                                                     |  136    |   |       |   |  654     |                         |   |   |  -   |   |   |   |  - |   |   |   |  790 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Total loans                          |                                                     |  46,895 |   |       |   | 115,089       |                         |   |   | 26,061    |   |   |   | 1,651   |   |   |   | 189,696 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Interest-bearing deposits with banks |                                                     | 10,043       |   |       |   | -             |                         |   |   | -         |   |   |   | -       |   |   |   | 10,043 |   |
| Federal funds sold                   |                                                     | -            |   |       |   | -             |                         |   |   | -         |   |   |   | -       |   |   |   | - |   |
| Federal Home Loan Bank stock         |                                                     | -            |   |       |   | -             |                         |   |   | -         |   |   |   | 1,087   |   |   |   | 1,087 |   |
| Securities (2)                       |                                                     |  19,402 |   |       |   | 1,683         |                         |   |   |  919 |   |   |   | 9,748   |   |   |   | 31,752 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Total rate-sensitive assets          |                                                     |  76,340 |   |       |   |  116,772 |                         |   |   | 26,980    |   |   |   | 12,486  |   |   |   | 232,578 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Deposit accounts (3):                |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Money market deposits                |                                                     | 40,424       |   |       |   | -             |                         |   |   | -         |   |   |   | -       |   |   |   | 40,424 |   |
| NOW deposits                         |                                                     | 14,270       |   |       |   | -             |                         |   |   | -         |   |   |   | -       |   |   |   | 14,270 |   |
| Savings deposits                     |                                                     | 5,997        |   |       |   | -             |                         |   |   | -         |   |   |   | -       |   |   |   | 5,997 |   |
| Certificates of deposit              |                                                     | 88,675       |   |       |   |  48,083  |                         |   |   |  -   |   |   |   |  - |   |   |   | 136,758 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Total deposit accounts               |                                                     | 149,366      |   |       |   | 48,083        |                         |   |   | -         |   |   |   | -       |   |   |   | 197,449 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Federal Home Loan Bank advances      |                                                     | 5,500        |   |       |   | 9,100         |                         |   |   |  -   |   |   |   |  - |   |   |   | 14,600 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Total rate-sensitive liabilities     |                                                     | 154,866      |   |       |   |  57,183  |                         |   |   |  -   |   |   |   |  - |   |   |   | 212,049 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| GAP (repricing differences)          | $                                                        | (78,526      | )      |       | $      |  59,589  |                         |   | $      | 26,980    |   |   | $      | 12,486  |   |   | $ |  20,529 |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Cumulative GAP                       | $                                                        | (78,526      | )      |       | $      | (18,937       | )                            |   | $      | 8,043     |   |   | $      | 20,529  |   |   |   |   |   |
|                                 |                                                     |         |   |       |   |          |                         |   |   |      |   |   |   |    |   |   |   |   |   |
| Cumulative GAP/total assets          |                                                     | (31.64       | )%     |       |   | (7.63         | )%                           |   |   | 3.24      | %      |   |   | 8.27    | % |   |   |   |   |

| (1) | In preparing the table above, adjustable-rate loans are included in the period in which the interest rates are next scheduled to adjust rather than in the period in which the loans mature.  Fixed-rate loans are scheduled, including repayment, according to their maturities. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Securities are scheduled through the maturity or call dates. |
|-----|--------------------------------------------------------------|

| (3) | Money-market, NOW, and savings deposits are regarded as readily accessible withdrawable accounts.  All other time deposits are scheduled through the maturity dates. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                         |   |       |   | Commercial |   |        |   |     |   |         |   |
|------------------------------|--------|------------|--------|------------|--------|-------------|--------|----------|--------|--------------|--------|
|                         |   |       |   | Real       |   | Residential |   |     |   |         |   |
| Years Ending                 |   | Commercial |   | Estate     |   | Mortgage    |   | Consumer |   | Construction |   |
| December 31,                 |   | Loans      |   | Loans      |   | Loans       |   | Loans    |   | Loans        |   |
|                         |   |       |   |       |   |        |   |     |   |         |   |
| 2010                         |   | $          | 23,006 |       | $      | 19,102      |   | $        | 439    |         | $      | 7,550 |   | $ | 61 |   |
| 2011                         |   |       | 8,316  |       |   | 7,561       |   |     | 218    |         |   | 4,342 |   |   | 61 |   |
| 2012                         |   |       | 5,158  |       |   | 6,290       |   |     | 133    |         |   | 2,297 |   |   | 61 |   |
|     2013-2014 |   |       | 7,404  |       |   | 11,539      |   |     | -      |         |   | 1,743 |   |   | 122 |   |
|     2015-2016 |   |       | 4,391  |       |   | 9,798       |   |     | -      |         |   | 720 |   |   | 122 |   |
| 2017 & beyond            |   |       | 15,540 |       |   | 52,513      |   |     | -      |         |   | 555 |   |   | 654 |   |
|                         |   |       |   |       |   |        |   |     |   |         |   |   |   |   |   |   |   |
| Total                        |   | $          | 63,815 |       | $      | 106,803     |   | $        | 790    |         | $      | 17,207 |   | $ | 1,081 |   |

| Originations:                                | 2009   |    | 2008   |   |
|----------------------------------------------|--------|---------|--------|--------|
|                                         |   |    |   |   |
| Commercial loans                             | $      | 16,764  |   | $      | 16,224 |   |
| Commercial real estate loans                 |   | 14,202  |   |   | 11,110 |   |
| Consumer loans                               |   | 4,411   |   |   | 5,467 |   |
| Construction loans                           |   | -       |   |   | 2,899 |   |
|    Residential loans          |   | 790     |   |   | 299 |   |
|                                         |   |    |   |   |   |   |
| Total loans originated                       |   | 36,167  |   |   | 35,999 |   |
|                                         |   |    |   |   |   |   |
| Principal reductions and participations sold |   | (33,793 | )      |   | (24,019 | ) |
|                                         |   |    |   |   |   |   |
| Increase in total loans                      | $      | 2,374   |   | $      | 11,980 |   |

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Table of Contents

|                              |         |   | At December 31, |    |
|-----------------------------------|--------------|--------|-----------------|---------|
|                              |         |   | 2009            |    |   | 2008 |   |   | 2007 |   |
|                              |         |   |            |    | % of |   |   |   |   |   | % of |   |   |   |   |   | % of |   |
|                              |         |   | Amount          |    | Deposits |   |   | Amount |   |   | Deposits |   |   | Amount |   |   | Deposits |   |
| Demand deposits                   |         |   | $               | 18,925  |   |   | 8.75 | % |   | $ | 19,492 |   |   |   | 9.71 | % |   | $ | 23,141 |   |   |   | 13.40 | % |
| Money-market deposits             |         |   |            | 40,424  |   |   | 18.68 |   |   |   | 30,262 |   |   |   | 15.08 |   |   |   | 26,121 |   |   |   | 15.13 |   |
| NOW deposits                      |         |   |            | 14,270  |   |   | 6.60 |   |   |   | 5,039 |   |   |   | 2.51 |   |   |   | 3,175 |   |   |   | 1.84 |   |
| Savings deposits                  |         |   |            | 5,997   |   |   |  2.77 |   |   |   | 4,157 |   |   |   |  2.07 |   |   |   | 4,061 |   |   |   |  2.35 |   |
|                              |         |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subtotal                          |         |   |            | 79,616  |   |   |  36.80 |   |   |   | 58,950 |   |   |   |  29.37 |   |   |   | 56,498 |   |   |   | 32.72 |   |
|                              |         |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Certificate of deposits:          |         |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              | 0%- 0.99     | %      |            |    | 748 |   |   | .34 |   |   |   | 23 |   |   |   | .01 |   |   |   | 391 |   |   |   | .23 |   |
|                              | 1.00% - 1.99 | %      |            |    | 38,056 |   |   | 17.59 |   |   |   | 140 |   |   |   | .07 |   |   |   | 170 |   |   |   | .10 |   |
|                              | 2.00% - 2.99 | %      |            |    | 56,831 |   |   | 26.26 |   |   |   | 11,735 |   |   |   | 5.85 |   |   |   | - |   |   |   | - |   |
|                              | 3.00% - 3.99 | %      |            |    | 12,659 |   |   | 5.85 |   |   |   | 48,016 |   |   |   | 23.93 |   |   |   | 1,497 |   |   |   | .87 |   |
|                              | 4.00% - 4.99 | %      |            |    | 15,140 |   |   | 7.00 |   |   |   | 59,287 |   |   |   | 29.54 |   |   |   | 41,742 |   |   |   | 24.17 |   |
|                              | 5.00% - 5.99 | %      |            |    | 13,324 |   |   |  6.16 |   |   |   | 22,532 |   |   |   |  11.23 |   |   |   | 72,379 |   |   |   |  41.91 |   |
|                              |         |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total certificates of deposit (1) |         |   |            | 136,758 |   |   |  63.20 |   |   |   | 141,733 |   |   |   |  70.63 |   |   |   | 116,179 |   |   |   |  67.28 |   |
|                              |         |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits                    |         |   | $               | 216,374 |   |   | 100.00 | % |   | $ | 200,683 |   |   |   | 100.00 | % |   | $ | 172,677 |   |   |   | 100.00 | % |

|  (1) | Included individual retirement accounts (“IRAs”) totaling $5.0 million, $4.3 and $4.5 million at December 31, 2009, 2008, and 2007 all of which are in the form of certificates of deposit. |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                          |         | Year Ending December 31, |   |
|-------------------------------|--------------|--------------------------|--------|
|                          |         | 2010                     |   | 2011 |   | 2012 |   | 2013 |   | 2014 |   | Total |   |
|                          |         |                     |   |   |   |   |   |   |   |   |   |   |   |
|                          | 0% - 0.99    | %                        | $      | 443 |   | $ | 105 |   | $ | 200 |   | $ | - |   | $ | - |   | $ | 748 |   |
|                          | 1.00% - 1.99 | %                        |   | 33,247 |   |   | 4,809 |   |   | - |   |   | - |   |   | - |   |   | 38,056 |   |
|                          | 2.00% - 2.99 | %                        |   | 31,370 |   |   | 19,823 |   |   | 4,974 |   |   | 236 |   |   | 428 |   |   | 56,831 |   |
|                          | 3.00% - 3.99 | %                        |   | 4,973 |   |   | 1,245 |   |   | 4,459 |   |   | 1,328 |   |   | 654 |   |   | 12,659 |   |
|                          | 4.00% - 4.99 | %                        |   | 13,224 |   |   | 322 |   |   | 1,306 |   |   | 288 |   |   | - |   |   | 15,140 |   |
|                          | 5.00% - 5.99 | %                        |   | 5,418 |   |   | 3,489 |   |   | 4,417 |   |   |  - |   |   | - |   |   | 13,324 |   |
| Total certificates of deposit |         | $                        | 88,675 |   | $ | 29,793 |   | $ | 15,356 |   | $ | 1,852 |   | $ | 1,082 |   | $ | 136,758 |   |

|                                |  December 31, |   |
|-------------------------------------|--------------------|--------|
|                                | 2009               |   | 2008 |   | 2007 |   |
|                                |               |   |   |   |   |   |
| Due three months or less            | $                  | 6,922  |   | $ | 11,778 |   | $ | 10,535 |   |
| Due over three months to six months |               | 4,493  |   |   | 4,698 |   |   | 14,286 |   |
| Due over six months to one year     |               | 16,044 |   |   | 22,404 |   |   | 16,464 |   |
| Due over one year to five years     |               | 17,243 |   |   | 16,716 |   |   | 27,249 |   |
|                                |               |   |   |   |   |   |   |   |   |
|                                | $                  | 44,702 |   | $ | 55,596 |   | $ | 68,534 |   |

| Type of Borrowing     | Outstanding |    | Line Amount |   | Available |   |
|-----------------------|-------------|---------|-------------|--------|-----------|--------|
|                  |        |    |        |   |      |   |
| Fed Funds Purchased   | $           | -       |        | $      | -         |   | $ | - |   |
| Repurchase Agreements |        | -       |        |   | -         |   |   | - |   |
| FHLB Advances         |        | 14,600  |        |   | 14,600    |   |   | - |   |
| FRB Discount Window   |        |  - |        |   | 64,975    |   |   | 64,975 |   |
|                  | $           | 14,600  |        | $      | 79,575    |   | $ | 64,975 |   |

