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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 | 3-26   |
|                                                                                  |   |
| Consolidated Financial Statements                                                     | 27-70  |
|                                                                                  |   |
| Report of Independent Registered Public Accounting Firm                               | 71     |
|                                                                                  |   |
| Board of Directors                                                                    | 72     |
|                                                                                  |   |
| Non-Director Executive Officers                                                       | 72     |
|                                                                                  |   |
| First Peoples Bank Board of Directors and Officers                                    | 73     |
|                                                                                  |   |
| General Information                                                                   | 74     |
|                                                                                  |   |
| Common Stock Prices and Dividends                                                     | 74     |
|                                                                                  |   |
| First Peoples Bank Branch Office Locations                                            | 75     |

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Table of Contents

FINANCIAL HIGHLIGHTS

| At Year End:                                          |       2010 |      |       2009 |   |        2008 |   |
|-------------------------------------------------------|-------------------------------------|-----------|-------------------------------------|--------|------------------------------------------------|--------|
|                                                  |                                |      |                                |   |                                           |   |
| Assets                                                | $                                   | 232,445   |                                | $      | 248,203                                        |   | $ | 239,173 |   |
| Loans, net                                            | $                                   | 161,946   |                                | $      | 184,312                                        |   | $ | 184,182 |   |
| Securities                                            | $                                   | 37,731    |                                | $      | 31,752                                         |   | $ | 33,239 |   |
| Deposits                                              | $                                   | 208,366   |                                | $      | 216,374                                        |   | $ | 200,683 |   |
| Stockholders' equity                                  | $                                   | 6,712     |                                | $      | 14,639                                         |   | $ | 24,896 |   |
| Book value per common share                           | $                                   | .61       |                                | $      | 4.50                                           |   | $ | 9.53 |   |
| Common shares outstanding                             |                                | 2,058,047 |                                |   | 2,058,047                                      |   |   | 2,058,047 |   |
| Equity as a percentage of assets                      |                                | 2.89      | %                                   |   | 5.90                                           | %      |   | 10.41 | % |
| Non-performing assets as a percentage of total assets |                                | 9.26      | %                                   |   | 9.17                                           | %      |   | 5.05 | % |
|                                                  |                                |      |                                |   |                                           |   |   |   |   |
| For The Year:                                         |                                |      |                                |   |                                           |   |   |   |   |
|                                                  |                                |      |                                |   |                                           |   |   |   |   |
| Interest income                                       | $                                   | 11,920    |                                | $      | 12,778                                         |   | $ | 13,802 |   |
| Net loss                                              | $                                   | (7,958    | )                                   | $      | (9,208                                         | )      | $ | (2,978 | ) |
| Loss per common share, basic                          | $                                   | (4.05     | )                                   | $      | (4.66                                          | )      | $ | (1.46 | ) |
| Loss per common share, diluted                        | $                                   | (4.05     | )                                   | $      | (4.66                                          | )      | $ | (1.46 | ) |
| Return on average assets                              |                                | (3.18     | )%                                  |   | (3.55                                          | )%     |   | (1.37 | )% |
| Return on average equity                              |                                | (69.27    | )%                                  |   | (41.74                                         | )%     |   | (13.97 | )% |
| Average equity as a percentage of average assets      |                                | 4.60      | %                                   |   | 8.50                                           | %      |   | 9.79 | % |
| Non-interest expenses to average assets               |                                | 4.65      | %                                   |   | 4.04                                           | %      |   | 3.89 | % |
|                                                  |                                |      |                                |   |                                           |   |   |   |   |
| Yields and Rates:                                     |                                |      |                                |   |                                           |   |   |   |   |
|                                                  |                                |      |                                |   |                                           |   |   |   |   |
| Loan portfolio                                        |                                | 6.03      | %                                   |   | 5.95                                           | %      |   | 7.02 | % |
| Securities                                            |                                | 3.64      | %                                   |   | 4.20                                           | %      |   | 4.95 | % |
| Other interest earning assets                         |                                | .24       | %                                   |   | .26                                            | %      |   | 2.00 | % |
| All interest earning assets                           |                                | 5.18      | %                                   |   | 5.47                                           | %      |   | 6.71 | % |
| Deposits                                              |                                | 1.98      | %                                   |   | 2.96                                           | %      |   | 4.05 | % |
| Borrowings                                            |                                | 1.64      | %                                   |   | 2.16                                           | %      |   | 2.54 | % |
| All interest bearing liabilities                      |                                | 1.95      | %                                   |   | 2.92                                           | %      |   | 4.04 | % |
| Interest rate spread (1)                              |                                | 3.23      | %                                   |   | 2.55                                           | %      |   | 2.67 | % |
| Net yield on average interest earning assets (2)      |                                | 3.36      | %                                   |   | 2.81                                           | %      |   | 3.33 | % |

| (1) | Average yield on all interest earning assets less average rate paid on all interest bearing liabilities. |
|-----|----------------------------------------------------------------------------------------------------------|

| (2) | Net interest income divided by average interest earning assets. |
|-----|-----------------------------------------------------------------|

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Table of Contents

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

| At Year End:                                                                              |        2010 |        |         2009 |   |         2008 |   |       2007 |      |       2006 |   |
|-------------------------------------------------------------------------------------------|-------------------------------------------|-------------|-------------------------------------------------|--------|-------------------------------------------------|--------|-------------------------------------|-----------|------------------------------------------|--------|
| Cash and cash equivalents                                                                 | $                                         | 12,229      |                                            |   | 12,932                                          |   |                                | 5,457     |                                     |   | 6,795 |   |   | 5,422 |   |
| Securities                                                                                |                                      | 37,731      |                                            |   | 31,752                                          |   |                                | 33,239    |                                     |   | 6,793 |   |   | 8,953 |   |
| Loans, net                                                                                |                                      | 161,946     |                                            |   | 184,312                                         |   |                                | 184,182   |                                     |   | 172,251 |   |   | 130,133 |   |
| All other assets                                                                          |                                      | 20,539      |                                            |   | 19,207                                          |   |                                | 16,295    |                                     |   | 10,914 |   |   | 8,931 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| Total assets                                                                              | $                                         | 232,445     |                                            |   | 248,203                                         |   |                                | 239,173   |                                     |   | 196,753 |   |   | 153,439 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| Deposit accounts                                                                          | $                                         | 208,366     |                                            |   | 216,374                                         |   |                                | 200,683   |                                     |   | 172,677 |   |   | 130,219 |   |
| Federal Home Loan Bank advances                                                           |                                      | 14,600      |                                            |   | 14,600                                          |   |                                | 11,100    |                                     |   | 100 |   |   | 100 |   |
| All other liabilities                                                                     |                                      | 2,767       |                                            |   | 2,590                                           |   |                                | 2,494     |                                     |   | 2,045 |   |   | 2,057 |   |
| Stockholders' equity                                                                      |                                      | 6,712       |                                            |   | 14,639                                          |   |                                | 24,896    |                                     |   | 21,931 |   |   | 21,063 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                                | $                                         | 232,445     |                                            |   |  248,203                                   |   |                                | 239,173   |                                     |   | 196,753 |   |   | 153,439 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| For the Period:                                                                           |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| Total interest income                                                                     | $                                         | 11,920      |                                            |   | 12,778                                          |   |                                | 13,802    |                                     |   | 13,588 |   |   | 10,626 |   |
| Total interest expense                                                                    |                                      |  4,200 |                                            |   |  6,215                                     |   |                                | 6,951     |                                     |   | 6,060 |   |   | 3,976 |   |
| Net interest income                                                                       |                                      | 7,720       |                                            |   | 6,563                                           |   |                                | 6,851     |                                     |   | 7,528 |   |   | 6,650 |   |
| Provision for loan losses                                                                 |                                      |  5,679 |                                            |   |  4,959                                     |   |                                | 4,059     |                                     |   | 885 |   |   | 429 |   |
| Net interest income after provision for loan losses                                       |                                      | 2,041       |                                            |   | 1,604                                           |   |                                | 2,792     |                                     |   | 6,643 |   |   | 6,221 |   |
| Non-interest income                                                                       |                                      | 2,004       |                                            |   | 1,189                                           |   |                                | 874       |                                     |   | 996 |   |   | 824 |   |
| Non-interest expenses                                                                     |                                      | 11,631      |                                            |   | 10,482                                          |   |                                | 8,464     |                                     |   | 7,385 |   |   | 6,082 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| (Loss) earnings before income taxes                                                       |                                      | (7,586      | )                                               |   | (7,689                                          | )      |                                | (4,798    | )                                        |   | 254 |   |   | 963 |   |
| Income tax (benefit)                                                                      |                                      |  372   |                                            |   |  1,519                                     |   |                                | (1,820    | )                                        |   | 77 |   |   | 332 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| Net (loss) earnings                                                                       | $                                         | (7,958      | )                                               |   | (9,208                                          | )      |                                | (2,978    | )                                        |   | 177 |   |   | 631 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| (Loss) earnings per basic common share (1)                                                | $                                         | (4.05       | )                                               |   | (4.66                                           | )      |                                | (1.46     | )                                        |   | .09 |   |   | .32 |   |
| (Loss) earnings per diluted common share (1)                                              | $                                         | (4.05       | )                                               |   | (4.66                                           | )      |                                | (1.46     | )                                        |   | .09 |   |   | .31 |   |
| Weighted-average number of common shares outstanding  for basic (1)             |                                      | 2,058,047   |                                            |   | 2,058,047                                       |   |                                | 2,058,047 |                                     |   | 2,017,553 |   |   | 1,998,871 |   |
| Weighted-average number of common shares outstanding for diluted (1)                      |                                      | 2,058,047   |                                            |   | 2,058,047                                       |   |                                | 2,058,047 |                                     |   | 2,034,070 |   |   | 2,030,344 |   |
|                                                                                      |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| Ratios and Other Data:                                                                    |                                      |        |                                            |   |                                            |   |                                |      |                                     |   |   |   |   |   |   |
| Return on average assets                                                                  |                                      | (3.18       | )%                                              |   | (3.55                                           | )%     |                                | (1.37     | )%                                       |   | .10 | % |   | .43 | % |
| Return on average equity                                                                  |                                      | (69.27      | )%                                              |   | (41.74                                          | )%     |                                | (13.97    | )%                                       |   | .83 | % |   | 3.04 | % |
| Average equity as a percentage of average assets                                          |                                      | 4.60        | %                                               |   | 8.50                                            | %      |                                | 9.79      | %                                        |   | 12.11 | % |   | 14.08 | % |
| Interest rate spread during the period                                                    |                                      | 3.23        | %                                               |   | 2.55                                            | %      |                                | 2.67      | %                                        |   | 3.33 | % |   | 3.82 | % |
| Net yield on average interest earning assets                                              |                                      | 3.36        | %                                               |   | 2.81                                            | %      |                                | 3.33      | %                                        |   | 4.53 | % |   | 4.79 | % |
| Non-interest expenses to average assets                                                   |                                      | 4.65        | %                                               |   | 4.04                                            | %      |                                | 3.89      | %                                        |   | 4.18 | % |   | 4.12 | % |
| Ratio of average interest earning assets to average interest bearing liabilities          |                                      | 1.07        |                                            |   | 1.10                                            |   |                                | 1.20      |                                     |   | 1.33 |   |   | 1.34 |   |
| Non-performing loans and foreclosed assets as a percentage of total assets at end of year |                                      | 9.26        | %                                               |   | 9.17                                            | %      |                                | 5.05      | %                                        |   | .89 | % |   | .22 | % |
| Allowance for loan losses as a percentage of total loans at end of year                   |                                      | 2.88        | %                                               |   | 2.49                                            | %      |                                | 1.36      | %                                        |   | 1.36 | % |   | 1.36 | % |
| Total number of banking offices                                                           |                                      | 6           |                                            |   | 6                                               |   |                                | 6         |                                     |   | 4 |   |   | 4 |   |
| Total shares outstanding at end of year (1)                                               |                                      | 2,058,047   |                                            |   | 2,058,047                                       |   |                                | 2,058,047 |                                     |   | 2,058,047 |   |   | 2,001,513 |   |
| Book value per common share at end of year (1)                                            | $                                         | .61         |                                            | $      | 4.50                                            |   | $                                   | 9.53      |                                     | $      | 10.66 |   | $ | 10.52 |   |