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Table of Contents

|                                                                                                | Year Ended December 31, |         |
|-----------------------------------------------------------------------------------------------------|-------------------------|--------------|
|                                                                                                | 2009                    |         | 2008 |   | 2007 |   |
|                                                                                                |                    |         |  Interest |   | Average |   |   |   | Interest |   | Average |   |   |   | Interest |   | Average |   |
|                                                                                                | Average                 |         | and |   | Yield/ |   |  Average |   | and |   | Yield/ |   | Average |   | and |   | Yield/ |   |
|                                                                                                | Balance                 |         |      Dividends |   | Rate |   |  Balance |   | Dividends |   | Rate |   | Balance |   | Dividends |   | Rate |   |
|   Interest-earning assets:                                                                     |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Loans                                                                | $                       | 189,672      |   |   | 11,287 |   |   | 5.95 | % | $ | 185,005 |   |   | 12,988 |   |   | 7.02 | % | $ | 151,760 |   |   | 12,878 |   |   | 8.49 | % |
|       Securities                                                           |                    | 34,961       |   |   | 1,468 |   |   | 4.20 |   |   | 13,608 |   |   | 673 |   |   | 4.95 |   |   | 7,704 |   |   | 375 |   |   | 4.87 |   |
|       Other interest-earning assets (1)                               |                    | 8,894        |   |   | 23 |   |   | .26 |   |   | 7,063 |   |   | 141 |   |   | 2.00 |   |   | 6,732 |   |   | 335 |   |   | 4.98 |   |
|       Total interest-earning assets                                        |                    | 233,527      |   |   | 12,778 |   |   | 5.47 |   |   | 205,676 |   |   | 13,802 |   |   | 6.71 |   |   | 166,196 |   |   | 13,588 |   |   | 8.18 |   |
|       Non interest-earning assets                                          |                    | 26,034       |   |   |   |   |   |   |   |   | 12,065 |   |   |   |   |   |   |   |   | 10,528 |   |   |   |   |   |   |   |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total assets                                                         | $                       | 259,561      |   |   |   |   |   |   |   | $ | 217,741 |   |   |   |   |   |   |   | $ | 176,724 |   |   |   |   |   |   |   |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Interest-bearing liabilities:                                        |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Savings, NOW and money-market deposits                               |                    | 58,070       |   |   | 986 |   |   | 1.70 |   |   | 38,292 |   |   | 976 |   |   | 2.55 |   |   | 34,200 |   |   | 1,156 |   |   | 3.38 |   |
|       Certificates of deposit                                              |                    | 143,781      |   |   | 4,986 |   |   | 3.47 |   |   | 133,180 |   |   | 5,961 |   |   | 4.48 |   |   | 90,727 |   |   | 4,900 |   |   | 5.40 |   |
|       Other borrowings                                                     |                    |  11,250 |   |   | 243 |   |   | 2.16 |   |   | 552 |   |   | 14 |   |   | 2.54 |   |   | 100 |   |   | 4 |   |   | 4.00 |   |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total interest-bearing liabilities                                   |                    | 213,101      |   |   | 6,215 |   |   | 2.92 |   |   | 172,024 |   |   | 6,951 |   |   | 4.04 |   |   | 125,027 |   |   | 6,060 |   |   | 4.85 |   |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Demand deposits                                                      |                    | 21,640       |   |   |   |   |   |   |   |   | 22,765 |   |   |   |   |   |   |   |   | 23,004 |   |   |   |   |   |   |   |
|       Non-interest bearing liabilities                                     |                    | 2,758        |   |   |   |   |   |   |   |   | 1,640 |   |   |   |   |   |   |   |   | 7,299 |   |   |   |   |   |   |   |
|       Stockholders' equity                                                 |                    | 22,062       |   |   |   |   |   |   |   |   | 21,312 |   |   |   |   |   |   |   |   | 21,394 |   |   |   |   |   |   |   |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total liabilities and stockholders' equity                           | $                       | 259,561      |   |   |   |   |   |   |   | $ | 217,741 |   |   |   |   |   |   |   | $ | 176,724 |   |   |   |   |   |   |   |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Net interest income                                                  |                    |         |   | $ | 6,563 |   |   |   |   |   |   |   | $ | 6,851 |   |   |   |   |   |   |   | $ | 7,528 |   |   |   |   |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Interest-rate spread (2)                                             |                    |         |   |   |   |   |   | 2.55 | % |   |   |   |   |   |   |   | 2.67 | % |   |   |   |   |   |   |   | 3.33 | % |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Net interest   margin (3)                             |                    |         |   |   |   |   |   | 2.81 | % |   |   |   |   |   |   |   | 3.33 | % |   |   |   |   |   |   |   | 4.53 | % |
|                                                                                                |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Ratio of average interest-earning   assets to average interest-bearing liabilities |                    | 1.10         |   |   |   |   |   |   |   |   | 1.20 |   |   |   |   |   |   |   |   | 1.33 |   |   |   |   |   |   |   |

| (1) | Other interest-earning assets included federal funds sold, Federal Home Loan Bank stock and interest-bearing deposits with banks. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

| (2) | Interest-rate spread represents the difference between the average yield on interest-earning assets and the average rate of interest-bearing liabilities. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Net interest margin is net interest income divided by total average interest-earning assets. |
|-----|----------------------------------------------------------------------------------------------|

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Table of Contents

|                                              | Year Ended December 31, 2009 vs. 2008                           |   | Year Ended December 31, 2008 vs. 2007 |   |
|---------------------------------------------------|-----------------------------------------------------------------|--------|---------------------------------------|--------|
|                                              | Increase (Decrease)                                             |   | Increase (Decrease)                   |   |
|                                              |                                                            |   |                                  |   | Rate/ |   |   |   |   |   |   |   | Rate/ |   |   |   |
|                                              |     Rate                                         |   | Volume                                |   | Volume |   | Total |   |    Rate |   |   Volume |   | Volume |   | Total |   |
|                                              |          (In thousands) |   | (In thousands)                        |   |
| Interest-earning assets:                          |                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                             | $                                                               | (1,979 | )                                     | $      | 328 |   | $ | (50 | ) | $ | (1,701 | ) | $ | (2,231 | ) | $ | 2,830 |   | $ | (489 | ) | $ | 110 |   |
| Securities                                        |                                                            | (102   | )                                     |   | 1,057 |   |   | (160 | ) |   | 795 |   |   | 6 |   |   | 287 |   |   | 5 |   |   | 298 |   |
| Other interest-earning assets                     |                                                            | (123   | )                                     |   | 37 |   |   | (32 | ) |   | (118 | ) |   | (201 | ) |   |  17 |   |   | (10 | ) |   | (194 | ) |
|                                              |                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |                                                            | (2,204 | )                                     |   | 1,422 |   |   | (242 | ) |   | (1,024 | ) |   | (2,426 | ) |   | 3,134 |   |   | (494 | ) |   | 214 |   |
|                                              |                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                     |                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                         |                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Savings, money-market and NOW deposits |                                                            | (326   | )                                     |   |  504 |   |   | (168 | ) |   | 10 |   |   | (284 | ) |   |  138 |   |   | (34 | ) |   | (180 | ) |
|  Certificates of deposit                     |                                                            | (1,343 | )                                     |   | 475 |   |   | (107 | ) |   | (975 | ) |   | (835 | ) |   | 2,287 |   |   | (391 | ) |   | 1,061 |   |
| Other borrowings                                  |                                                            | (2     | )                                     |   |  272 |   |   | (41 | ) |   |  229 |   |   | (1 | ) |   |  18 |   |   | (7 | ) |   |  10 |   |
|                                              |                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |                                                            | (1,671 | )                                     |   | 1,251 |   |   | (316 | ) |   | (736 | ) |   | (1,120 | ) |   | 2,443 |   |   | (432 | ) |   | 891 |   |
|                                              |                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in net interest income            | $                                                               | (533   | )                                     | $      |  171 |   | $ | 74 |   | $ | (288 | ) | $ | (1,306 | ) | $ | 691 |   | $ | (62 | ) | $ | (677 | ) |

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Table of Contents

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Table of Contents

|                                     | 2009    |   | 2008    |   |
|------------------------------------------|---------|--------|---------|--------|
|                                     | Fourth  |   | Third   |   | Second |   | First |   | Fourth |   | Third |   | Second |   | First |   |
|                                     | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   |
|                                     |    |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                          | $       | 3,178  |    |   | 3,207 |   |   | 3,174 |   |   | 3,219 |   | $ | 3,313 |   |   | 3,457 |   |   | 3,455 |   |   | 3,577 |   |
| Interest expense                         |    | 1,311  |    |   | 1,580 |   |   | 1,660 |   |   | 1,664 |   |   | 1,794 |   |   | 1,674 |   |   | 1,707 |   |   | 1,776 |   |
| Net interest income                      |    | 1,867  |    |   | 1,627 |   |   | 1,514 |   |   | 1,555 |   |   | 1,519 |   |   | 1,783 |   |   | 1,748 |   |   | 1,801 |   |
| Provision for loan  losses     |    | 1,046  |    |   | 1,981 |   |   | 863 |   |   | 1,069 |   |   | 2,331 |   |   | 896 |   |   | 273 |   |   | 559 |   |
| Loss before income taxes                 |    | (1,771 | )       |   | (2,714 | ) |   | (1,970 | ) |   | (1,234 | ) |   | (2,675 | ) |   | (1,036 | ) |   | (469 | ) |   | (618 | ) |
| Net loss                                 |    | (5,773 | )       |   | (1,580 | ) |   | (1,093 | ) |   | (762 | ) |   | (1,663 | ) |   | (643 | ) |   | (291 | ) |   | (381 | ) |
| Basic loss per common share              |    | (2.85  | )       |   | (.81 | ) |   | (.58 | ) |   | (.42 | ) |   | (.81 | ) |   | (.31 | ) |   | (.14 | ) |   | (.20 | ) |
| Diluted loss per common share            |    | (2.85  | )       |   | (.81 | ) |   | (.58 | ) |   | (.42 | ) |   | (.81 | ) |   | (.31 | ) |   | (.14 | ) |   | (.20 | ) |
| Cash dividends declared per common share |    | -      |    |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |

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Table of Contents

Consolidated Balance Sheets

|                                                                                                               |  December 31, |
|--------------------------------------------------------------------------------------------------------------------|--------------------|
|                                                                                                               |               |   | 2008 |   |
| Assets                                                                                                             |               |
| Cash and due from banks                                                                                            | $                  | 2,889 |   | 2,826 |   |
| Federal funds sold                                                                                                 |               | - |   | 2,384 |   |
| Interest-bearing deposits with banks                                                                               |               | 10,043 |   | 247 |   |
|                                                                                                               |               |   |   |   |   |
| Total cash and cash equivalents                                                                                    |               | 12,932 |   | 5,457 |   |
|                                                                                                               |               |   |   |   |   |
| Securities available for sale                                                                                      |               | 31,752 |   | 33,238 |   |
| Security held to maturity (market value of $1)                                                                     |               | - |   | 1 |   |
| Loans, net of allowance for loan losses of $4,730 and $2,552                                                       |               | 184,312 |   | 184,182 |   |
| Premises and equipment, net                                                                                        |               | 5,432 |   | 5,881 |   |
| Federal Home Loan Bank stock, at cost                                                                              |               | 1,087 |   | 853 |   |
| Foreclosed assets                                                                                                  |               | 6,719 |   | 1,714 |   |
| Accrued interest receivable                                                                                        |               | 1,201 |   | 1,355 |   |
| Deferred income taxes, net                                                                                         |               | - |   | 1,654 |   |
| Bank-owned life insurance                                                                                          |               | 3,017 |   | 2,789 |   |
| Other assets                                                                                                       |               | 1,751 |   | 2,049 |   |
|                                                                                                               |               |   |   |   |   |
| Total assets                                                                                                       | $                  | 248,203 |   | 239,173 |   |
|                                                                                                               |               |   |   |   |   |
| Liabilities and Stockholders' Equity                                                                               |               |   |   |   |   |
| Liabilities:                                                                                                       |               |   |   |   |   |
| Non-interest bearing demand deposits                                                                               |               | 18,925 |   | 19,492 |   |
| Savings, NOW and money-market deposits                                                                             |               | 60,691 |   | 39,458 |   |
| Time deposits                                                                                                      |               | 136,758 |   | 141,733 |   |
|                                                                                                               |               |   |   |   |   |
| Total deposits                                                                                                     |               | 216,374 |   | 200,683 |   |
|                                                                                                               |               |   |   |   |   |
| Official checks                                                                                                    |               | 960 |   | 1,217 |   |
| Federal Home Loan Bank advances                                                                                    |               | 14,600 |   | 11,100 |   |
| Other liabilities                                                                                                  |               | 1,630 |   | 1,277 |   |
|                                                                                                               |               |   |   |   |   |
| Total liabilities                                                                                                  |               | 233,564 |   | 214,277 |   |
|                                                                                                               |               |   |   |   |   |
| Commitments (Notes 4, 7 and 17)                                                                                    |               |   |   |   |   |
|                                                                                                               |               |   |   |   |   |
| Stockholders' equity:                                                                                              |               |   |   |   |   |
| Preferred stock, $.01 par value; 2,000,000 shares authorized, 5,800 shares of Series A issued and outstanding |               | - |   | - |   |
| Additional paid-in capital, preferred                                                                              |               | 5,800 |   | 5,800 |   |
| Preferred stock discount                                                                                           |               | (429 |   | (521 | ) |
| Common stock, $.01 par value; 25,000,000 shares authorized, 2,058,047 shares issued and outstanding                |               | 20 |   | 20 |   |
| Additional paid-in capital, common                                                                                 |               | 24,444 |   | 24,393 |   |
| Accumulated deficit                                                                                                |               | (14,572 |   | (4,982 | ) |
| Accumulated other comprehensive (loss) income                                                                      |               | (624 |   | 186 |   |
|                                                                                                               |               |   |   |   |   |
| Total stockholders' equity                                                                                         |               | 14,639 |   | 24,896 |   |
|                                                                                                               |               |   |   |   |   |
| Total liabilities and stockholders' equity                                                                         | $                  | 248,203 |   | 239,173 |   |