|         (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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Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

|   | FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|--------|-----------------------------------------------|

----

Table of Contents

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Table of Contents

|                                                                 | 2010   |        |                | 2009   |   |   | 2008   |               |        | 2007   |   |   | 2006                |   |
|----------------------------------------------------------------------|--------|-------------|---------------------|--------|--------|--------|--------|--------------------|-------------|--------|--------|--------|---------------------|--------|
|                                                                 |   |        | Loans toTotal Loans |   |   |   |   | Loans toTotalLoans |        |   |   |   | Loans toTotal Loans |   |   |   |   | Loans toTotal Loans |   |   |   |   | Loans toTotal Loans |   |
|                                                                 |   |        |                |   |   |   |   |               |        |   |   |   |                |   |
|                                                                 | Amount |        |                | Amount |   |   | Amount |               |        | Amount |   |   | Amount              |   |
|                                                                 |   |        |                |   |   |   |   |               |        |   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                            | $      | 2,192       |                |   | 35.29  | %      |   | $                  | 1,712       |   |   | 33.64  | %                   |   | $ | 1,292 |   |   | 34.04 | % |   | $ | 1,156 |   |   | 34.15 | % |   | $ | 811 |   |   | 38.13 | % |
| Commercial real estate                                               |   | 1,931       |                |   | 55.53  |   |   |               | 2,654       |   |   | 56.30  |                |   |   | 916 |   |   | 50.54 |   |   |   | 858 |   |   | 47.31 |   |   |   | 631 |   |   | 42.24 |   |
| Construction and development                                         |   | -           |                |   | -      |   |   |               | 18          |   |   | .57    |                |   |   | 113 |   |   | 5.23 |   |   |   | 145 |   |   | 6.38 |   |   |   | 65 |   |   | 4.59 |   |
| Consumer                                                             |   | 135         |                |   | 3.69   |   |   |               | 127         |   |   | 4.39   |                |   |   | 173 |   |   | 6.47 |   |   |   | 176 |   |   | 8.62 |   |   |   | 216 |   |   | 8.87 |   |
| Residential real estate                                              |   | 551         |                |   | 5.49   |   |   |               |  219   |   |   | 5.10   |                |   |   |  58 |   |   | 3.72 |   |   |   |  58 |   |   |  3.54 |   |   |   |  78 |   |   |  6.17 |   |
|                                                                 |   |        |                |   |   |   |   |               |        |   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total allowance for loan loss                                        | $      |  4,809 |                |   | 100.00 | %      |   | $                  |  4,730 |   |   | 100.00 | %                   |   | $ | 2,552 |   |   | 100.00 | % |   | $ | 2,393 |   |   | 100.00 | % |   | $ | 1,801 |   |   | 100.00 | % |
|                                                                 |   |        |                |   |   |   |   |               |        |   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses as a percentage of total loans outstanding |   |        |                |   | 2.88   | %      |   |               |        |   |   | 2.49   | %                   |   |   |   |   |   | 1.36 | % |   |   |   |   |   | 1.36 | % |   |   |   |   |   | 1.36 | % |

|                              | 2010   |    |      | 2009   |   |   | 2008   |      |    | 2007   |   |   | 2006      |   |
|-----------------------------------|--------|---------|-----------|--------|--------|--------|--------|-----------|---------|--------|--------|--------|-----------|--------|
|                              |   |    | % ofTotal |   |   |   |   | % ofTotal |    |   |   |   | % ofTotal |   |   |   |   | % ofTotal |   |   |   |   | % ofTotal |   |
|                              | Amount |    |      | Amount |   |   | Amount |      |    | Amount |   |   | Amount    |   |
|                              |   |    |      |   |   |   |   |      |    |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial         | $      | 59,003  |      |   | 35.29  | %      |   | $         | 63,815  |   |   | 33.64  | %         |   | $ | 63,768 |   |   | 34.04 | % |   | $ | 59,878 |   |   | 34.15 | % |   | $ | 50,521 |   |   | 38.13 | % |
| Commercial real estate            |   | 92,835  |      |   | 55.53  |   |   |      | 106,803 |   |   | 56.30  |      |   |   | 94,675 |   |   | 50.54 |   |   |   | 82,951 |   |   | 47.31 |   |   |   | 55,967 |   |   | 42.24 |   |
| Construction and development      |   | -       |      |   | -      |   |   |      | 1,081   |   |   | .57    |      |   |   | 9,793 |   |   | 5.23 |   |   |   | 11,186 |   |   | 6.38 |   |   |   | 6,089 |   |   | 4.59 |   |
| Consumer                          |   | 6,175   |      |   | 3.69   |   |   |      | 8,329   |   |   | 4.39   |      |   |   | 12,118 |   |   | 6.47 |   |   |   | 15,115 |   |   | 8.62 |   |   |   | 11,757 |   |   | 8.87 |   |
| Residential real estate           |   | 9,182   |      |   | 5.49   |   |   |      | 9,668   |   |   | 5.10   |      |   |   | 6,968 |   |   | 3.72 |   |   |   | 6,212 |   |   | 3.54 |   |   |   | 8,176 |   |   |  6.17 |   |
|                              |   | 167,195 |      |   | 100.00 | %      |   |      | 189,696 |   |   | 100.00 | %         |   |   | 187,322 |   |   | 100.00 | % |   |   | 175,342 |   |   | 100.00 | % |   |   | 132,510 |   |   | 100.00 | % |
| Less:                             |   |    |      |   |   |   |   |      |    |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred loan costs and fees, net |   | (440    | )         |   |   |   |   |      | (654    | )      |   |   |      |   |   | (588 | ) |   |   |   |   |   | (698 | ) |   |   |   |   |   | (576 | ) |   |   |   |
| Allowance for loan losses         |   | (4,809  | )         |   |   |   |   |      | (4,730  | )      |   |   |      |   |   | (2,552 | ) |   |   |   |   |   | (2,393 | ) |   |   |   |   |   | (1,801 | ) |   |   |   |
| Loans, net                        | $      | 161,946 |      |   |   |   |   | $         | 184,312 |   |   |   |      |   | $ | 184,182 |   |   |   |   |   | $ | 172,251 |   |   |   |   |   | $ | 130,133 |   |   |   |   |

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Table of Contents

|                                            | One Year or Less |   | After One Through Five Years |   | AfterFive Years |   | Total  |    |
|-------------------------------------------------|------------------|--------|------------------------------|--------|-----------------|--------|--------|---------|
|                                            |             |   |
| Commercial and industrial                       | $                | 10,108 |                         | $      | 17,229          |   | $      | 31,666  |   | $ | 59,003 |   |
| Commercial real estate                          |             | 7,347  |                         |   | 8,873           |   |   | 76,615  |   |   | 92,835 |   |
| Consumer                                        |             | 1,613  |                         |   | 4,256           |   |   | 306     |   |   | 6,175 |   |
| Residential real estate                         |             | 1,904  |                         |   | 4,409           |   |   | 2,869   |   |   | 9,182 |   |
|       Total loans | $                | 20,972 |                         | $      | 34,767          |   | $      | 111,456 |   | $ | 167,195 |   |
|                                            |             |   |                         |   |            |   |   |    |   |   |   |   |
| Loans with a fixed interest rate                | $                | 17,739 |                         | $      | 23,998          |   | $      | 12,401  |   | $ | 54,138 |   |
| Loans with a variable interest rate             |             | 3,233  |                         |   | 10,769          |   |   | 99,055  |   |   | 113,057 |   |
| Total loans                                     | $                | 20,972 |                         | $      | 34,767          |   | $      | 111,456 |   | $ | 167,195 |   |

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Table of Contents

|                                                                                                |  At December 31, |   |
|-----------------------------------------------------------------------------------------------------|-----------------------|--------|
|                                                                                                | 2010                  |   | 2009 |   | 2008 |   | 2007 |   | 2006 |   |
| Nonaccrual loans:                                                                                   |                  |   |   |   |   |   |   |   |   |   |
|    Commercial real estate                                                            | $                     | 5,834  |   | $ | 8,443 |   | $ | 6,627 |   | $ | 805 |   | $ | - |   |
|    Commercial and industrial                                                         |                  | 6,220  |   |   | 6,154 |   |   | 1,635 |   |   | 297 |   |   | 154 |   |
|    Construction and development                                                      |                  | -      |   |   | - |   |   | 1,106 |   |   | - |   |   | - |   |
|    Residential real estate                                                           |                  | 232    |   |   | 448 |   |   | 625 |   |   | 272 |   |   | 172 |   |
|    Consumer                                                                          |                  | 39     |   |   | 38 |   |   | 112 |   |   | 27 |   |   | 18 |   |
|                                                                                                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total nonaccrual loans                                          |                  | 12,325 |   |   | 15,083 |   |   | 10,105 |   |   | 1,401 |   |   | 344 |   |
|                                                                                                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accruing loans over 90 days delinquent:                                                             |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial real estate                                                            |                  | -      |   |   | 400 |   |   | - |   |   | 243 |   |   | - |   |
|    Commercial and industrial                                                         |                  | -      |   |   | 488 |   |   | 250 |   |   | 106 |   |   | - |   |
|    Consumer                                                                          |                  | -      |   |   | 19 |   |   | - |   |   | - |   |   | - |   |
|                                                                                                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total accrual loans over 90 days delinquent                     |                  | -      |   |   | 907 |   |   | 250 |   |   | 349 |   |   | - |   |
|                                                                                                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total non-performing loans                                      |                  | 12,325 |   |   | 15,990 |   |   | 10,355 |   |   | 1,750 |   |   | 344 |   |
|                                                                                                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed assets                                                                                   |                  | 9,190  |   |   | 6,763 |   |   | 1,816 |   |   | 41 |   |   | 26 |   |
|                                                                                                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total non-performing loans and foreclosed assets                | $                     | 21,515 |   | $ | 22,753 |   | $ | 12,171 |   | $ | 1,791 |   | $ | 370 |   |
|       Total non-performing loans as a percentage of total loans  |                  | 7.37   | % |   | 8.43 | % |   | 5.53 | % |   | 1.00 | % |   | .26 | % |
|       Total non-performing loans as a percentage of total assets |                  | 5.30   | % |   | 6.44 | % |   | 4.33 | % |   | .89 | % |   | .22 | % |
|       Total non-performing loans and foreclosed assets                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           as a percentage of total assets         |                  | 9.26   | % |   | 9.17 | % |   | 5.05 | % |   | .89 | % |   | .22 | % |
|                                                                                                |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Restructured troubled debt                                      | $                     | 10,754 |   | $ | 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 of foreclosed assets; |
|---------------|----------------------------------------------------------------------------------|

| 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 |      | Nonaccrual and Past Due 90 days and Over |   | Total    |   |
|---------------------------|----------------------------------|-----------|------------------------------------------|--------|----------|--------|
|                      | Amount                           |      | Amount                                   |   | Amount   |   |
| As of December 31, 2010   |                             |      |                                     |   |     |   |
| Commercial real estate    | $                                | 967       |                                     | $      | 5,834    |   | $ | 6,801 |   |
| Commercial and industrial |                             | 538       |                                     |   | 6,220    |   |   | 6,758 |   |
| Residential real estate   |                             | 269       |                                     |   | 232      |   |   | 501 |   |
| Consumer                  |                             |  66  |                                     |   |  39 |   |   | 105 |   |
| Total                     | $                                | 1,840     |                                     | $      | 12,325   |   | $ | 14,165 |   |
|                      |                             |      |                                     |   |     |   |   |   |   |
| As of December 31, 2009   |                             |      |                                     |   |     |   |   |   |   |
| Commercial real estate    | $                                | 548       |                                     | $      | 8,843    |   | $ | 9,391 |   |
| Commercial and industrial |                             | 560       |                                     |   | 6,642    |   |   | 7,202 |   |
| Residential real estate   |                             | 10        |                                     |   | 448      |   |   | 458 |   |
| Consumer                  |                             |  162 |                                     |   |  57 |   |   | 219 |   |
| Total                     | $                                | 1,280     |                                     | $      | 15,990   |   | $ | 17,270 |   |

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|                                                                                  |  Year Ended December 31, |       |
|---------------------------------------------------------------------------------------|-------------------------------|------------|
|                                                                                  | 2010                          |       | 2009 |   | 2008 |   | 2007 |   | 2006 |   |
| Allowance at beginning of year                                                        | $                             | 4,730      |   | $ | 2,552 |   | $ | 2,393 |   | $ | 1,801 |   | $ | 1,383 |   |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Charge-offs:                                                                          |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential real estate                                                               |                          | 343        |   |   | 953 |   |   | 202 |   |   | 71 |   |   | - |   |
| Consumer                                                                              |                          | 237        |   |   | 267 |   |   | 110 |   |   | 144 |   |   | 19 |   |
| Construction and development                                                          |                          | -          |   |   | - |   |   | 490 |   |   | - |   |   | - |   |
| Commercial real estate                                                                |                          | 2,856      |   |   | 241 |   |   | 1,926 |   |   | - |   |   | - |   |
| Commercial  an industrial                                                   |                          | 2,355      |   |   | 1,537 |   |   | 1,195 |   |   | 85 |   |   | 14 |   |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total charge-offs                                                                     |                          | 5,791      |   |   | 2,998 |   |   | 3,923 |   |   | 300 |   |   | 33 |   |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                                           |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential real estate                                                               |                          | 12         |   |   | 12 |   |   | 2 |   |   | - |   |   | - |   |
| Consumer                                                                              |                          | 42         |   |   | 19 |   |   | 9 |   |   | 7 |   |   | 10 |   |
| Construction and development                                                          |                          | -          |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Commercial real estate                                                                |                          | 8          |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Commercial  an industrial                                                   |                          |  129  |   |   |  186 |   |   |  12 |   |   | - |   |   | 12 |   |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total recoveries                                                                      |                          | 191        |   |   | 217 |   |   | 23 |   |   | 7 |   |   | 22 |   |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses charged to operations                                       |                          | 5,679      |   |   | 4,959 |   |   | 4,059 |   |   | 885 |   |   | 429 |   |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance at end of year                                                              | $                             | 4,809      |   | $ | 4,730 |   | $ | 2,552 |   | $ | 2,393 |   | $ | 1,801 |   |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of net charge-offs during the year to average loans outstanding during the year |                          | 3.19       | % |   | 1.47 | % |   |  2.11 | % |   |  .19 | % |   |  .01 | % |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses as a percentage of total loans at end of year               |                          |  2.88 | % |   |  2.49 | % |   | 1.36 | % |   | 1.36 | % |   |  1.36 | % |
|                                                                                  |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses as a percentage of non-performing loans                     |                          | 39.02      | % |   | 29.58 | % |   | 24.65 | % |   | 136.74 | % |   | 523.55 | % |

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|                                   |  Actual |   | Minimumfor Capital Adequacy  Purposes |   | Requirements of Consent Order |   |
|----------------------------------------|--------------|--------|-------------------------------------------------|--------|-------------------------------|--------|
| As of December 31, 2010:               | Amount       |   | %                                               |   | Amount                        |   | % |   | Amount |   | % |   |
|                                   |         |   |                                            |   |                          |   |   |   |   |   |   |   |
| Total Capital to Risk-Weighted Assets  | 9,373        |   | 5.57                                            | %      | 13,472                        |   | 8.00 | % | 18,524 |   | 11.00 | % |
| Tier 1 Capital to Risk-Weighted Assets | 7,235        |   | 4.30                                            |   | 6,736                         |   | 4.00 |   | N/A |   | N/A |   |
| Tier 1 Capital to Average Assets       | 7,235        |   | 3.02                                            |   | 9,588                         |   | 4.00 |   | 19,176 |   | 8.00 |   |