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Table of Contents

|                                                                               | Year Ended December 31, |        |
|------------------------------------------------------------------------------------|-------------------------|-------------|
| Interest income:                                                                   | 2009                    |        | 2008 |   |
| Loans                                                                              | $                       | 11,287      |   |   | 12,988 |   |
| Securities                                                                         |                    | 1,468       |   |   | 673 |   |
| Other                                                                              |                    | 23          |   |   | 141 |   |
|                                                                               |                    |        |   |   |   |   |
| Total interest income                                                              |                    | 12,778      |   |   | 13,802 |   |
|                                                                               |                    |        |   |   |   |   |
| Interest expense:                                                                  |                    |        |   |   |   |   |
| Deposits                                                                           |                    | 5,972       |   |   | 6,937 |   |
| Other borrowings                                                                   |                    |  243   |   |   |  14 |   |
|                                                                               |                    |        |   |   |   |   |
| Total interest expense                                                             |                    | 6,215       |   |   | 6,951 |   |
|                                                                               |                    |        |   |   |   |   |
| Net interest income                                                                |                    | 6,563       |   |   | 6,851 |   |
| Provision for loan losses                                                          |                    | 4,959       |   |   | 4,059 |   |
| Net interest  income after provision for loan losses                     |                    | 1,604       |   |   | 2,792 |   |
|                                                                               |                    |        |   |   |   |   |
| Non-interest income:                                                               |                    |        |   |   |   |   |
| Service charges and fees on deposit accounts                                       |                    | 725         |   |   | 532 |   |
| Loan brokerage fees                                                                |                    | 117         |   |   | 158 |   |
| Gain on sale of loans held for sale                                                |                    | 233         |   |   | 15 |   |
| Gain on sale of securities available for sale                                      |                    | 520         |   |   | 41 |   |
| Write-down of other assets                                                         |                    | (548        | ) |   | - |   |
| Income from bank-owned life insurance                                              |                    | 120         |   |   | 108 |   |
| Other fees                                                                         |                    | 22          |   |   | 20 |   |
|                                                                               |                    |        |   |   |   |   |
| Total non-interest income                                                          |                    | 1,189       |   |   | 874 |   |
|                                                                               |                    |        |   |   |   |   |
| Non-interest expenses:                                                             |                    |        |   |   |   |   |
| Salaries and employee benefits                                                     |                    | 3,820       |   |   | 3,974 |   |
| Occupancy and equipment                                                            |                    | 1,564       |   |   | 1,528 |   |
| Advertising                                                                        |                    | 245         |   |   | 434 |   |
| Data processing                                                                    |                    | 589         |   |   | 589 |   |
| Supplies                                                                           |                    | 118         |   |   | 178 |   |
| Professional fees                                                                  |                    | 757         |   |   | 589 |   |
| Loss on sale of foreclosed assets                                                  |                    | 142         |   |   | - |   |
| Write-down of foreclosed assets                                                    |                    | 880         |   |   | - |   |
| Expenses on foreclosed assets                                                      |                    | 899         |   |   | 55 |   |
| FDIC insurance                                                                     |                    | 610         |   |   | 185 |   |
| Other                                                                              |                    |  858   |   |   |  932 |   |
|                                                                               |                    |        |   |   |   |   |
| Total non-interest expenses                                                        |                    | 10,482      |   |   | 8,464 |   |
|                                                                               |                    |        |   |   |   |   |
| Loss before income taxes (benefit)                                                 |                    | (7,689      | ) |   | (4,798 | ) |
| Income tax expense (benefit)                                                       |                    | 1,519       |   |   | (1,820 | ) |
|                                                                               |                    |        |   |   |   |   |
| Net loss                                                                           |                    | (9,208      | ) |   | (2,978 | ) |
| Preferred stock dividend requirements and amortization of preferred stock discount |                    |  382   |   |   | 26 |   |
| Net loss available to common shareholders                                          | $                       | (9,590      | ) |   | (3,004 | ) |
|                                                                               |                    |        |   |   |   |   |
|     Net Loss per common share (basic)                          | $                       |  (4.66 | ) |   |  (1.46 | ) |
|     Net Loss per common share (diluted)                        | $                       |  (4.66 | ) |   |  (1.46 | ) |
|                                                                               |                    |        |   |   |   |   |
| Weighted-average number of common shares, basic                                    |                    | 2,058,047   |   |   | 2,058,047 |   |
| Weighted-average number of common shares, diluted                                  |                    | 2,058,047   |   |   | 2,058,047 |   |

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Table of Contents

|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |   Accumulated                                            |                              |
|-----------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------|-------------------------------------------------------|---------------------------------------------------------------------------------------|---------------------------------------------------------------|-----------------------------------|
|                                                                                                                              | ­­­­­­­­­­­­­­­­­­­­              Preferred Stock |                                        |                Common Stock |                                  |         Other |                                                                                  |
|                                                                                                                              |                                                                                                                                                                                                                        | Additional                                  |                                                                                                   |                                  |                                                  |                                                                                  | Additional                                                    |                              | Compre- | Total |
|                                                                                                                              |                                                                                                                                                                                                                        | Paid-In                                     |                                                                                                   |                                  | Paid-In                                               | Accumulated                                                                           | hensive                                                       | Stockholders’               |
|                                                                                                                              | Shares                                                                                                                                                                                                                      |    Amount                         | Capital                                                                                                | Discount                              |                                                  | Shares                                                                                | Amount                                                        | Capital                           | Deficit |  Income (Loss) | Equity |
| Balance at December 31, 2007                                                                                                      | -                                                                                                                                                                                                                           | $      -      | -                                                                                                      | -                                     |                                                  | 2,058,047                                                                             | $20                                                           | 23,813                            |      (1,936) |        34 |   21,931 |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |    |   |
| Comprehensive income:                                                                                                             |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Net loss                                                                                                                          | -                                                                                                                                                                                                                           | -                                           | -                                                                                                      | -                                     |                                                  | -                                                                                     | -                                                             | -                                 |    (2,978) | - | (2,978) |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Net change in unrealized gain on securities available for sale, net of tax of $92                                                 | -                                                                                                                                                                                                                           | -                                           | -                                                                                                      | -                                     |                                                  | -                                                                                     | -                                                             | -                                 | - | 152 |           152 |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Comprehensive loss                                                                                                                |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |       (2,826) |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Proceeds from issuance of $5,800 shares of Series A to US Treasury                                                                | 5,800                                                                                                                                                                                                                       | -                                           |      5,800                                                                         | -                                     |                                                  | -                                                                                     | -                                                             |  -                           | - | - | 5,800 |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Allocation of estimated fair value of common stock warrants issued to US Treasury in tandem with preferred stock to common equity | -                                                                                                                                                                                                                           | -                                           | -                                                                                                      | (526)                                 |                                                  | -                                                                                     | -                                                             |      526 | - | - | - |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
|    Preferred stock dividend requirements and mortization of preferred stock discount                                    |   -                                                                                                                                                                                                                    |   -                                    | -                                                                                                      | 5                                     |                                                  | -                                                                                     | -                                                             |    -                    | (26) | - | (21) |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Share-based compensation                                                                                                          | -                                                                                                                                                                                                                           | -                                           | -                                                                                                      | -                                     |                                                  | -                                                                                     | -                                                             | 54                                | - | - | 54 |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Cumulative effect adjustment related to deferred compensation plans, net of tax benefit of $25 (see note 9)                       |       -                                                                                                                                                                                       |        - |       -                                                                  |       - |                                                  |               - |           - |     -              |          (42) |        - |        (42) |
|                                                                                                                              |                                                                                                                                                                                                                        |                                        |                                                                                                   |                                  |                                                  |                                                                                  |                                                          |                              |   |   |   |
| Balance at December 31, 2008                                                                                                      | 5,800                                                                                                                                                                                                                       | $      -           | 5,800                                                                                                  | (521)                                 |                                                  | 2,058,047                                                                             | $20                                                           | 24,393                            | (4,982) |   186 |       24,896 |

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Table of Contents

|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    | Accumulated                                 |                                                                                 |
|------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|--------------------------------------------------------------|---------------------------------------------------------------------------------------|---------------------------------------------------------------|----------------------------------------|---------------------------------------------------------|---------------------------------------------|--------------------------------------------------------------------------------------|
|                                                                               | ­­­­­­­­­­­­­­­­­­­­                       Preferred Stock |                             |                   Common Stock |                                                                       |   Other         |                                                                                  |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |    Additional                                                                                                  |                                                                       |                                                         |                                                                                  |                                                          | Additional                             |                                                    | Compre-                                     | Total                                                                                |
|                                                                               |                                                                                                                                                                                                                                                                              | Paid-In                          |                                                                                                                     |                                                                       | Paid-In                                                      | Accumulated                                                                           | hensive                                                       | Stockholders’                    |
|                                                                               | Shares                                                                                                                                                                                                                                                                            |     Amount   | Capital                                                                                                                  | Discount                                                                   |                                                         | Shares                                                                                |      Amount                               | Capital                                | Deficit                                                 | Income (Loss)                               | Equity                                                                               |
| Balance at December 31, 2008                                                       | 5,800                                                                                                                                                                                                                                                                             |    $  - | 5,800                                                                                                                    | (521)                                                                      |                                                         | 2,058,047                                                                             | $20                                                           | 24,393                                 | (4,982)                                                 |   186                             |              24,896 |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        |                                                                                 |
| Comprehensive loss:                                                                |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        |                                                                                 |
| Net loss                                                                           | -                                                                                                                                                                                                                                                                                 | -                                | -                                                                                                                        | -                                                                          |                                                         | -                                                                                     | -                                                             | -                                      |    (9,208)                               | -                                           | (9,208)                                                                              |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        |                                                                                 |
| Net change in unrealized gain on securities available for sale                     | -                                                                                                                                                                                                                                                                                 | -                                | -                                                                                                                        | -                                                                          |                                                         | -                                                                                     | -                                                             | -                                      | -                                                       | (810)                                       | (810)                                                                                |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        |                                                                                 |
| Comprehensive Loss                                                                 |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        | (10,018)                                                                             |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        |                                                                                 |
| Preferred stock dividend requirements and amortization of preferred stock discount | -                                                                                                                                                                                                                                                                                 | -                                | -                                                                                                                        |             92 |                                                         | -                                                                                     | -                                                             | -                                      | (382)                                                   | -                                           | (290)                                                                                |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        |                                                                                 |
| Share-based compensation                                                           | -                                                                                                                                                                                                                                                                                 | -                                | -                                                                                                                        | -                                                                          |                                                         |               - |           - |       51 |          - |        - | 51                                                                                   |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                                                     |                                                                       |                                                         |                                                                                  |                                                          |                                   |                                                    |                                        |                                                                                 |
| Balance at December 31, 2009                                                       | 5,800                                                                                                                                                                                                                                                                             | $ -                              | 5,800                                                                                                                    |       (429)                                  |                                                         | 2,058,047                                                                             | $20                                                           |  24,444                           |   (14,572)                                    | (624)                                       |          14,639                              |