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|                                                                    |   2010 |        |   2009 |   | 2008    |   |
|-------------------------------------------------------------------------|-------------|-------------|-------------|--------|---------|--------|
| Securities available for sale:                                          |        |        |        |   |    |   |
|     U.S. Government agency securities                    | $           | -           |        | $      | 14,332  |   | $ | 16,375 |   |
| Municipal bonds-taxable                                                 |        | 1,902       |        |   | -       |   |   | - |   |
| SBA securities                                                          |        | 1,999       |        |   | -       |   |   | - |   |
| Asset-backed securities                                                 |        | -           |        |   | 6,097   |   |   | - |   |
| Mortgage-backed securities                                              |        | 12,769      |        |   | 5,087   |   |   | 16,863 |   |
| CMO securities                                                          |        | 19,596      |        |   | 6,236   |   |   |  - |   |
|                                                                    |        | 36,266      |        |   | 31,752  |   |   | 33,238 |   |
| Securities held to maturity:                                            |        |        |        |   |    |   |   |   |   |
| Mortgage-backed securities                                              |        |  1,465 |        |   |  - |   |   |  1 |   |
|                                                                    |        |        |        |   |    |   |   |   |   |
|            Total | $           | 37,731      |        | $      | 31,752  |   | $ | 33,239 |   |

|                                            | 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,  2010:             |                   |    |                |   |               |   |             |   |     |        |    |   |   |   |   |   |   |   |   |   |   |
| Municipal bonds-taxable                         | $                      | -       |                |   | -                  | %      | $                | -      |     |        | -       | % | $ | - |   |   | - | % | $ | 1,902 |   |   | 5.23 | % |   | $ | 1,902 |   |   | 5.23 | % |
|      SBA securities    |                   |  - |                |   |  -            |   |             | -      |     |        | -       |   |   | - |   |   |  - |   |   |  - |   |   |  - |   |   |   |  1,999 |   |   | 3.34 | % |
| Mortgage-backed securities                      |                   |  - |                |   |  -            |   |             | -      |     |        | -       |   |   | - |   |   |  - |   |   |  - |   |   |  - |   |   |   | 14,234 |   |   | 2.60 | % |
| CMO securities                                  |                   | -       |                |   |  -            |   |             | -      |     |        | -       |   |   | - |   |   |  - |   |   | - |   |   |  - |   |   |   | 19,596 |   |   | 2.60 | % |
|                                            |                   |    |                |   |               |   |             |   |     |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                           |                   |    |                |   |               |   |             |   |     |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 37,731 |   |   | 3.64 | % |
|                                            |                   |    |                |   |               |   |             |   |     |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |   | 4.20 | % |
|                                            |                   |    |                |   |               |   |             |   |     |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |   | 4.95 | % |

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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  |   |
| Loan portfolio (1):                  |     |          |       |   |          |   |    |      |   |   |
| Commercial and industrial            | $        | 32,065        |       | $      | 22,851        |   | $       | 4,087     |   | $      | - |   | $ | 59,003 |   |
| Commercial real estate               |     | 21,549        |       |   | 57,642        |   |    | 13,147    |   |   | 497 |   |   | 92,835 |   |
| Consumer                             |     | 2,659         |       |   | 3,362         |   |    | 154       |   |   | - |   |   | 6,175 |   |
| Residential real estate              |     | 2,218         |       |   |  6,603   |   |    |  361 |   |   |  - |   |   | 9,182 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Total loans                          |     |  58,491  |       |   | 90,458        |   |    | 17,749    |   |   |  497 |   |   | 167,195 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Interest bearing deposits with banks |     | 10,031        |       |   | -             |   |    | -         |   |   | - |   |   | 10,031 |   |
| Federal funds sold                   |     | 104           |       |   | -             |   |    | -         |   |   | - |   |   | 104 |   |
| Federal Home Loan Bank stock         |     | -             |       |   | -             |   |    | -         |   |   | 1,087 |   |   | 1,087 |   |
| Securities (2)                       |     |  -       |       |   |  97      |   |    | 15,469    |   |   | 22,165 |   |   | 37,731 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Total rate-sensitive assets          |     |  68,626  |       |   | 90,555        |   |    | 33,218    |   |   | 23,749 |   |   | 216,148 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Deposit accounts (3):                |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Money market deposits                |     | 36,177        |       |   | -             |   |    | -         |   |   | - |   |   | 36,177 |   |
| NOW deposits                         |     | 9,276         |       |   | -             |   |    | -         |   |   | - |   |   | 9,276 |   |
| Savings deposits                     |     | 6,013         |       |   | -             |   |    | -         |   |   | - |   |   | 6,013 |   |
| Certificates of deposit              |     |  86,681  |       |   | 51,883        |   |    |  -   |   |   | - |   |   | 138,564 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Total deposit accounts               |     | 138,147       |       |   | 51,883        |   |    | -         |   |   | - |   |   | 190,030 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Federal Home Loan Bank advances      |     |  10,500  |       |   | 4,100         |   |    |  -   |   |   | - |   |   |  14,600 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Total rate-sensitive liabilities     |     |  148,647 |       |   | 55,983        |   |    | -         |   |   | - |   |   | 204,630 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| GAP (repricing differences)          | $        | (80,021       | )          | $      | 34,572        |   | $       | 33,218    |   | $      | 23,749 |   | $ | 11,518 |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Cumulative GAP                       | $        | (80,021       | )          | $      | (45,449       | )      | $       | (12,231   | )      | $      | 11,518 |   |   |   |   |
|                                 |     |          |       |   |          |   |    |      |   |   |   |   |   |   |   |
| Cumulative GAP/total assets          |     |  (34.43  | )%         |   | (19.55        | )%     |    | (5.26     | )%     |   |  4.96 | % |   |   |   |

| (1) | In preparing the table above, adjustable-rate loans are included in the period in which the interest 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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|              |   | Commercial |   | Commercial |   |        |   |     |   |
|-------------------|--------|------------|--------|------------|--------|-------------|--------|----------|--------|
|              |   | and        |   | Real       |   | Residential |   |     |   |
| Years Ending      |   | Industrial |   | Estate     |   | Real Estate |   | Consumer |   |
| December 31,      |   | Loans      |   | Loans      |   | Loans       |   | Loans    |   |
|              |   |       |   |       |   |        |   |     |   |
| 2011              |   | $          | 19,967 |       | $      | 15,107      |   | $        | 4,360  |   | $ | 3,563 |   |
| 2012              |   |       | 7,806  |       |   | 7,551       |   |     | 1,914  |   |   | 1,442 |   |
| 2013              |   |       | 4,865  |       |   | 6,324       |   |     | 897    |   |   | 667 |   |
| 2014-2015         |   |       | 7,028  |       |   | 9,265       |   |     | 1,036  |   |   | 388 |   |
| 2016-2017         |   |       | 4,003  |       |   | 8,654       |   |     | 631    |   |   | 62 |   |
| 2018 & beyond |   |       | 15,334 |       |   | 45,934      |   |     | 344    |   |   | 53 |   |
|              |   |       |   |       |   |        |   |     |   |   |   |   |   |   |
| Total             |   | $          | 59,003 |       | $      | 92,835      |   | $        | 9,182  |   | $ | 6,175 |   |

| Originations:                                   | 2010   |      |   2009 |   |
|-------------------------------------------------|--------|-----------|-------------|--------|
|                                            |   |      |        |   |
| Commercial and industrial loans                 | $      | 5,153     |        | $      | 16,764 |   |
| Commercial real estate loans                    |   | 511       |        |   | 14,202 |   |
| Consumer loans                                  |   | 894       |        |   | 4,411 |   |
| Construction and development loans              |   | 59        |        |   | - |   |
|    Residential real estate loans |   |  952 |        |   |  790 |   |
|                                            |   |      |        |   |   |   |
| Total loans originated                          |   | 7,569     |        |   | 36,167 |   |
|                                            |   |      |        |   |   |   |
| Principal reductions and participations sold    |   | (18,895   | )           |   | (21,943 | ) |
|                                            |   |      |        |   |   |   |
| (Decrease) increase in total loans              | $      | (11,326   | )           | $      | 14,224 |   |

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|                              |   | At December 31, |    |
|-----------------------------------|--------|-----------------|---------|
|                              |   | 2010            |    |   | 2009 |   |   | 2008 |   |
|                              |   |            |    | % of |   |   |   |   | % of |   |   |   |   | % of |   |
|                              |   | Amount          |    | Deposits |   |   | Amount |   | Deposits |   |   | Amount |   | Deposits |   |
| Demand deposits                   |   | $               | 18,336  |   |   | 8.80 | % |   | $ | 18,925 |   |   | 8.75 | % |   | $ | 19,492 |   |   | 9.71 | % |
| Money-market deposits             |   |            | 36,177  |   |   | 17.36 |   |   |   | 40,424 |   |   | 18.68 |   |   |   | 30,262 |   |   | 15.08 |   |
| NOW deposits                      |   |            | 9,276   |   |   | 4.45 |   |   |   | 14,270 |   |   | 6.60 |   |   |   | 5,039 |   |   | 2.51 |   |
| Savings deposits                  |   |            | 6,013   |   |   |  2.89 |   |   |   | 5,997 |   |   |  2.77 |   |   |   | 4,157 |   |   |  2.07 |   |
|                              |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subtotal                          |   |            | 69,802  |   |   |  33.50 |   |   |   | 79,616 |   |   |  36.80 |   |   |   | 58,950 |   |   |  29.37 |   |
|                              |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Certificate of deposits:          |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 0%- 0.99                          | %      |            |    | 10,891 |   |   | 5.23 |   |   |   | 748 |   |   | .34 |   |   |   | 23 |   |   | .01 |   |
| 1.00% - 1.99                      | %      |            |    | 72,601 |   |   | 34.84 |   |   |   | 38,056 |   |   | 17.59 |   |   |   | 140 |   |   | .07 |   |
| 2.00% - 2.99                      | %      |            |    | 37,459 |   |   | 17.98 |   |   |   | 56,831 |   |   | 26.26 |   |   |   | 11,735 |   |   | 5.85 |   |
| 3.00% - 3.99                      | %      |            |    | 7,692 |   |   | 3.69 |   |   |   | 12,659 |   |   | 5.85 |   |   |   | 48,016 |   |   | 23.93 |   |
| 4.00% - 4.99                      | %      |            |    | 1,948 |   |   | .93 |   |   |   | 15,140 |   |   | 7.00 |   |   |   | 59,287 |   |   | 29.54 |   |
| 5.00% - 5.99                      | %      |            |    | 7,973 |   |   |  3.83 |   |   |   | 13,324 |   |   |  6.16 |   |   |   | 22,532 |   |   |  11.23 |   |
|                              |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total certificates of deposit (1) |   |            | 138,564 |   |   |  66.50 |   |   |   | 136,758 |   |   |  63.20 |   |   |   | 141,733 |   |   |  70.63 |   |
|                              |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits                    |   | $               | 208,366 |   |   | 100.00 | % |   | $ | 216,374 |   |   | 100.00 | % |   | $ | 200,683 |   |   | 100.00 | % |

| (1)   | Included individual retirement accounts (“IRAs”) totaling $6.9, $5.0 and $4.3 million at December 31, 2010, 2009, and 2008 all of which are in the form of certificates of deposit. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                          |   | Year Ending December 31, |   |
|-------------------------------|--------|--------------------------|--------|
|                          |   | 2011                     |   | 2012 |   | 2013 |   | 2014 |   | 2015 |   | Total |   |
|                          |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| 0% - 0.99                     | %      |                     | $      | 10,663 |   | $ | 228 |   | $ | - |   | $ | - |   | $ | - |   | $ | 10,891 |   |
| 1.00% - 1.99                  | %      |                     |   | 51,038 |   |   | 17,662 |   |   | 3,690 |   |   | 211 |   |   | - |   |   | 72,601 |   |
| 2.00% - 2.99                  | %      |                     |   | 19,899 |   |   | 8,662 |   |   | 4,382 |   |   | 1,788 |   |   | 2,728 |   |   | 37,459 |   |
| 3.00% - 3.99                  | %      |                     |   | 1,253 |   |   | 4,445 |   |   | 1,340 |   |   | 654 |   |   | - |   |   | 7,692 |   |
| 4.00% - 4.99                  | %      |                     |   | 327 |   |   | 1,321 |   |   | 300 |   |   | - |   |   | - |   |   | 1,948 |   |
| 5.00% - 5.99                  | %      |                     |   | 3,501 |   |   | 4,472 |   |   | - |   |   | - |   |   | - |   |   | 7,973 |   |
| Total certificates of deposit |   | $                        | 86,681 |   | $ | 36,790 |   | $ | 9,712 |   | $ | 2,653 |   | $ | 2,728 |   | $ | 138,564 |   |

|                                |  December 31, |   |
|-------------------------------------|--------------------|--------|
|                                | 2010               |   | 2009 |   | 2008 |   |
|                                |               |   |   |   |   |   |
| Due three months or less            | $                  | 9,518  |   | $ | 6,922 |   | $ | 11,778 |   |
| Due over three months to six months |               | 7,512  |   |   | 4,493 |   |   | 4,698 |   |
| Due over six months to one year     |               | 13,678 |   |   | 16,044 |   |   | 22,404 |   |
| Due over one year to five years     |               | 15,003 |   |   | 17,243 |   |   | 16,716 |   |
|                                |               |   |   |   |   |   |   |   |   |
|                                | $                  | 45,711 |   | $ | 44,702 |   | $ | 55,596 |   |

| Type of Borrowing    | Outstanding |   | Line Amount |   | Available |   |
|----------------------|-------------|--------|-------------|--------|-----------|--------|
|                 |        |   |        |   |      |   |
| Repurchase Agreement | $           | -      |        | $      | 5,000     |   | $ | 5,000 |   |
| FHLB Advances        |        | 14,600 |        |   | 14,600    |   |   | - |   |
| FRB Discount Window  |        | -      |        |   | 23,454    |   |   | 23,454 |   |
|                 | $           | 14,600 |        | $      | 43,054    |   | $ | 28,454 |   |

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|                                                                             | Year Ended December 31, |         |
|----------------------------------------------------------------------------------|-------------------------|--------------|
|                                                                             | 2010                    |         | 2009 |   | 2008 |   |
|                                                                             |                    |         | 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                                                                            | $                       | 175,710      |   |   | 10,589 |   |   | 6.03 | % | $ | 189,672 |   |   | 11,287 |   |   | 5.95 | % | $ | 185,005 |   |   | 12,988 |   |   | 7.02 | % |
| Securities                                                                       |                    | 35,278       |   |   | 1,285 |   |   | 3.64 |   |   | 34,961 |   |   | 1,468 |   |   | 4.20 |   |   | 13,608 |   |   | 673 |   |   | 4.95 |   |
| Other interest earning assets (1)                                                |                    | 19,015       |   |   | 46 |   |   | .24 |   |   | 8,894 |   |   | 23 |   |   | .26 |   |   | 7,063 |   |   | 141 |   |   | 2.00 |   |
| Total interest earning assets                                                    |                    | 230,003      |   |   | 11,920 |   |   | 5.18 |   |   | 233,527 |   |   | 12,778 |   |   | 5.47 |   |   | 205,676 |   |   | 13,802 |   |   | 6.71 |   |
| Non-interest earning assets                                                      |                    | 19,953       |   |   |   |   |   |   |   |   | 26,034 |   |   |   |   |   |   |   |   | 12,065 |   |   |   |   |   |   |   |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                     | $                       | 249,956      |   |   |   |   |   |   |   | $ | 259,561 |   |   |   |   |   |   |   | $ | 217,741 |   |   |   |   |   |   |   |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                    |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings, NOW and money-market deposits                                           |                    | 55,235       |   |   | 536 |   |   | .97 |   |   | 58,070 |   |   | 986 |   |   | 1.70 |   |   | 38,292 |   |   | 976 |   |   | 2.55 |   |
| Certificates of deposit                                                          |                    | 144,564      |   |   | 3,415 |   |   | 2.36 |   |   | 143,781 |   |   | 4,986 |   |   | 3.47 |   |   | 133,180 |   |   | 5,961 |   |   | 4.48 |   |
| Other borrowings                                                                 |                    |  15,206 |   |   | 249 |   |   | 1.64 |   |   |  11,250 |   |   | 243 |   |   | 2.16 |   |   | 552 |   |   | 14 |   |   | 2.54 |   |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest bearing liabilities                                               |                    | 215,005      |   |   | 4,200 |   |   | 1.95 |   |   | 213,101 |   |   | 6,215 |   |   | 2.92 |   |   | 172,024 |   |   | 6,951 |   |   | 4.04 |   |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                                                  |                    | 17,684       |   |   |   |   |   |   |   |   | 21,640 |   |   |   |   |   |   |   |   | 22,765 |   |   |   |   |   |   |   |
| Non-interest bearing liabilities                                                 |                    | 5,779        |   |   |   |   |   |   |   |   | 2,758 |   |   |   |   |   |   |   |   | 1,640 |   |   |   |   |   |   |   |
| Stockholders' equity                                                             |                    | 11,488       |   |   |   |   |   |   |   |   | 22,062 |   |   |   |   |   |   |   |   | 21,312 |   |   |   |   |   |   |   |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                       | $                       | 249,956      |   |   |   |   |   |   |   | $ | 259,561 |   |   |   |   |   |   |   | $ | 217,741 |   |   |   |   |   |   |   |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                              |                    |         |   | $ | 7,720 |   |   |   |   |   |   |   | $ | 6,563 |   |   |   |   |   |   |   | $ | 6,851 |   |   |   |   |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate spread (2)                                                         |                    |         |   |   |   |   |   | 3.23 | % |   |   |   |   |   |   |   | 2.55 | % |   |   |   |   |   |   |   | 2.67 | % |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin (3)                                                          |                    |         |   |   |   |   |   | 3.36 | % |   |   |   |   |   |   |   | 2.81 | % |   |   |   |   |   |   |   | 3.33 | % |
|                                                                             |                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of average interest earning assets to average interest bearing liabilities |                    | 1.07         |   |   |   |   |   |   |   |   | 1.10 |   |   |   |   |   |   |   |   | 1.20 |   |   |   |   |   |   |   |