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Table of Contents

|                                                                                  | Year Ended December 31, |        |
|---------------------------------------------------------------------------------------|-------------------------|-------------|
|                                                                                  |    2009       |        | 2008 |   |
| Cash flows from operating activities:                                                 |                    |        |   |   |
| Net loss                                                                              | $                       | (9,208      | ) |   | (2,978 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities:           |                    |        |   |   |   |   |
| Depreciation and amortization                                                         |                    | 467         |   |   | 468 |   |
| Provision for loan losses                                                             |                    | 4,959       |   |   | 4,059 |   |
| Amortization of loan fees, net                                                        |                    | (105        | ) |   | (180 | ) |
| Deferred income taxes                                                                 |                    | 1,766       |   |   | (1,093 | ) |
| Net amortization of premiums and discounts on securities                              |                    | 154         |   |   | 11 |   |
| Gain on sale of loans held for sale                                                   |                    | (233        | ) |   | (15 | ) |
| Gain on sale of securities available for sale                                         |                    | (520        | ) |   | (41 | ) |
| Proceeds from sale of loans held for sale                                             |                    | 5,876       |   |   | 400 |   |
| Originations of loans held for sale                                                   |                    | (5,643      | ) |   | (385 | ) |
| Write-down of foreclosed assets                                                       |                    | 880         |   |   | - |   |
| Loss on sale of foreclosed assets                                                     |                    | 142         |   |   | - |   |
| Decrease (increase) in accrued interest receivable                                    |                    | 154         |   |   | (372 | ) |
| Decrease (increase) in other assets                                                   |                    | 298         |   |   | (1,173 | ) |
| Increase in official checks and other liabilities                                     |                    | 81          |   |   | 361 |   |
| Income from bank-owned life insurance                                                 |                    | (120        | ) |   | (108 | ) |
| Share-based compensation                                                              |                    | 51          |   |   | 54 |   |
|                                                                                  |                    |        |   |   |   |   |
| Net cash used in operating activities                                                 |                    | (1,001      | ) |   | (992 | ) |
|                                                                                  |                    |        |   |   |   |   |
| Cash flows from investing activities:                                                 |                    |        |   |   |   |   |
| Maturities and calls of securities available for sale                                 |                    | 16,400      |   |   | - |   |
| Purchase of securities available for sale                                             |                    | (52,041     | ) |   | (34,056 | ) |
| Principal payments on securities available for sale                                   |                    | 2,919       |   |   | 650 |   |
| Proceeds from sale of securities available for sale                                   |                    | 33,652      |   |   | 7,231 |   |
| Principal payments on securities held to maturity                                     |                    | 1           |   |   | 3 |   |
| Net increase in loans                                                                 |                    | (14,224     | ) |   | (17,524 | ) |
| Purchase of premises and equipment                                                    |                    | (18         | ) |   | (883 | ) |
| Purchase of Federal Home Loan Bank stock                                              |                    | (234        | ) |   | (573 | ) |
| Purchase of  bank-owned life insurance                                      |                    | (108        | ) |   | - |   |
| Proceeds from the sale of foreclosed assets                                           |                    |  3,213 |   |   | - |   |
|                                                                                  |                    |        |   |   |   |   |
| Net cash used in investing activities                                                 |                    | (10,440     | ) |   | (45,152 | ) |
|                                                                                  |                    |        |   |   |   |   |
| Cash flows from financing activities:                                                 |                    |        |   |   |   |   |
| Net increase in deposits                                                              |                    | 15,691      |   |   | 28,006 |   |
| Cash paid to preferred stockholder                                                    |                    | (275        | ) |   | - |   |
| Proceeds from Federal Home Loan Bank advances                                         |                    | 3,500       |   |   | 11,000 |   |
| Proceeds from the issuance of 5,800 shares of Series A preferred stock to US Treasury |                    |  -     |   |   | 5,800 |   |
|                                                                                  |                    |        |   |   |   |   |
| Net cash provided by financing activities                                             |                    | 18,916      |   |   | 44,806 |   |
|                                                                                  |                    |        |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                  |                    | 7,475       |   |   | (1,338 | ) |
|                                                                                  |                    |        |   |   |   |   |
| Cash and cash equivalents at beginning of year                                        |                    | 5,457       |   |   | 6,795 |   |
|                                                                                  |                    |        |   |   |   |   |
| Cash and cash equivalents at end of year                                              | $                       | 12,932      |   |   | 5,457 |   |

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Table of Contents

|                                                                                                                      | Year Ended December 31,                               |     |
|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------|----------|
|                                                                                                                      |          2009 |     |          2008 |   |
| Supplemental disclosure of cash flow information:                                                                         |                                                  |     |   |   |
| Cash paid (received) during the year for:                                                                                 |                                                  |     |   |   |
| Interest, net of interest capitalized of $21 in 2008                                                                      | $                                                     | 6,347    |   |   | 6,732 |   |
|                                                                                                                      |                                                  |     |   |   |   |   |
| Income taxes                                                                                                              | $                                                     | (1,011   | ) |   | 75 |   |
|                                                                                                                      |                                                  |     |   |   |   |   |
| Non-cash transactions:                                                                                                    |                                                  |     |   |   |   |   |
| Accumulated other comprehensive income (loss), net change in unrealized gain on securities available for sale, net of tax | $                                                     | (810     | ) |   | 152 |   |
|                                                                                                                      |                                                  |     |   |   |   |   |
| Cumulative effect adjustment related to deferred compensation plans, net of tax benefit of $25                            | $                                                     |  -  |   |   |  (42 | ) |
|                                                                                                                      |                                                  |     |   |   |   |   |
| Transfer of loans to foreclosed assets                                                                                    | $                                                     | 9,240    |   |   | 1,714 |   |
|                                                                                                                      |                                                  |     |   |   |   |   |
| Amortization of preferred stock discount                                                                                  | $                                                     |  92 |   |   | 5 |   |
|                                                                                                                      |                                                  |     |   |   |   |   |
| Accrual of preferred stock dividend at end of period                                                                      | $                                                     |  37 |   |   | 21 |   |
|                                                                                                                      |                                                  |     |   |   |   |   |
|                                                                                                                      |                                                  |     |   |   |   |   |

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|   | Organization.  FPB Bancorp, Inc. (the "Holding Company") owns 100% of the outstanding common stock of First Peoples Bank (the "Bank") and the Bank owns 100% of the outstanding common stock of Treasure Coast Holdings, Inc., (collectively referred to as the "Company"). The Holding Company operates as a one-bank holding company and its only business activity is the operation of the Bank.  The Bank is a state (Florida)-chartered commercial bank and its deposits are insured up to the maximum amounts by the Federal Deposit Insurance Corporation, which are currently $250,000 for all qualified deposits through December 31, 2013, and unlimited for non-interest bearing transaction accounts, through  June 30, 2010. The Bank offers a variety of community banking services to individual and corporate customers through its six banking offices located in Port St. Lucie, Stuart, Fort Pierce, Vero Beach and Palm City, Florida.  The newest office opened in May, 2008, on Gatlin Boulevard in Port St. Lucie, Florida.  In addition, the Palm City, Florida office opened in January of 2008 and an 11,000 square foot Operations Center in Jensen Beach, Florida, opened in March of 2007. The new subsidiary, Treasure Coast Holdings, Inc., was incorporated in June 2008 for the sole purpose of managing foreclosed assets. |
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|   | The following is a description of the significant accounting policies and practices followed by the Company, which conform with U.S. generally accepted accounting principles and prevailing practices within the banking industry. |
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|   | Subsequent Events.  Management has evaluated events occurring subsequent to the balance sheet date through March 15, 2010, determining no events require additional disclosure in these consolidated financial statements. |
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|   | Basis of Presentation.  The consolidated financial statements include the accounts of the Holding Company, the Bank and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. |
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|   | Use of Estimates.  In preparing consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, foreclosed assets and deferred tax assets. |
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|   | Cash and Cash Equivalents.  For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks, interest-bearing deposits with banks and federal funds sold, all of which mature within ninety days. |
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|   |  Securities.  Securities may be classified as either trading, held to maturity or available for sale. Trading securities are held principally for resale and recorded at their fair values.  Unrealized gains and losses on trading securities are included immediately in operations.  Held-to-maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost.  Available-for-sale securities consist of securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses, net of tax, on available-for-sale securities are reported as a net amount in accumulated other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the specific-identification method. Premiums and discounts on securities are recognized in interest income using the interest method over the period to maturity. |
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|   | Loans.  Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance, adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs. |
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|   | Commitment fees and loan origination fees are deferred and certain direct origination costs are capitalized. Both are recognized as an adjustment of the yield of the related loan. |
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|   | The accrual of interest on loans is discontinued at the time the loan is ninety days delinquent unless the loan is well collateralized and in process of collection.  In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. |
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|   | All interest accrued but not collected for loans that are placed on non-accrual or charged-off is reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. |
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|   | Loans Held for Sale.  The Company originates loans guaranteed by the U.S. Small Business Administration, the guaranteed portion of which may be sold at a premium.  These loans are carried at the lower of cost or estimated fair value in the aggregate. There were no loans held for sale at December 31, 2009 or 2008. |
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|   | Allowance for Loan Losses.  The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to operations.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance. |
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|   | Allowance for Loan Losses, Continued. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. |
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|   | The allowance consists of specific and general components.  The specific component relates to loans that are classified as impaired. For such loans, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers all other loans and is based on historical loss experience adjusted for qualitative factors. |
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|   | A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on all loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. |
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|   | Foreclosed Assets.  Assets acquired through, or in lieu of, loan foreclosures are to be sold and are initially recorded at the lower of the related loan balance or the fair value at the date of foreclosure establishing a new cost basis.  After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less costs to sell.  Revenue and expenses from operations are included in the consolidated statement of operations. |
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|   | Premises and Equipment.  Land is stated at cost.  Building and improvements, leasehold improvements, and furniture, fixtures and equipment are stated at cost less accumulated depreciation and amortization.  Depreciation and amortization expense are computed using the straight-line method over the estimated useful life of each type of asset or the length of time the Company expects to lease the property, if shorter. |
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|   | Transfer of Financial Assets.  Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. |
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|   |   Income Taxes.  The Company follows accounting guidance relating to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.  The Company determines deferred income taxes using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. |
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|   | Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.  Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination.  The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any.  A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information.  The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management's judgment.  Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. As of December 31, 2009, the Company recorded a $4.4 million valuation allowance against the deferred tax asset of $4.4 million. |
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|   | The Company recognizes interest and penalties on income taxes as a component of income tax (benefit) expense. |
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|   | Share-Based Compensation. The Company has adopted the fair value recognition provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718, Stock Compensation ("ASC 718"), and expenses the fair value of any stock options as they vest.  Under the fair value recognition provisions of ASC 718, the Company recognizes stock-based compensation in the accompanying consolidated statement of operations. |
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|   | Off-Balance-Sheet Instruments.  In the ordinary course of business the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, available lines of credit and standby letters of credit.  Such financial instruments are recorded in the consolidated financial statements when they are funded. |
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|   | Loss Per Common Share. Loss per common share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the year.  In 2009 and 2008, outstanding stock options and warrants are not considered dilutive due to the losses incurred by the Company. |
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|   | Fair Value Measurements. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy describes three levels of inputs that may be used to measure fair value: |
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|   | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
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|   | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services. |
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|   | Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort. |
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|   | The following describes valuation methodologies for assets and liabilities measured at fair value: |
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|   |  Securities Available for Sale. Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.  Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases where there is limited activity or less transparency around inputs to |
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|   | Impaired Loans. Estimates of fair value are determined based on a variety of information, including the use of available appraisals, estimates of market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company's management related to values of properties in the Company's market areas. Management takes into consideration the type, location and occupancy of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value. Accordingly, fair value estimates for impaired loans are classified as Level 3. |
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|   | Foreclosed Assets. The Company's foreclosed assets are recorded at lower of cost or fair market value less estimated costs to sell.  Estimates of fair values are determined based on a variety of information, including the use of available appraisals, estimates of market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company's senior lending officers related to values of properties in the Company's market areas. These officers take into consideration the type, location and occupancy of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value. Accordingly, the fair values estimates for foreclosed assets are classified as Level 3. |
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|   | Fair Values of Financial Instruments. The fair value of a financial instrument is the current        amount that would be exchanged between willing parties, other than in a forced liquidation.     Fair value is best determined based upon quoted market prices.  However, in many instances,   there are no quoted market prices for the Company's various financial instruments.  In cases     where quoted market prices are not available, fair values are based on estimates using present   value or other valuation techniques. Those techniques are significantly affected by the               assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument or may not necessarily represent the underlying fair value of the Company.  The following methods and assumptions were used by the Company in estimating fair values of financial instruments: |
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|   | Cash and Cash Equivalents.  The carrying amounts of cash and cash equivalents approximate      their fair value. |
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|   |  Securities. The fair value for securities are based on the framework for measuring fair value. |
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|   | Loans.  For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values.  Fair values for fixed-rate mortgage (e.g. one-to-four     family residential), commercial real estate and commercial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to     borrowers of similar credit quality. Fair values for impaired loans are based on the framework for measuring fair value. |
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|   | Federal Home Loan Bank Stock.  Fair value of the Company's investment in Federal Home Loan Bank stock is based on its redemption value, which is its cost of $100 per share.  |
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|   | Deposit Liabilities.  The fair values disclosed for demand, NOW, money-market and savings deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts).  Fair values for fixed-rate time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on time deposits to a schedule of aggregated expected monthly maturities of time deposits. |
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|   | Accrued Interest.  The carrying amounts of accrued interest approximate their fair values. |
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|   | Federal Home Loan Bank Advances.  The fair value of Federal Home Loan Bank advances are estimated using a discounted cash flow analysis based on the Company's current incremental borrowing rate for similar types of borrowings. |
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|   | Off-Balance-Sheet Instruments.  Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. |
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|   | Comprehensive Loss.  Accounting principles generally require that recognized revenue, expenses, gains and losses be included in operations.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with net loss, are components of comprehensive loss.  The components of other comprehensive loss and related tax effects are as follows (in thousands): |
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|                                                                                                                    |    Before |   |  Tax     |   |   After |   |
|-------------------------------------------------------------------------------------------------------------------------|---------------------|--------|---------------|--------|--------------|--------|
| Year Ended December 31, 2009:                                                                                           |  Tax           |   |   Effect |   |  Tax    |   |
|       Holding losses                                                                      | $                   | (290   | )             |   | -            |   |   | (290 | ) |
|       Gains included in net loss                                                          | $                   | (520   | )             |   | -            |   |   | (520 | ) |
|                Net unrealized holding losses | $                   | (810   | )             |   | -            |   |   | (810 | ) |
|                                                                                                                    |                |   |          |   |         |   |   |   |   |
| Year Ended December 31, 2008:                                                                                           |                |   |          |   |         |   |   |   |   |
|       Holding gains                                                                       | $                   | 285    |          |   | (107         | )      |   | 178 |   |
|       Gains included in net loss                                                          |                | (41    | )             |   | 15           |   |   | (26 | ) |
|                Net unrealized holding gains  | $                   | 244    |          |   | (92          | )      |   | 152 |   |

|   | Recent Accounting Pronouncements.  In 2009, the FASB Accounting Standards Codification ("ASC") became the single source of authoritative generally accepted accounting principles in the United States of America ("GAAP") recognized by the FASB to be applied be nongovernmental entities.  Rules and interpretive releases of the Securities and Exchange Commission ("SEC") are also sources of authoritative GAAP for SEC registrants.  The ASC superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the ASC is non-authoritative. The Company's policies were not affected by the conversion to ASC. |
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|                                                                                | AmortizedCost |    | GrossUnrealizedGains |   | GrossUnrealizedLosses |   | FairValue |    |
|-------------------------------------------------------------------------------------|---------------|---------|----------------------|--------|-----------------------|--------|-----------|---------|
| At December 31, 2009:  Securities available for sale:                     |          |    |                 |   |                  |   |      |    |
|      U.S. Government agency securities                     | $             | 14,620  |                 |   | 2                     |   |      | (290    | ) |   | 14,332 |   |
|      Mortgage-backed securities                            |          | 5,182   |                 |   | 4                     |   |      | (99     | ) |   | 5,087 |   |
|      Asset-backed securities                               |          | 6,282   |                 |   | -                     |   |      | (185    | ) |   | 6,097 |   |
|      CMO securities                                        |          | 6,292   |                 |   |  -               |   |      | (56     | ) |   | 6,236 |   |
|         Total securities available for sale | $             | 32,376  |                 |   |  6               |   |      | (630    | ) |   | 31,752 |   |
|                                                                                |          |    |                 |   |                  |   |      |    |   |   |   |   |
| At December 31, 2008:  Securities available for sale:                     |          |    |                 |   |                  |   |      |    |   |   |   |   |
|      U.S. Government agency securities                     | $             | 16,247  |                 |   | 128                   |   |      | -       |   |   | 16,375 |   |
|      Mortgage-backed securities                            |          | 16,693  |                 |   | 170                   |   |      |  - |   |   | 16,863 |   |
|                                                                                |          |    |                 |   |                  |   |      |    |   |   |   |   |
|         Total securities available for sale | $             | 32,940  |                 |   |  298             |   |      |  - |   |   | 33,238 |   |
|                                                                                |          |    |                 |   |                  |   |      |    |   |   |   |   |
|   Security held to maturity -                                             |          |    |                 |   |                  |   |      |    |   |   |   |   |
|      Mortgage-backed security                              | $             |  1 |                 |   | -                     |   |      | -       |   |   | 1 |   |
|                                                                                |          |    |                 |   |                  |   |      |    |   |   |   |   |

|                          | Year Ended December 31, |      |
|-------------------------------|-------------------------|-----------|
|                          | 2009                    |      | 2008 |   |
|                          |                    |      |   |   |
| Principal received from sales | $                       | 33,641    |   | $ | 7,231 |   |
|                          |                    |      |   |   |   |   |
| Gross gains                   | $                       |  520 |   | $ | 41 |   |

|   | Information pertaining to securities with gross unrealized losses at December 31, 2009, aggregated by investment category and length of time that individual securities available for sale have been in a continuous loss position, follows (in thousands): |
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| At December 31, 2009:                                                 | Gross Unrealized Losses |   | ApproximateFairValue |   |
|-----------------------------------------------------------------------|-------------------------|--------|----------------------|--------|
|       U.S. Government agency securities | $                       | (290   | )                    | $      | 10,842 |   |
|      Mortgage-backed securities              |                    | (99    | )                    |   | 4,900 |   |
|       Asset-backed securities           |                    | (185   | )                    |   | 6,097 |   |
|       CMO securities                    |                    | (56    | )                    |   | 6,236 |   |
|                                                                  |                    |   |                 |   |   |   |
|      Total                                   | $                       | (630   | )                    | $      | 28,075 |   |

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|                       | Available for Sale |        |
|----------------------------|--------------------|-------------|
|                       | AmortizedCost      |        | FairValue |   |
|                       |               |        |   |   |
| Due from five to ten years |               | 5,864       |   |   | 5,766 |   |
| Due in more than ten years |               | 8,756       |   |   | 8,566 |   |
| Asset-backed securities    |               | 6,282       |   |   | 6,097 |   |
| CMO securities             |               | 6,292       |   |   | 6,236 |   |
| Mortgage-backed securities |               |  5,182 |   |   | 5,087 |   |
|                       |               |        |   |   |   |   |
|                       | $                  | 32,376      |   | $ | 31,752 |   |

|   | At December 31, 2009 and 2008, securities with a carrying value of $31,332,000 and $24,135,000, respectively, were pledged for Federal Home Loan Bank advances, to the Federal Reserve Bank for Treasury Tax and Loan (TT&L) transactions, and the State of Florida as collateral for public funds. |
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|   | Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. |
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|   |    |
|--------|--------------|

|   | The unrealized losses on fifteen investment securities available for sale were caused by market conditions.  It is expected that the securities would not be settled at a price less than the par value of the investments. Because the decline in fair value is attributable to market conditions and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired. |
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|                                                                                                                    |  At December 31, |    |
|-------------------------------------------------------------------------------------------------------------------------|-----------------------|---------|
|                                                                                                                    |    2009     |    | 2008 |   |
|                                                                                                                    |                  |    |   |   |
| Commercial                                                                                                              | $                     | 63,815  |   |   | 63,768 |   |
| Commercial real estate                                                                                                  |                  | 106,803 |   |   | 94,675 |   |
| Construction                                                                                                            |                  | 1,081   |   |   | 9,793 |   |
| Consumer                                                                                                                |                  | 17,207  |   |   | 18,762 |   |
| Residential real estate                                                                                                 |                  | 790     |   |   | 324 |   |
|                                                                                                                    |                  |    |   |   |   |   |
|                   Total loans |                  | 189,696 |   |   | 187,322 |   |
|                                                                                                                    |                  |    |   |   |   |   |
| Deduct:                                                                                                                 |                  |    |   |   |   |   |
|        Deferred loan costs and fees, net                                             |                  | (654    | ) |   | (588 | ) |
|        Allowance for loan losses                                                     |                  | (4,730  | ) |   | (2,552 | ) |
|                                                                                                                    |                  |    |   |   |   |   |
| Loans, net                                                                                                              | $                     | 184,312 |   |   | 184,182 |   |

|                           | Year ended December 31, |   |
|--------------------------------|-------------------------|--------|
|                           | 2009                    |   | 2008 |   |
|                           |                    |   |   |   |
| Beginning balance              | $                       | 2,552  |   |   | 2,393 |   |
| Provision for loan losses      |                    | 4,959  |   |   | 4,059 |   |
| Charge-offs, net of recoveries |                    | (2,781 | ) |   | (3,900 | ) |
|                           |                    |   |   |   |   |   |
| Ending balance                 | $                       | 4,730  |   |   | 2,552 |   |

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|                                                     |    At December 31, |   |
|----------------------------------------------------------|------------------------------|--------|
|                                                     | 2009                         |   | 2008 |   |
| Collateral dependent loans identified as impaired:       |                         |   |   |   |
| Gross loans with no related allowance for losses (1)     | $                            | 7,197  |   |   | 6,960 |   |
|                                                     |                         |   |   |   |   |   |
| Gross loans with related allowance for losses recorded   |                         | 8,443  |   |   | 3,445 |   |
| Less allowances on these loans                           |                         | (2,007 | ) |   | (448 | ) |
|                                                     |                         |   |   |   |   |   |
| Net loans with related allowance                         |                         | 6,436  |   |   | 2,997 |   |
|                                                     |                         |   |   |   |   |   |
| Net investment in collateral dependent impaired loans    |                         | 13,633 |   |   | 9,957 |   |
|                                                     |                         |   |   |   |   |   |
| Noncollateral dependent loans identified as impaired:    |                         |   |   |   |   |   |
| Gross loans with no related allowance for losses         |                         | 1,945  |   |   | 11,017 |   |
|                                                     |                         |   |   |   |   |   |
| Gross loans with related allowance for losses recorded   |                         | 3,645  |   |   | 1,262 |   |
| Less allowance on these loans                            |                         | (79    | ) |   | (38 | ) |
|                                                     |                         |   |   |   |   |   |
| Net loans with related allowance                         |                         | 3,566  |   |   | 1,224 |   |
|                                                     |                         |   |   |   |   |   |
| Net investment in noncollateral dependent impaired loans |                         | 5,511  |   |   | 12,241 |   |
|                                                     |                         |   |   |   |   |   |
| Net investment in impaired loans                         | $                            | 19,144 |   |   | 22,198 |   |

| (1)   | At December 31, 2009, includes loans with partial charge-offs of $734,000 relating to loans with a net carrying value of $915,000. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------|

|                                         |  Year Ended December 31, |   |
|----------------------------------------------|-------------------------------|--------|
|                                         |     2009       |   |     2008 |   |
|  Average investment in impaired loans   | $                             | 21,202 |   |   | 7,498 |   |
|                                         |                          |   |   |   |   |   |
| Interest income recognized on impaired loans | $                             | 404    |   |   | 117 |   |
|                                         |                          |   |   |   |   |   |
| Interest income received on impaired loans   | $                             | 426    |   |   | 103 |   |

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Table of Contents

|                                            | At December 31, |   |
|-------------------------------------------------|-----------------|--------|
|                                            |  2009      |   |  2008 |   |
|                                            |            |   |   |   |
| Non-accrual loans                               | $               | 15,083 |   |   | 10,105 |   |
| Past due ninety days or more but still accruing |            | 907    |   |   | 250 |   |
|                                            | $               | 15,990 |   |   | 10,355 |   |

|                                            | At December 31,  |   |
|-------------------------------------------------|------------------|--------|
|                                            |   2009 |   |   2008 |   |
|                                            |             |   |   |   |
| Non-accrual loans                               | $                | 15,083 |   |   | 10,105 |   |
| Past due ninety days or more but still accruing |             | 907    |   |   | 250 |   |
|                                            | $                | 15,990 |   |   | 10,355 |   |

|                                                                                     | At December 31, |      |
|------------------------------------------------------------------------------------------|-----------------|-----------|
|                                                                                     |   2009     |      |  2008 |   |
| Building and improvements                                                                | $               | 3,936     |   |   | 3,936 |   |
| Land                                                                                     |            | 552       |   |   | 552 |   |
| Furniture, fixtures and equipment                                                        |            | 2,072     |   |   | 2,058 |   |
| Leasehold improvements                                                                   |            |  965 |   |   |  964 |   |
|                                                                                     |            |      |   |   |   |   |
|        Total, at cost                                 |            | 7,525     |   |   | 7,510 |   |
|                                                                                     |            |      |   |   |   |   |
|        Less accumulated depreciation and amortization |            | (2,093    | ) |   | (1,629 | ) |
|                                                                                     |            |      |   |   |   |   |
|        Premises and equipment, net                    | $               | 5,432     |   |   | 5,881 |   |