|         (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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|                                         | Year Ended December 31, 2010 vs. 2009 |   | Year Ended December 31, 2009 vs. 2008 |   |
|----------------------------------------------|---------------------------------------|--------|---------------------------------------|--------|
|                                         | Increase (Decrease)                   |   | Increase (Decrease)                   |   |
|                                         |                                  |   |                                  |   | Rate/ |   |   |   |   |   |   |   | Rate/ |   |   |   |
|                                         |     Rate               |   |  Volume                          |   | Volume |   | Total |   |     Rate |   |  Volume |   | Volume |   | Total |   |
|                                         | (In thousands)                        |   | (In thousands)                        |   |
| Interest earning assets:                     |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                        | $                                     | 143    |                                  | $      | (830 | ) | $ | (11 | ) | $ | (698 | ) | $ | (1,979 | ) | $ | 328 |   | $ | (50 | ) | $ | (1,701 | ) |
| Securities                                   |                                  | (194   | )                                     |   | 13 |   |   | (2 | ) |   | (183 | ) |   | (102 | ) |   | 1,057 |   |   | (160 | ) |   | 795 |   |
| Other interest earning assets                |                                  | (1     | )                                     |   | 26 |   |   | (2 | ) |   | 23 |   |   | (123 | ) |   | 37 |   |   | (32 | ) |   | (118 | ) |
|                                         |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                        |                                  | (52    | )                                     |   | (791 | ) |   | (15 | ) |   | (858 | ) |   | (2,204 | ) |   | 1,422 |   |   | (242 | ) |   | (1,024 | ) |
|                                         |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                    |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings, money-market  and NOW deposits |                                  | (423   | )                                     |   | (48 | ) |   | 21 |   |   | (450 | ) |   | (326 | ) |   |  504 |   |   | (168 | ) |   | 10 |   |
| Certificates of deposit                      |                                  | (1,589 | )                                     |   | 27 |   |   | (9 | ) |   | (1,571 | ) |   | (1,343 | ) |   | 475 |   |   | (107 | ) |   | (975 | ) |
| Other borrowings                             |                                  | (58    | )                                     |   |  85 |   |   | (21 | ) |   |  6 |   |   | (2 | ) |   |  272 |   |   | (41 | ) |   | 229 |   |
|                                         |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                        |                                  | (2,070 | )                                     |   |  64 |   |   | (9 | ) |   | (2,015 | ) |   | (1,671 | ) |   | 1,251 |   |   | (316 | ) |   | (736 | ) |
|                                         |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in net interest income       | $                                     | 2,018  |                                  | $      | (855 | ) | $ | (6 | ) | $ | 1,157 |   | $ | (533 | ) | $ |  171 |   | $ | 74 |   | $ | (288 | ) |

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|   | Status as of December 31, 2010 |   |
|--------|--------------------------------|--------|
|   | Resolved Satisfactorily        |   | Resolved Unsatisfactorily |   | Pending |   | Totals |   |
|   | #                              |   | ApproximateAmount |   | # |   | ApproximateAmount |   | # |   | ApproximateAmount |   | # |   | ApproximateAmount |   |
| 2007   | 14                             |   | $ | 5.6 |   | 7 |   | $ | 2.4 |   | 0 |   | $ | 0 |   | 21 |   | $ | 7.9 |   |
| 2008   | 46                             |   |   | 24.5 |   | 13 |   |   | 8.0 |   | 2 |   |   | 2.5 |   | 61 |   |   | 35.0 |   |
| 2009   | 51                             |   |   | 16.5 |   | 16 |   |   | 4.2 |   | 3 |   |   | 1.9 |   | 70 |   |   | 22.7 |   |
| 2010   | 4                              |   |   | 4.2 |   | 0 |   |   | 0 |   | 0 |   |   | 0 |   | 4 |   |   | 4.3 |   |
| Total  | 115                            |   | $ | 50.8 |   | 36 |   | $ | 14.6 |   | 5 |   | $ | 4.4 |   | 156 |   | $ | 69.9 |   |

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|                                     | 2010    |   | 2009    |   |
|------------------------------------------|---------|--------|---------|--------|
|                                     | Fourth  |   | Third   |   | Second |   | First |   | Fourth |   | Third |   | Second |   | First |   |
|                                     | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   | Quarter |   |
|                                     |    |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                          | $       | 2,844  |    | 2,995  |   | 3,069 |   | 3,012 |   | $ | 3,178 |   | 3,207 |   | 3,174 |   | 3,219 |   |
| Interest expense                         |    | 923    |    | 1,024  |   | 1,113 |   | 1,140 |   |   | 1,311 |   | 1,580 |   | 1,660 |   | 1,664 |   |
| Net interest income                      |    | 1,921  |    | 1,971  |   | 1,956 |   | 1,872 |   |   | 1,867 |   | 1,627 |   | 1,514 |   | 1,555 |   |
| Provision for loan  losses     |    | 1,049  |    | 1,477  |   | 1,263 |   | 1,890 |   |   | 1,046 |   | 1,981 |   | 863 |   | 1,069 |   |
| Loss before income taxes                 |    | (2,276 | )       | (1,464 | ) | (1,429 | ) | (2,417 | ) |   | (1,771 | ) | (2,714 | ) | (1,970 | ) | (1,234 | ) |
| Net loss                                 |    | (2,648 | )       | (1,464 | ) | (1,429 | ) | (2,417 | ) |   | (5,773 | ) | (1,580 | ) | (1,093 | ) | (762 | ) |
| Basic loss per common share              |    | (1.47  | )       | (.76   | ) | (.74 | ) | (1.22 | ) |   | (2.85 | ) | (.81 | ) | (.58 | ) | (.42 | ) |
| Diluted loss per common share            |    | (1.47  | )       | (.76   | ) | (.74 | ) | (1.22 | ) |   | (2.85 | ) | (.81 | ) | (.58 | ) | (.42 | ) |
| Cash dividends declared per common share |    | -      |    | -      |   | - |   | - |   |   | - |   | - |   | - |   | - |   |

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Consolidated Balance Sheets

|                                                                                                               | December 31, |    |
|--------------------------------------------------------------------------------------------------------------------|--------------|---------|
|                                                                                                               | 2010         |    | 2009 |   |
| Assets                                                                                                             |         |    |
| Cash and due from banks                                                                                            | $            | 2,094   |   |   | 2,889 |   |
| Federal funds sold                                                                                                 |         | 104     |   |   | - |   |
| Interest bearing deposits with banks                                                                               |         | 10,031  |   |   | 10,043 |   |
|                                                                                                               |         |    |   |   |   |   |
| Total cash and cash equivalents                                                                                    |         | 12,229  |   |   | 12,932 |   |
|                                                                                                               |         |    |   |   |   |   |
| Securities available for sale                                                                                      |         | 36,266  |   |   | 31,752 |   |
| Security held to maturity (market value of $1,482)                                                                 |         | 1,465   |   |   | - |   |
| Loans, net of allowance for loan losses of $4,809 and $4,730                                                       |         | 161,946 |   |   | 184,312 |   |
| Premises and equipment, net                                                                                        |         | 5,006   |   |   | 5,432 |   |
| Federal Home Loan Bank stock, at cost                                                                              |         | 1,087   |   |   | 1,087 |   |
| Foreclosed assets, net                                                                                             |         | 9,190   |   |   | 6,763 |   |
| Accrued interest receivable                                                                                        |         | 884     |   |   | 1,201 |   |
| Bank-owned life insurance                                                                                          |         | 3,138   |   |   | 3,017 |   |
| Other assets                                                                                                       |         | 1,234   |   |   | 1,707 |   |
|                                                                                                               |         |    |   |   |   |   |
| Total assets                                                                                                       | $            | 232,445 |   |   | 248,203 |   |
|                                                                                                               |         |    |   |   |   |   |
| Liabilities and Stockholders' Equity                                                                               |         |    |   |   |   |   |
| Liabilities:                                                                                                       |         |    |   |   |   |   |
| Non-interest bearing demand deposits                                                                               |         | 18,336  |   |   | 18,925 |   |
| Savings, NOW and money-market deposits                                                                             |         | 51,466  |   |   | 60,691 |   |
| Time deposits                                                                                                      |         | 138,564 |   |   | 136,758 |   |
|                                                                                                               |         |    |   |   |   |   |
| Total deposits                                                                                                     |         | 208,366 |   |   | 216,374 |   |
|                                                                                                               |         |    |   |   |   |   |
| Official checks                                                                                                    |         | 1,218   |   |   | 960 |   |
| Federal Home Loan Bank advances                                                                                    |         | 14,600  |   |   | 14,600 |   |
| Other liabilities                                                                                                  |         | 1,549   |   |   | 1,630 |   |
|                                                                                                               |         |    |   |   |   |   |
| Total liabilities                                                                                                  |         | 225,733 |   |   | 233,564 |   |
|                                                                                                               |         |    |   |   |   |   |
| Commitments (Notes 4, 9 and 19)                                                                                    |         |    |   |   |   |   |
|                                                                                                               |         |    |   |   |   |   |
| 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                                                                                           |         | (337    | ) |   | (429 | ) |
| Common stock, $.01 par value; 25,000,000 shares authorized, 2,058,047 shares issued and outstanding           |         | 20      |   |   | 20 |   |
| Additional paid-in capital, common                                                                                 |         | 24,469  |   |   | 24,444 |   |
| Accumulated deficit                                                                                                |         | (22,625 | ) |   | (14,572 | ) |
| Accumulated other comprehensive loss                                                                               |         | (615    | ) |   | (624 | ) |
|                                                                                                               |         |    |   |   |   |   |
| Total stockholders' equity                                                                                         |         | 6,712   |   |   | 14,639 |   |
|                                                                                                               |         |    |   |   |   |   |
| Total liabilities and stockholders' equity                                                                         | $            | 232,445 |   |   | 248,203 |   |

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Table of Contents

|                                                                               | Year Ended December 31, |      |
|------------------------------------------------------------------------------------|-------------------------|-----------|
| Interest income:                                                                   | 2010                    |      | 2009 |   |
| Loans                                                                              | $                       | 10,589    |   |   | 11,287 |   |
| Securities                                                                         |                    | 1,285     |   |   | 1,468 |   |
| Other                                                                              |                    | 46        |   |   | 23 |   |
|                                                                               |                    |      |   |   |   |   |
| Total interest income                                                              |                    | 11,920    |   |   | 12,778 |   |
|                                                                               |                    |      |   |   |   |   |
| Interest expense:                                                                  |                    |      |   |   |   |   |
| Deposits                                                                           |                    | 3,951     |   |   | 5,972 |   |
| Other borrowings                                                                   |                    | 249       |   |   | 243 |   |
|                                                                               |                    |      |   |   |   |   |
| Total interest expense                                                             |                    | 4,200     |   |   | 6,215 |   |
|                                                                               |                    |      |   |   |   |   |
| Net interest income                                                                |                    | 7,720     |   |   | 6,563 |   |
| Provision for loan losses                                                          |                    | 5,679     |   |   | 4,959 |   |
| Net interest income after provision for loan losses                                |                    | 2,041     |   |   | 1,604 |   |
|                                                                               |                    |      |   |   |   |   |
| Non-interest income:                                                               |                    |      |   |   |   |   |
| Service charges and fees on deposit accounts                                       |                    | 728       |   |   | 725 |   |
| Loan brokerage fees                                                                |                    | 117       |   |   | 117 |   |
| Gain on sale of loans held for sale                                                |                    | 199       |   |   | 233 |   |
| Gain on sale of securities available for sale                                      |                    | 809       |   |   | 520 |   |
| Write-down of other assets                                                         |                    | -         |   |   | (548 | ) |
| Income from bank-owned life insurance                                              |                    | 121       |   |   | 120 |   |
| Other fees                                                                         |                    | 30        |   |   | 22 |   |
|                                                                               |                    |      |   |   |   |   |
| Total non-interest income                                                          |                    | 2,004     |   |   | 1,189 |   |
|                                                                               |                    |      |   |   |   |   |
| Non-interest expenses:                                                             |                    |      |   |   |   |   |
| Salaries and employee benefits                                                     |                    | 3,743     |   |   | 3,820 |   |
| Occupancy and equipment                                                            |                    | 1,532     |   |   | 1,564 |   |
| Advertising                                                                        |                    | 126       |   |   | 245 |   |
| Data processing                                                                    |                    | 650       |   |   | 589 |   |
| Supplies                                                                           |                    | 199       |   |   | 118 |   |
| Professional fees                                                                  |                    | 981       |   |   | 757 |   |
| Expenses on foreclosed assets                                                      |                    | 2,254     |   |   | 1,938 |   |
| FDIC insurance                                                                     |                    | 1,075     |   |   | 610 |   |
| Other                                                                              |                    | 1,071     |   |   | 841 |   |
|                                                                               |                    |      |   |   |   |   |
| Total non-interest expenses                                                        |                    | 11,631    |   |   | 10,482 |   |
|                                                                               |                    |      |   |   |   |   |
| Loss before income taxes                                                           |                    | (7,586    | ) |   | (7,689 | ) |
| Income tax expense                                                                 |                    | 372       |   |   | 1,519 |   |
|                                                                               |                    |      |   |   |   |   |
| Net loss                                                                           |                    | (7,958    | ) |   | (9,208 | ) |
| Preferred stock dividend requirements and amortization of preferred stock discount |                    | 385       |   |   | 382 |   |
| Net loss available to common shareholders                                          | $                       | (8,343    | ) |   | (9,590 | ) |
|                                                                               |                    |      |   |   |   |   |
|     Net Loss per common share (basic)                          | $                       | (4.05     | ) |   | (4.66 | ) |
|     Net Loss per common share (diluted)                        | $                       | (4.05     | ) |   | (4.66 | ) |
|                                                                               |                    |      |   |   |   |   |
| 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, 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

|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     | 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, 2009                                                       |  5,800                                                                                                                                                                                                                                                                       |    $  - |  5,800                                                                                      |  (429)                                               |                                                                                       | 2,058,047                                                                             | $20                                                           |  24,444                                              |   (14,572)                                          |      (624)                                                                                 |             14,639 |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |                                                                      |
| Comprehensive loss:                                                                |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |                                                                      |
| Net loss                                                                           |        -                                                                                                                                                                                                                                            | -                                |        -                                                           | -                                                         |                                                                                       | -                                                                                     | -                                                             | -                                                         |    (7,958)                                |                   -       | (7,958)                                                                   |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |                                                                      |
| Net change in unrealized loss on securities available for sale, net of tax         |        -                                                                                                                                                                                                                                            | -                                |        -                                                           | -                                                         |                                                                                       | -                                                                                     | -                                                             | -                                                         |           - |                    9 |          9                        |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |                                                                      |
| Comprehensive Loss                                                                 |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |      (7,949)                                     |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |                                                                      |
| Preferred stock dividend requirements and amortization of preferred stock discount |          -                                                                                                                                                                                                                           | -                                |        -                                                           |           92 |                                                                                       | -                                                                                     | -                                                             | -                                                         |         (95)          |                   -       |             (3)    |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |                                                                      |
| Share-based compensation                                                           |         -                                                                                                                                                                                                                                      | -                                |        -                                                           |      -                                |                                                                                       |               - |           - |           25 |           - |                   -       |           25            |
|                                                                               |                                                                                                                                                                                                                                                                              |                             |                                                                                             |                                                      |                                                                                       |                                                                                  |                                                          |                                                      |                                                     |                                                                                                           |                                                                      |
| Balance at December 31, 2010                                                       |  5,800                                                                                                                                                                                                                                                                       | $ -                              | 5,800                                                                                            |       (337)                 |                                                                                       | 2,058,047                                                                             | $20                                                           |   24,469                                        |       (22,625)                  |       (615)                                                                                |         6,712                          |

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Table of Contents

|                                                                        | Year Ended December 31, |    |
|-----------------------------------------------------------------------------|-------------------------|---------|
|                                                                        | 2010                    |    | 2009 |   |
| Cash flows from operating activities:                                       |                    |    |   |   |
| Net loss                                                                    | $                       | (7,958  | ) |   | (9,208 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |                    |    |   |   |   |   |
| Depreciation and amortization                                               |                    | 433     |   |   | 467 |   |
| Provision for loan losses                                                   |                    | 5,679   |   |   | 4,959 |   |
| Amortization of loan fees, net                                              |                    | (207    | ) |   | (105 | ) |
| Deferred income taxes                                                       |                    | -       |   |   | 1,766 |   |
| Net amortization of premiums and discounts on securities                    |                    | 199     |   |   | 154 |   |
| Gain on sale of loans held for sale                                         |                    | (199    | ) |   | (233 | ) |
| Gain on sale of securities available for sale                               |                    | (809    | ) |   | (520 | ) |
| Proceeds from sale of loans held for sale                                   |                    | 2,989   |   |   | 5,876 |   |
| Originations of loans held for sale                                         |                    | (2,790  | ) |   | (5,643 | ) |
| Write-down of foreclosed assets                                             |                    | 1,211   |   |   | 880 |   |
| Provision for losses on foreclosed assets                                   |                    | 242     |   |   | - |   |
| Loss on sale of foreclosed assets                                           |                    | 152     |   |   | 142 |   |
| Decrease in accrued interest receivable                                     |                    | 317     |   |   | 154 |   |
| Decrease in other assets                                                    |                    | 473     |   |   | 298 |   |
| Increase in official checks and other liabilities                           |                    | 174     |   |   | 81 |   |
| Income from bank-owned life insurance                                       |                    | (121    | ) |   | (120 | ) |
| Share-based compensation                                                    |                    | 25      |   |   | 51 |   |
|                                                                        |                    |    |   |   |   |   |
| Net cash used in operating activities                                       |                    | (190    | ) |   | (1,001 | ) |
|                                                                        |                    |    |   |   |   |   |
| Cash flows from investing activities:                                       |                    |    |   |   |   |   |
| Maturities and calls of securities available for sale                       |                    | 12,125  |   |   | 16,400 |   |
| Purchase of securities available for sale                                   |                    | (58,929 | ) |   | (52,041 | ) |
| Principal payments on securities available for sale                         |                    | 2,247   |   |   | 2,919 |   |
| Proceeds from sale of securities available for sale                         |                    | 40,668  |   |   | 33,652 |   |
| Principal payments on securities held to maturity                           |                    | 97      |   |   | 1 |   |
| Purchase of securities held to maturity                                     |                    | (2,568  | ) |   | - |   |
| Call of securities held to maturity                                         |                    | 1,000   |   |   | - |   |
| Net decrease (increase) in loans                                            |                    | 11,326  |   |   | (14,224 | ) |
| Purchase of premises and equipment                                          |                    | (7      | ) |   | (18 | ) |
| Purchase of Federal Home Loan Bank stock                                    |                    | -       |   |   | (234 | ) |
| Purchase of  bank-owned life insurance                            |                    | -       |   |   | (108 | ) |
| Proceeds from the sale of foreclosed assets                                 |                    | 1,236   |   |   | 3,213 |   |
| Principal reduction in foreclosed assets                                    |                    | 300     |   |   | - |   |
|                                                                        |                    |    |   |   |   |   |
| Net cash provided by (used in) investing activities                         |                    | 7,495   |   |   | (10,440 | ) |
|                                                                        |                    |    |   |   |   |   |
| Cash flows from financing activities:                                       |                    |    |   |   |   |   |
| Net (decrease) increase in deposits                                         |                    | (8,008  | ) |   | 15,691 |   |
| Cash paid to preferred stockholder                                          |                    | -       |   |   | (275 | ) |
| Proceeds from Federal Home Loan Bank advances                               |                    | -       |   |   | 3,500 |   |
|                                                                        |                    |    |   |   |   |   |
| Net cash (used in) provided by financing activities                         |                    | (8,008  | ) |   | 18,916 |   |
|                                                                        |                    |    |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                        |                    | (703    | ) |   | 7,475 |   |
|                                                                        |                    |    |   |   |   |   |
| Cash and cash equivalents at beginning of year                              |                    | 12,932  |   |   | 5,457 |   |
|                                                                        |                    |    |   |   |   |   |
| Cash and cash equivalents at end of year                                    | $                       | 12,229  |   |   | 12,932 |   |