|   | Interest capitalized and included in construction in process during 2008 was approximately $21,000.  No interest was capitalized during 2009. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company leases its Stuart, Florida branch office facility under a non-cancelable lease. The initial lease term is five years with two five-year renewal options.  In November 2005, the Company signed a ten year lease with four five-year renewals, on a branch building in Vero Beach, Florida which opened in March, 2006.  In February of 2006, the Company signed a fifty year lease, with four ten-year renewal options on a ground lease for the Gatlin Boulevard, Port St. Lucie, Florida  branch site, which opened in May of 2008.  In April of 2006, the Company signed a seven year lease, with two five-year renewal options, on the Operations Center in Jensen Beach, Florida which opened in March of 2007. In May of 2007, the Company signed a 10 year lease with two five-year renewal options for a branch office in Palm City, Florida, which opened in January, 2008. The Company is required to pay an allowable share of common area maintenance, insurance and real estate taxes on these leases. Rent expense under the operating leases during the years ended December 31, 2009 and 2008 was approximately $655,000 and $593,000, respectively. In addition, the Company leases space in its Fort Pierce branch office facility to third parties, one of whom is now on a month-by-month basis. The second lease was renewed in 2009 for a term of five years, with one five-year renewal term. Total lease income was approximately $141,000 and $125,000 in 2009 and 2008, respectively. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|   | At December 31, 2009, future minimum rental commitments, including certain renewal options, under these non-cancelable leases were approximately as follows (in thousands): |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   Year Ending December 31, | OperatingLeaseExpense |   | OperatingLeaseIncome |   |
|-------------------------------------------|-----------------------|--------|----------------------|--------|
| 2010                                      |                  | 509    |                 |   | 17 |   |
| 2011                                      |                  | 521    |                 |   | 17 |   |
| 2012                                      |                  | 539    |                 |   | 17 |   |
| 2013                                      |                  | 548    |                 |   | 17 |   |
| 2014                                      |                  | 559    |                 |   | 11 |   |
| Thereafter                                |                  | 15,209 |                 |   |  - |   |
|                                      |                  |   |                 |   |   |   |
| Total                                     | $                     | 17,885 |                 |   |  79 |   |
|                                      |                  |   |                 |   |   |   |

|   | The aggregate amount of time deposits with a minimum denomination of $100,000 was approximately $44,702,000 and $55,596,000 at December 31, 2009 and 2008, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year Ending December 31, |   | Amount |    |
|--------------------------|--------|--------|---------|
| 2010                     |   | $      | 88,675  |   |
| 2011                     |   |   | 29,793  |   |
| 2012                     |   |   | 15,356  |   |
| 2013                     |   |   | 1,852   |   |
| 2014                     |   |   | 1,082   |   |
|                     |   |   |    |   |
|                     |   | $      | 136,758 |   |
|                     |   |   |    |   |

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Table of Contents

|   | Maturity and interest rate of the advances from the Federal Home Loan Bank of Atlanta ("FHLB") consisted of the following ($ in thousands): |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

| Maturity Year Ending | Fixed or Variable |   |          |   |     At December 31, |   |
|----------------------|-------------------|--------|---------------|--------|------------------------------------|--------|
| December 31,         | Rate              |   | Interest Rate |   |   2009                        |   |    2008 |   |
|                 |              |   |          |   |                               |   |   |   |
| 2009                 | Fixed             |   |          | 1.32   | %                                  |   | - |   | 3,000 |   |
| 2010                 | Fixed             |   |          | 1.81   | %                                  |   | 3,000 |   | 3,000 |   |
| 2010                 | Variable          |   |          | .36    | %                                  |   | 2,500 |   | - |   |
| 2011                 | Fixed             |   |          | 2.31   | %                                  |   | 1,000 |   | 1,000 |   |
| 2011                 | Fixed             |   |          | 1.41   | %                                  |   | 4,000 |   | - |   |
| 2012                 | Fixed             |   |          | 3.05   | %                                  |   | 2,500 |   | 2,500 |   |
| 2013                 | Fixed             |   |          | 3.20   | %                                  |   | 1,500 |   | 1,500 |   |
| 2015                 | Fixed (1)         |   |          | .50    | %                                  |   |  100 |   | 100 |   |
|                 |              |   |          |   |                               |   |   |   |   |   |
|                 |              |   |          |   |                               | $      | 14,600 |   | 11,100 |   |

|   |  (1)    Low interest rate due to being related to FHLB low-housing project lending. |
|--------|---------------------------------------------------------------------------------------------------------|

|   | The advances are collateralized by securities available for sale with a carrying value of approximately $10,039,000 and $13,193,000 at December 31, 2009 and 2008, respectively. In addition, at December 31, 2009, advances were also collateralized by $1,921,000 in cash and $8,107,000 in residential real estate, home equity lines of credit and multi-family loans. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The estimated fair values of the Company's financial instruments were as follows (in thousands): |
|--------|--------------------------------------------------------------------------------------------------|

|                                                          | At December 31, 2009 |    | At December 31, 2008 |   |
|---------------------------------------------------------------|----------------------|---------|----------------------|--------|
|                                                          | CarryingAmount       |    | FairValue            |   | CarryingAmount |   | FairValue |   |
|                                                          |                 |    |                 |   |   |   |   |   |
| Financial assets:                                             |                 |    |                 |   |   |   |   |   |
|      Cash and cash equivalents       | $                    | 12,932  |                 |   | 12,932 |   |   | 5,457 |   |   | 5,457 |   |
|      Securities available for sale   |                 | 31,752  |                 |   | 31,752 |   |   | 33,238 |   |   | 33,238 |   |
|      Securities held to maturity     |                 | -       |                 |   | - |   |   | 1 |   |   | 1 |   |
|      Loans, net                      |                 | 184,312 |                 |   | 184,701 |   |   | 184,182 |   |   | 189,649 |   |
|      Federal Home Loan Bank stock    |                 | 1,087   |                 |   | 1,087 |   |   | 853 |   |   | 853 |   |
|      Accrued interest receivable     |                 | 1,201   |                 |   | 1,201 |   |   | 1,355 |   |   | 1,355 |   |
|                                                          |                 |    |                 |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                        |                 |    |                 |   |   |   |   |   |   |   |   |   |
|      Deposit liabilities             |                 | 216,374 |                 |   | 218,124 |   |   | 200,683 |   |   | 202,475 |   |
|      Federal Home Loan Bank advances |                 | 14,600  |                 |   | 14,618 |   |   | 11,100 |   |   | 11,377 |   |
| Off-balance-sheet financial instruments                       |                 | -       |                 |   | - |   |   | - |   |   | - |   |

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|   | The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments are commitments to extend credit, available lines of credit and standby letters of credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the consolidated balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed-expiration dates or other termination clauses and may require payment of a fee.  Because some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit, is based on management's credit evaluation of the counterparty. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  The credit risk involved in issuing letters of credit is essentially the same as that included in extending loans to customers. The Company generally holds collateral supporting these commitments and management does not anticipate any potential losses if these letters of credit are funded. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Standby letters of credit, available lines of credit and commitments to extend credit typically result in loans with a market interest rate when funded. A summary of Company's financial instruments with off balance sheet risk at December 31, 2009 follows (in thousands): |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Standby letters of credit    | $      |  86 |   |
|------------------------------|--------|----------|--------|
|                         |   |     |   |
| Commitments to extend credit | $      | 3,278    |   |
|                         |   |     |   |
| Available lines of credit    | $      | 14,408   |   |
|                         |   |     |   |

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Table of Contents

|   | The Company grants the majority of its loans to borrowers throughout the Port St. Lucie, Stuart, Palm City, Fort Pierce and Vero Beach, Florida area. Although the Company has a diversified loan portfolio, a significant portion of its borrowers' ability to honor their contracts is dependent upon the economy in St. Lucie County, Martin County and Indian River County, Florida. The Company does not have significant concentrations to any one industry or customer. The Company did have fifteen loans aggregating $11.6 million and eighteen loans aggregating $14.1 million at December 31, 2009 and 2008 respectively, with original maturities of five years or less, where the primary source of repayment is the sale of the related collateral or the conversion of the existing debt into debt at another financial institution. The majority of these loans are located in Martin, St. Lucie and Indian Counties, Florida. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | With the uncertain real estate market in Martin, St. Lucie and Indian River Counties, Florida, in the short-term, obtaining refinancing or sale of the collateral, with terms acceptable to the borrower may be difficult or impossible. While some of these loans have been extended, it is possible others will be extended and/or modified or the loans which have been extended may be extended again. Management is closely monitoring these loans and believes the loan loss allowance at December 31, 2009 is adequate. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2009, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands): |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                               |                            |   | Fair Value Measurements at December 31, 2009 Using          |   |
|------------------------------------|---------------------------------|--------|-------------------------------------------------------------|--------|
|                               | Fair ValueAs ofDecember 31,2009 |   | Quoted PricesIn ActiveMarkets forIdentical Assets (Level 1) |   | Significant OtherObservableInputs (Level 2) |   | Significant UnobservableInputs (Level 3) |   |
|                               |                            |   |                                                        |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities | $                               | 31,752 |                                                        |   |  - |   |   | 31,752 |   |   |  - |   |

|              | At December 31, 2009 |   |    |   | LossesRecorded in |   |
|-------------------|----------------------|--------|---------|--------|-------------------|--------|
|              | Fair                 |   |    |   |              |   |   |   | Total |   | Operations |   |
|              | Value(1)             |   | Level 1 |   | Level 2           |   | Level 3 |   | Losses |   | During 2009 |   |
|              |                 |   |    |   |              |   |   |   |   |   |   |   |
| Impaired loans    | $                    | 7,351  |    |   | -                 |   |   | - |   |   | 7,351 |   |   | (3,173 | ) |   | (2,425 | ) |
| Foreclosed assets |                 | 5,358  |    |   | -                 |   |   | - |   |   | 5,358 |   |   |  (336 | ) |   | (336 | ) |
|              |                 |   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total             | $                    | 12,709 |    |   | -                 |   |   | - |   |   | 12,709 |   |   | (3,509 | ) |   | (2,761 | ) |

| (1)    | In addition, impaired loans and foreclosed real estate with a carrying value of $6.3 million and $1.4 million, respectively, were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value. |
|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | The Company has Deferred Compensation Agreements (the "Agreements") with certain officers and directors which require the Company to provide salary continuation benefits to them upon retirement.  The Agreements require the Company to pay annual benefits for five to fifteen years following their normal retirement ages. The Company has purchased life insurance policies on these officers and directors which although not formerly linked, have estimated future cash values that exceed the estimated future benefits that will be due under these Agreements. The Company recognized income on the life insurance policies, net of benefit expense accrued on the Agreements, of $96,000 in 2009 and $84,000 in 2008. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company is required to recognize a liability for postretirement death benefits provided under endorsement split-dollar agreements. An endorsement split-dollar agreement is an arrangement whereby an employer owns a life insurance policy that covers the life of an employee and, pursuant to a separate agreement, endorses a portion of the policy’s death benefits to the insured employee’s beneficiary. The Company has entered into Supplemental Death Benefit Agreements with certain of its directors and executive officers pursuant to which the Company has agreed to pay a portion of the death benefit payable under certain life insurance policies owned by the Company to the directors’ or executives’ beneficiaries upon their death. As a result, the Company recognized a cumulative effect adjustment (increase) to accumulated deficit of ($42,000) representing additional liability of $67,000 on January 1, 2008 relating to the agreements, net of deferred income taxes of $25,000. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                                                                                                                         |   |   Year Ended December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                                                         |   | 2009                           |   |   | 2008 |   |
| Current:                                                                                                                     |   |                           |   |   |   |   |
|      Federal                                                                                        |   | $                              | (247   | ) |   |   | (727 | ) |
|      State                                                                                          |   |                           | -      |   |   |   | - |   |
|                  Total current          |   | $                              | (247   | ) |   |   | (727 | ) |
|                                                                                                                         |   |                           |   |   |   |   |   |   |
| Deferred:                                                                                                                    |   |                           |   |   |   |   |   |   |
|      Federal                                                                                        |   |                           | (2,241 | ) |   |   | (829 | ) |
|      State                                                                                          |   |                           | (426   | ) |   |   | (264 | ) |
|      Valuation allowance                                                                            |   |                           | 4,433  |   |   |   |  - |   |
|                  Total deferred         |   |                           | 1,766  |   |   |   | (1,093 | ) |
|                                                                                                                         |   |                           |   |   |   |   |   |   |
|                  Income taxes (benefit) |   | $                              | 1,519  |   |   |   | (1,820 | ) |
|                                                                                                                         |   |                           |   |   |   |   |   |   |

|                                                                                     |       Year Ended December 31, |     |
|------------------------------------------------------------------------------------------|--------------------------------------------------------|----------|
|                                                                                     | 2009                                                   |     | 2008 |   |
|                                                                                     |  Amount                                           |     | % ofPretaxLoss |   |  Amount |   | % ofPretaxLoss |   |
|                                                                                     |                                                   |     |   |   |   |   |   |   |
| Income taxes (benefit) at statutory rate                                                 | $                                                      | (2,614   | ) |   | (34 | )% | $ | (1,631 | ) |   | (34 | )% |
| Increase (decrease) resulting from:                                                      |                                                   |     |   |   |   |   |   |   |   |   |   |   |
|      State taxes, net of Federal tax benefit                    |                                                   | (281     | ) |   | (4 | ) |   | (175 | ) |   | (3 | ) |
|      Valuation allowance                                        |                                                   | 4,433    |   |   | 58 |   |   | - |   |   | - |   |
|      Income from bank-owned life insurance                      |                                                   | (46      | ) |   | (1 | ) |   | (43 | ) |   | (1 | ) |
|      Nondeductible expenses                                     |                                                   | 12       |   |   | - |   |   | 12 |   |   | - |   |
|      Share-based compensation                                   |                                                   |  15 |   |   |  1 |   |   |  17 |   |   |  - |   |
|            Income taxes (benefit) | $                                                      | 1,519    |   |   | 20 | % | $ | (1,820 | ) |   | (38 | )% |
|                                                                                     |                                                   |     |   |   |   |   |   |   |   |   |   |   |

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|                                                                                                                                              |   At December 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|---------|
|                                                                                                                                              |      2009    |    |    2008 |   |
| Deferred tax assets:                                                                                                                              |                             |    |   |   |
|       Allowance for loan losses                                                                                     | $                                | 1,208   |   |   | 519 |   |
|       Net operating loss carryforward                                                                               |                             | 2,772   |   |   | 1,166 |   |
|       Foreclosed property expenses                                                                                  |                             | 354     |   |   | - |   |
|       Deferred compensation                                                                                         |                             | 181     |   |   | 127 |   |
|       Impaired loan interest                                                                                        |                             | -       |   |   | 68 |   |
|       Other                                                                                                         |                             | 192     |   |   | 110 |   |
|                                                                                                                                              |                             |    |   |   |   |   |
|                    Gross deferred tax assets       |                             | 4,707   |   |   | 1,990 |   |
|                     Less: Valuation allowance |                             | 4,433   |   |   | - |   |
|                     Net deferred tax asset    |                             | 274     |   |   | 1,990 |   |
|                                                                                                                                              |                             |    |   |   |   |   |
| Deferred tax liabilities:                                                                                                                         |                             |    |   |   |   |   |
|        Accrual to cash adjustment                                                                              |                             | -       |   |   | (30 | ) |
|        Premises and equipment                                                                                  |                             | (147    | ) |   | (81 | ) |
|        Deferred loan costs                                                                                     |                             | (127    | ) |   | (113 | ) |
|        Unrealized gain on securities available for sale                                                        |                             |  - |   |   | (112 | ) |
|                                                                                                                                              |                             |    |   |   |   |   |
|                    Deferred tax liabilities        |                             | (274    | ) |   | (336 | ) |
|                                                                                                                                              |                             |    |   |   |   |   |
|                    Net deferred tax asset          | $                                |  - |   |   | 1,654 |   |

|   | During the year ended December 31, 2009, the Company assessed its earnings history and trend over the past year, its estimate of future earnings, and the expiration of the net operating loss carryforwards and determined that it is more likely than not that the deferred tax assets will not be realized in the near term.  Accordingly, a full valuation allowance was recorded against the net deferred tax asset. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | At December 31, 2009, the Company had net operating loss carryforwards of approximately $7.1 million for Federal and $9.9 million for Florida available to offset future taxable income. The carryforwards will begin to expire in 2028. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company files income tax returns in the U.S. Federal jurisdiction and the State of Florida. The Company is no longer subject to U.S. Federal, State and local income tax examinations by tax authorities for years before 2006. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                                                                         |  2009 |   | 2008  |   |
|------------------------------------------------------------------------------|------------|--------|------------|--------|
| Loans:                                                                       |       |   |       |   |
|         Balance at beginning of year | $          | 3,878  |       |   | 4,346 |   |
|         Borrowings                   |       | 1,140  |       |   | 708 |   |
|         Repayments                   |       | (495   | )          |   | (1,176 | ) |
|                                                                         |       |   |       |   |   |   |
|         Balance at end of year       | $          | 4,523  |       |   | 3,878 |   |
|                                                                         |       |   |       |   |   |   |
| Deposits                                                                     | $          | 3,507  |       |   | 3,954 |   |

|   | The Company established a Stock Option Plan in 1998 (“1998 Plan”) for directors, officers and employees of the Company. The 1998 Plan as amended provides for 131,553 shares of common stock to be available for grant.  The exercise price of the stock options is the fair market value of the common stock on the date of grant.  The options expire ten years from the date of grant. At December 31, 2009, no shares remain available for grant, as the Plan Agreement terminated on December 8, 2008. A summary of stock option information follows ($ in thousands, except per share amounts): |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                        |  Number ofOptions |   | Weighted-AverageExercisePrice |   | Weighted-AverageRemainingContractual  Term |   |  AggregateIntrinsic Value |       |
|---------------------------------------------|------------------------|--------|-------------------------------|--------|------------------------------------------------------|--------|-------------------------------------|------------|
|                                        |                   |   |                          |   |                                                 |   |                                |       |
| Outstanding at December 31, 2007            |                   | 36,953 |                          | $      | 11.68                                                |   |                                |       |   |   |
| Options granted                             |                   | 579    |                          |   | 8.50                                                 |   |                                |       |   |   |
| Options forfeited                           |                   | (771   | )                             |   | (9.52                                                | )      |                                |       |   |   |
|                                        |                   |   |                          |   |                                                 |   |                                |       |   |   |
| Outstanding at December 31, 2008            |                   | 36,761 |                          |   | 11.68                                                |   |                                |       |   |   |
| Options forfeited                           |                   | (2,755 | )                             |   | 11.88                                                |   |                                |       |   |   |
| Options expired                             |                   | (3,306 | )                             |   | 9.07                                                 |   |                                |       |   |   |
|                                        |                   |   |                          |   |                                                 |   |                                |       |   |   |
| Outstanding at December 31, 2009            |                   | 30,700 |                          | $      | 11.94                                                |   |                                | 1.30 years |   | $ | - |   |
|                                        |                   |   |                          |   |                                                 |   |                                |       |   |   |   |
| Exercisable at  December 31, 2009 |                   | 30,237 |                          | $      | 11.99                                                |   |                                | 1.19 years |   | $ | - |   |
|                                        |                   |   |                          |   |                                                 |   |                                |       |   |   |   |

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|   | In 2005, the Company established a new option plan (“2005 Plan”) for directors, officers and employees of the Company.  The 2005 Plan provides for 158,743 shares of common stock to be available for grant.  The exercise price of the stock options is the fair market value of the common stock on the date of grant. The 2005 Plan allows for various vesting periods and the options expire ten years from the date of grant. At December 31, 2009, 41,627 shares remain available for grant.  A summary of stock option information follows: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   Number ofOptions |    | Weighted-AverageExercisePrice |   | Weighted-AverageRemainingContractualTerm |   |  AggregateIntrinsicValue |       |
|------------------------------------------|------------------------------|---------|-------------------------------|--------|------------------------------------------|--------|-------------------------------|------------|
|                                     |                         |    |                          |   |                                     |   |                          |       |
| Options outstanding at December 31, 2007 |                         | 101,783 |                          | $      | 15.63                                    |   |                          |       |   |   |
| Options forfeited                        |                         | (6,442  | )                             |   | (14.47                                   | )      |                          |       |   |   |
| Options granted                          |                         | 27,708  |                          |   | 9.34                                     |   |                          |       |   |   |
|                                     |                         |    |                          |   |                                     |   |                          |       |   |   |
| Options outstanding at December 31, 2008 |                         | 123,049 |                          |   | 14.27                                    |   |                          |       |   |   |
| Options forfeited                        |                         | (6,433  | )                             |   | (15.91                                   | )      |                          |       |   |   |
| Options granted                          |                         | 500     |                          |   | 8.85                                     |   |                          |       |   |   |
|                                     |                         |    |                          |   |                                     |   |                          |       |   |   |
| Options outstanding at December 31, 2009 |                         | 117,116 |                          | $      | 14.16                                    |   |                          | 6.76 years |   | $ | - |   |
|                                     |                         |    |                          |   |                                     |   |                          |       |   |   |   |
| Options exercisable at December 31, 2009 |                         | 92,461  |                          | $      | 15.05                                    |   |                          | 6.44 years |   | $ |  - |   |
|                                     |                         |    |                          |   |                                     |   |                          |       |   |   |   |

|   | The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: |
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|                                                                     | Years Ended December 31,                                                                                             |   |
|--------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                     | 2009                                                                                                                 |   | 2008 |   |
| Dividend yield                                                           |                                                                                                                 | -      | % | - | % |
| Expected life                                                            |                    6 years |   |          6-6.5 years |   |
| Expected volatility                                                      |                                                                                                                 | 86.14  | % | 23.44%-28.74 | % |
| Risk-free interest rate                                                  |                                                                                                                 | 3.76   | % | 4.07%-4.98 | % |
| Weighted-average grant-date fair value of options issued during the year | $                                                                                                                    | 1.18   |   | $2.27-$3.40 |   |

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|   | The Company has examined its historical pattern of option exercises by its directors and employees in an effort to determine if there was any pattern based on these populations.  From this analysis, the Company could not identify any patterns in the exercise of options.  As such, the Company used the guidance in Staff Accounting Bulletin No. 107 issued by the Securities and Exchange Commission to determine the estimated life of options.  Expected volatility is based on historical volatility of the Company's common stock.  The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.  The dividend yield assumptions are based on the Company’s history and expectation of dividend payments. |
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|   | The total fair value of shares vested and recognized as compensation expense was $51,000 and $54,000 for 2009 and 2008 respectively, and the related tax benefit recognized was $2,000 in 2008. As of December 31, 2009, the Company had 25,118 stock options not fully vested and there was $38,000 of total unrecognized compensation cost related to these non-vested options. This cost is expected to be recognized monthly over a weighted-average period of 1.5 years on a straight-line basis. |
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|   | Also in January 2004, 22,050 stock options were granted to a third party as compensation for services provided to the Company.  The options, which expire at the end of ten years, were issued at $11.00 per share and are fully vested.  As of December 31, 2009, none of these options had been exercised. |
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|   | In addition, as discussed in more detail in Note 14, the Company sold on December 5, 2008 to the U.S. Treasury a ten year warrant to purchase at any time up to 183,158 shares of the Company’s common stock for $4.75 per share. |
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|   | The Company sponsors a section 401(k) profit sharing plan (the "Plan") which is available to all employees electing to participate.  During 2008, the Company approved 1% match, to the Plan in an approximate amount of $24,000. The Company did not approve a match during 2009. |
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|   | On December 5, 2008, the Company issued and sold to the United States Department of the Treasury (the “Treasury”) 5,800 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Preferred Shares”), along with a ten year warrant (the “Warrant”) to purchase at any time up to 183,158 shares of the Company’s common stock for $4.75 per share, for a total cash investment of $5.8 million from the Treasury (the “Transaction”). The Transaction was completed pursuant to, and is governed by, the U.S. Treasury’s Capital Purchase Program (the “CPP”), which is designed to attract broad participation by healthy institutions, to stabilize the financial system, and to increase lending for the benefit of the U.S. economy. |
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|   | The Transaction proceeds of $5.8 million were allocated between the Preferred Shares and Warrant based on the ratio of the estimated fair value of the Warrant to the aggregate estimated fair value of both the Preferred Shares and the Warrant. The value of the Warrant was computed to be $394,000 using the Black Scholes model with the following inputs: expected stock volatility of 61.89%, risk-free interest rate of 4.11%, expected life of 5 years and no dividend yield. The value of the Preferred Shares was computed to be $3.9 million based on the net present value of the expected cash flows over five years using a discount rate of 14%, which represents what the Company believes to be its incremental borrowing rate for a similar transaction in the private sector. The allocation of proceeds to the Warrant was recorded as a “preferred stock discount” against the Preferred Shares, with a corresponding and equal entry to additional paid in common equity in the amount of $526,000. This discount is being amortized over five years on a straight-line basis and increases the loss available to common shareholders. |
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|   | The Preferred Shares carry a 5% per year cumulative preferred dividend rate, payable quarterly. The dividend rate increases to 9% after five years. Dividends compound if they accrue and are not paid. The Preferred Shares have a liquidation preference of $1,000 per share, plus accrued unpaid dividends. During the first three years after the Transaction, the Company may not redeem the Preferred Shares except in conjunction with a qualified equity offering meeting certain requirements. After three years, the Company may redeem the Preferred Shares, plus accrued unpaid dividends, in whole or in part, subject to the approval of the Company’s primary federal banking regulator. |
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|   | While the Preferred Shares are outstanding, certain restrictions apply to the Company, including, among others, those that are discussed below. |
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|   | The Preferred Shares have a senior rank and the Company cannot issue other preferred stock senior to the Preferred Shares. Until the third anniversary of the sale of the Preferred Shares, unless the Preferred Shares have been redeemed in whole or the Treasury has transferred all of the shares to a non-affiliated third party, the Company may not increase its common stock cash dividend or repurchase common stock or other equity shares (subject to certain limited exceptions) without the Treasury’s approval. If the Company were to pay a cash dividend in the future, any such dividend would have to be discontinued if a Preferred Share dividend were missed. Thereafter, dividends on common stock could be resumed only if all Preferred Share dividends in arrears were paid. Similar restrictions apply to the Company’s ability to repurchase common stock if Preferred Share dividends are missed. Failure to pay the Preferred Share dividend is not an event of default. However, a failure to pay a total of six   Preferred Share dividends, whether or not consecutive, gives the holders of the Preferred Shares the right to elect two directors to the Company’s board of directors.  That right would continue until the Company pays all dividends in arrears. |
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|   | Senior Executive Officers of the Company and its subsidiary agreed to limit certain compensation, bonus, incentive and other benefit plans, arrangements, and policies with respect to the Senior Executive Officers during the period that the Treasury owns any debt or equity securities acquired in connection with the Transaction. The Preferred Shares generally are non-voting, other than in connection with proposals to issue preferred stock senior to the Preferred Shares, certain merger transactions, amendments to the rights of the holder of the Preferred Shares, and other than in connection with the board representation rights mentioned above, as required by Delaware State law. The Warrant is exercisable immediately and expires in ten years. The Warrant has anti-dilution protections and certain other protections for the holder, as well as potential registration rights upon written request from the Treasury. If requested by the Treasury, the Warrant (and the underlying common stock) may need to be listed on a national securities exchange. The Treasury has agreed not to exercise voting rights with respect to common shares it may acquire upon exercise of the Warrant. The number of common shares covered by the Warrant may be reduced by up to one-half if the Company completes an equity offering meeting certain requirements by December 31, 2009. If the Preferred Shares are redeemed in whole, the Company has the right to purchase any common shares held by the Treasury at their fair market value at that time. |
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|   | The Company’s ability to pay cash dividends on its common stock is limited to the amount of dividends it could receive from the Bank plus its own cash and cash equivalents. It is also restricted as discussed in Note 15 and Note 17. The amount of dividends the Bank is permitted to pay to the Company is restricted to 100% of its calendar year-to-date net earnings plus retained earnings for the preceding two years.  In addition, no bank may pay a dividend at any time that net earnings in the current year when combined with retained earnings from the preceding two years produce a loss. Under Florida law, a Florida chartered commercial bank may not pay cash dividends that would cause the Bank’s capital to fall below the minimum amount required by Federal or Florida law. |
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|   | The Bank is subject to various regulatory capital requirements administered by the regulatory banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's and the Company's consolidated financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. |
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|   | Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and percentages (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined).  Management believes, as of December 31, 2009, the Bank met all capital adequacy requirements to which they are subject. |
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|   | To be categorized as adequately capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage percentages as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank's category.  The Bank's actual capital amounts and percentages are also presented in the table ($ in thousands). |
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|                                                     |    Actual |   |  Minimum forCapital AdequacyPurposes |   | Minimum To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |   |
|----------------------------------------------------------|--------------------------|--------|-------------------------------------------|--------|-----------------------------------------------------------------------|--------|
|                                                     |   Amount            |   |    %                            |   |     Amount                                        |   |      % |   | Amount |   |    % |   |
| As of December 31, 2009:                                 |                     |   |                                      |   |                                                                  |   |   |   |   |   |   |   |
|   Total Capital to Risk- Weighted Assets  | $                        | 17,324 |                                      |   | 8.96                                                                  | %      | $ | 15,461 |   |   | 8.00 | % | $ | 19,326 |   |   | 10.00 | % |
|   Tier 1 Capital to Risk- Weighted Assets |                     | 14,880 |                                      |   | 7.70                                                                  |   |   | 7,730 |   |   | 4.00 |   |   | 11,596 |   |   |  6.00 |   |
|    Tier 1 Capital To Average Assets  |                     | 14,880 |                                      |   | 5.65                                                                  |   |   | 10,538 |   |   | 4.00 |   |   | 13,172 |   |   | 5.00 |   |
|                                                     |                     |   |                                      |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2008:                                 |                     |   |                                      |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Total Capital to Risk-Weighted Assets        |                     | 21,280 |                                      |   | 10.88                                                                 |   |   | 15,647 |   |   | 8.00 |   |   | 19,559 |   |   | 10.00 |   |
|   Tier 1 Capital to Risk-Weighted Assets       |                     | 18,834 |                                      |   | 9.63                                                                  |   |   | 7,824 |   |   | 4.00 |   |   | 11,736 |   |   | 6.00 |   |
|    Tier 1 Capital To Total Assets    |                     | 18,834 |                                      |   | 8.27                                                                  |   |   | 9,111 |   |   | 4.00 |   |   | 11,389 |   |   | 5.00 |   |

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|   | Board Resolutions.  The Federal Reserve Bank of Atlanta (“Federal Reserve”) has requested our Board of Directors to adopt resolutions limiting us from reducing our capital position. Pursuant to these resolutions, we  have committed to: (i) not incurring debt at the holding company level without prior Federal Reserve approval; (ii) not paying dividends on our securities (including our Series A Preferred Stock) without prior Federal Reserve approval; (iii) not purchasing or redeeming stock without Federal Reserve approval; (iv) not making any other payment which would represent a reduction in capital, other than normal and routine operating expenses; and (v) providing to the Federal Reserve on a quarterly basis, a parent-only balance sheet and confirmation of compliance with the resolutions.  Our Board of Directors adopted these resolutions at its October 21, 2009. These resolutions also prohibit us from paying dividends on, or redeeming, the Series A Preferred Stock without Federal Reserve approval. |
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|   | Memorandum of Understanding.  The Bank has agreed with the bank regulatory agencies, in a memorandum of understanding, that by December 31, 2009 and thereafter, the Bank will maintain a Tier 1 leverage capital ratio of not less than 8% and a total risk-based capital ratio of not less than 11%. The Bank has also committed to reducing its ratio of classified assets to the sum of its capital and allowance for loan and lease losses on a graduated basis over the next year, culminating in a ratio of 60% by September 2010. At December 31, 2009, the Bank had a Tier 1 leverage capital ratio of 5.65% and a total risk-based capital ratio of 8.96%, with FPB retaining $379,000 in cash at the holding company level which could be down-streamed to the Bank as capital. |
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|   | Consent Order.  The FDIC on December 18, 2009, requested that the Bank agree to the entry of a Consent Order. The proposed terms of the Consent Order are substantially similar to the terms of the Bank’s current memorandum of understanding, and in certain cases, are less stringent.  The Bank and the FDIC have reached agreement relative to certain terms and deadlines, and anticipate the entry of a Consent Order in March or April of 2010. |
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|   | As proposed, the Consent Order would require the Bank to achieve within 90 days of the effective date and thereafter maintain an 8% Tier 1 Leverage Capital Ratio and a 11% Total Risk Based Capital Ratio. The memorandum of understanding currently requires the Bank to maintain ratios of 8% and 11%, respectively. |
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|   | With respect to reducing the level of assets classified as “Substandard,” the proposed Consent Order is less stringent than the memorandum of understanding. As proposed, the Consent Order would require the ratio of such assets to Tier 1 Capital plus the Allowance for Loan and Lease Losses (“ALLL”) to be reduced to no greater than: (i) 140% within 90 days of the effective date; (ii) 120% within 120 days; (iii) 100% within 270 days; (iv) 80% within 360 days; and (v) 60% within 540 days. The memorandum of understanding currently requires the Bank to reach the 60% target by September 2010. |
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|   | The proposed Consent Order also imposes a new asset growth restriction of 10% per year. In light of the current economic conditions, the Bank’s management has not intended to budget asset growth in excess of 10% for 2010. Other new obligations are a requirement of the Bank to perform a risk segmentation analysis with respect to its concentrations of credit and the elimination of a quantitative target with respect to the Bank’s net non-core funding dependence ratio. The Bank will also be prohibited from making dividend payments to FPB during the term of the Consent Order. |
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|   | The Consent Order, as proposed, also contains requirements similar to those the Bank is already obligated to adhere to with respect to: (i) Board involvement with overseeing compliance; (ii) maintaining an adequate ALLL; (iii) not extending credit to borrowers with classified assets at the Bank, except under limited circumstances; and (iv) developing and adopting a strategic plan, a liquidity plan, a profit plan and a budget. When the Consent Order becomes effective, it will replace and supersede the MOU. |
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|                                                           | At December 31, |   |
|----------------------------------------------------------------|-----------------|--------|
|                                                           | 2009            |   | 2008 |   |
|       Assets                     |            |   |   |   |
|                                                           |            |   |   |   |
| Cash and cash equivalents                                      | $               | 379    |   |   | 4,402 |   |
| Investment in subsidiary                                       |            | 14,255 |   |   | 20,248 |   |
| Other assets                                                   |            | 192    |   |   | 342 |   |
|                                                           |            |   |   |   |   |   |
|       Total assets               | $               | 14,826 |   |   | 24,992 |   |
|                                                           |            |   |   |   |   |   |
|       Liabilities                |            |   |   |   |   |   |
|                                                           |            |   |   |   |   |   |
|       Total liabilities          | $               | 187    |   |   | 96 |   |
|                                                           |            |   |   |   |   |   |
|       Stockholders’ Equity |            |   |   |   |   |   |
|                                                           |            |   |   |   |   |   |
|       Stockholders’ Equity |            | 14,639 |   |   | 24,896 |   |
|                                                           |            |   |   |   |   |   |
| Total Liabilities and Stockholders’ Equity               | $               | 14,826 |   |   | 24,992 |   |

|                                                         | Year Ended  December 31, |   |
|--------------------------------------------------------------|------------------------------------|--------|
|                                                         | 2009                               |   | 2008 |   |
|                                                         |                               |   |   |   |
| Revenues                                                     | $                                  | -      |   |   | - |   |
| Expenses                                                     |                               | (225   | ) |   | (159 | ) |
|                                                         |                               |   |   |   |   |   |
|      Loss before loss of subsidiary |                               | (225   | ) |   | (159 | ) |
|      Loss of subsidiary             |                               | (8,983 | ) |   | (2,819 | ) |
|                                                         |                               |   |   |   |   |   |
|      Net loss                       | $                                  | (9,208 | ) |   | (2,978 | ) |

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|                                                                                                                                                                            | Year Ended                    |           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|----------------|
|                                                                                                                                                                            | December 31,                  |           |
|                                                                                                                                                                            |      2009 |           |      2008 |   |
| Cash flows from operating activities:                                                                                                                                           |                          |           |   |   |
| Net loss                                                                                                                                                                        | $                             | (9,208         | ) |   | (2,978 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                                                                                       |                          |           |   |   |   |   |
| Share-based compensation                                                                                                                                                        |                          | 51             |   |   | 54 |   |
| Undistributed losses of subsidiary                                                                                                                                              |                          | 8,983          |   |   | 2,819 |   |
| Decrease (increase) in other assets                                                                                                                                             |                          | 150            |   |   | (55 | ) |
| Increase in other liabilities                                                                                                                                                   |                          |   76 |   |   | 75 |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Net cash provided by (used in) operating activities                                                                                                                             |                          |  52       |   |   | (85 | ) |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Cash flows from investing activity -                                                                                                                                            |                          |           |   |   |   |   |
|     Investment in subsidiary                                                                                                                                     |                          | (3,800         | ) |   | (5,000 | ) |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Cash flows from financing activities:                                                                                                                                           |                          |           |   |   |   |   |
|         Proceeds from the issuance of 5,800 shares of Series A preferred stock to the US Treasury                                            |                          | -              |   |   | 5,800 |   |
|         Cash dividends paid to preferred shareholder                                                                                         |                          | (275           | ) |   |  - |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Net cash (used in) provided by financing activities                                                                                                                             |                          | (275           | ) |   | 5,800 |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                                                                                                                            |                          | (4,023         | ) |   | 715 |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Cash and cash equivalents at beginning of year                                                                                                                                  |                          | 4,402          |   |   | 3,687 |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Cash and cash equivalents at end of year                                                                                                                                        | $                             | 379            |   |   | 4,402 |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
|     Non-cash transactions:                                                                                                                                       |                          |           |   |   |   |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Accumulated other comprehensive (loss) income of subsidiary,      net change in unrealized gain on securities available for sale, net of tax | $                             | (810           | ) |   | 152 |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
|         Accrual of preferred stock dividend                                                                                                  | $                             |  290      |   |   | 21 |   |
|                                                                                                                                                                            |                          |           |   |   |   |   |
| Cumulative effect adjustment related to deferred compensation plans, net of tax benefit of $25                                                                                  | $                             |  -        |   |   | 42 |   |

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Report of Independent Registered 

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BOARD OF DIRECTORS

NON-DIRECTOR EXECUTIVE OFFICERS

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BOARD OF DIRECTORS

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