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Table of Contents

|                                                                                                                    | Year Ended December 31, |   |
|-------------------------------------------------------------------------------------------------------------------------|-------------------------|--------|
|                                                                                                                    | 2010                    |   | 2009 |   |
| Supplemental disclosure of cash flow information:                                                                       |                    |   |   |   |
| Cash paid (received) during the year for:                                                                               |                    |   |   |   |
| Interest                                                                                                                | $                       | 4,044  |   |   | 6,347 |   |
|                                                                                                                    |                    |   |   |   |   |   |
| Income taxes                                                                                                            | $                       | -      |   |   | (1,011 | ) |
|                                                                                                                    |                    |   |   |   |   |   |
| Non-cash transactions:                                                                                                  |                    |   |   |   |   |   |
| Accumulated other comprehensive loss, net change in unrealized loss (gain) on securities available for sale, net of tax | $                       | 9      |   |   | (810 | ) |
|                                                                                                                    |                    |   |   |   |   |   |
|                                                                                                                    |                    |   |   |   |   |   |
| Transfer of loans to foreclosed assets                                                                                  | $                       | 5,568  |   |   | 9,284 |   |
|                                                                                                                    |                    |   |   |   |   |   |
| Preferred dividends payable at beginning of period                                                                      | $                       | 37     |   |   | 21 |   |
|                                                                                                                    |                    |   |   |   |   |   |
| Preferred dividends payable at end of period                                                                            | $                       | 40     |   |   | 37 |   |
|                                                                                                                    |                    |   |   |   |   |   |
| Amortization of preferred stock discount                                                                                | $                       | 92     |   |   | 92 |   |
|                                                                                                                    |                    |   |   |   |   |   |

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Table of Contents

| (1)   | Summary of Significant Accounting Policies |
|-----------------|--------------------------------------------|

|   | 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 it’s 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 $250,000 for all qualified deposits, and unlimited for non-interest bearing transaction accounts, through December 30, 2012. 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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Going Concern.  The Company’s recent and continuing increases in non-performing assets, continuing high levels of operating expenses related to the credit problems and eroding regulatory capital raise substantial doubt about the Company’s ability to continue as a going concern.  The Company has not complied with its regulatory capital requirements set forth in the Consent Order and Prompt Corrective Action discussed in Footnote 19, Regulatory Matters.  The Company needs to raise substantial additional capital.  Management is evaluating all potential sources of capital to meet the Company’s capital requirements, to include offering stock to outside parties and seeking a strategic merger partner.  There is no guarantee that sufficient capital would be available at acceptable terms, if at all, or that the Company would be able to sell assets at terms favorable enough to accomplish its regulatory capital needs.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 ("GAAP") and prevailing practices within the banking industry. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (1)   | Summary of Significant Accounting Policies, Continued |
|-----------------|-------------------------------------------------------|

|   | Use of Estimates.  In preparing consolidated financial statements in conformity with GAAP, 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The accrual of interest on all classes of 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, all loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.  Past-due status is based on contractual terms of the loan. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | All interest accrued but not collected for all classes of loans that are placed on nonaccrual 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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (1)   | Summary of Significant Accounting Policies, Continued |
|-----------------|-------------------------------------------------------|

|   | 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, 2010 or 2009. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (1)   | Summary of Significant Accounting Policies, Continued |
|-----------------|-------------------------------------------------------|

|   | Allowance for Loan Losses,Continued. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.  Accordingly, the Bank generally does not separately identify individual consumer and residential real estate loans for impairment disclosures. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Foreclosed Assets.  Assets acquired through, or in lieu of, loan foreclosures are to be sold and are initially recorded at 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 the new cost basis or fair value less costs to sell.  Revenue and expenses from operations are included in the consolidated statement of operations. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Transfer of Financial Assets.  Transfers of financial assets or a participating interest in an entire financial asset 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.  A participating interest is a portion of an entire financial asset that (1) conveys proportionate ownership rights with equal priority to each participating interest holder (2) involves no recourse (other than standard representations and warranties) to, or subordination by, any participating interest holder, and (3) does not entitle any participating interest holder to receive cash before any other participating interest holder. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income Taxes.  There are 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.  Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (1)   | Summary of Significant Accounting Policies, Continued |
|-----------------|-------------------------------------------------------|

|   | Income Taxes, Continued |
|--------|-------------------------|

|   | 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 2010 and 2009, outstanding stock options and warrants are not considered dilutive due to the losses incurred by the Company. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|--------|----------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (1)   | Summary of Significant Accounting Policies, Continued |
|-----------------|-------------------------------------------------------|

|   | Fair Value Measurements, continued |
|--------|------------------------------------|

|   | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following describes valuation methodologies for assets and liabilities measured at fair value |
|--------|---------------------------------------------------------------------------------------------------|

|   | 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 the valuation, securities are classified within Level 3 of the valuation hierarchy. Securities classified within Level 3 include certain residual interests in securitizations and other less liquid securities. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Foreclosed Assets. 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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Table of Contents

| (1)   | Summary of Significant Accounting Policies, Continued |
|-----------------|-------------------------------------------------------|

|   | 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: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash and Cash Equivalents.  The carrying amounts of cash and cash equivalents approximate their fair value. |
|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | Securities. The fair value for securities are based on the framework for measuring fair value. |
|--------|------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Accrued Interest Receivable.  The carrying amounts of accrued interest receivable approximate their fair values. |
|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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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Table of Contents

| (1)   | Summary of Significant Accounting Policies, Continued |
|-----------------|-------------------------------------------------------|

|   | 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): |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          | Before |   | Tax    |   | After  |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|
|                          | Tax    |   | Effect |   | Tax    |   |
| Year Ended December 31, 2010: |   |   |   |   |   |   |   |   |   |
| Holding gains                 | $      | 818    |   |   | -      |   |   | 818 |   |
| Gains included in net loss    | $      | (809   | )      |   | -      |   |   | (809 | ) |
| Net unrealized holding gains  | $      | 9      |   |   | -      |   |   |  9 |   |
|                          |   |   |   |   |   |   |   |   |   |
| Year Ended December 31, 2009: |   |   |   |   |   |   |   |   |   |
| Holding losses                | $      | (290   | )      |   | -      |   |   | (290 | ) |
| Gains included in net loss    | $      | (520   | )      |   | -      |   |   | (520 | ) |
| Net unrealized holding losses | $      | (810   | )      |   | -      |   |   | (810 | ) |

|   | Recent Accounting Pronouncements.  In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value Measurements (Topic 820), which amends the guidance for fair value measurements and disclosures.  The guidance in ASU 2010-06 requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. Furthermore, ASU 2010-06 requires a reporting entity to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs; clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value; and amends guidance on employers' disclosures about postretirement benefit plan assets to require that disclosures be provided by classes of assets instead of by major categories of assets.  The ASU was effective for interim and annual reporting periods beginning January 1, 2010, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements. Those disclosures were effective January 1, 2011 and for interim periods thereafter. In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes.  The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (2)   | Securities |
|-----------------|------------|

|   | Securities have been classified according to management's intention. The carrying amount of securities and their fair values are as follows (in thousands): |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  | AmortizedCost |   | GrossUnrealizedGains |   | GrossUnrealizedLosses |   | FairValue |   |
|-------------------------------------------------------|---------------|--------|----------------------|--------|-----------------------|--------|-----------|--------|
| At December 31, 2010:Securities available for sale:   |          |   |                 |   |                  |   |      |   |
| Municipal bonds-taxable                               | $             | 2,059  |                 |   | -                     |   |      | (157   | ) |   | 1,902 |   |
| SBA securities                                        |          | 2,059  |                 |   | -                     |   |      | (60    | ) |   | 1,999 |   |
| Mortgage-backed securities                            |          | 12,969 |                 |   | 2                     |   |      | (202   | ) |   | 12,769 |   |
| Collateralized Mortgage Obligation ("CMO") securities |          | 20,166 |                 |   | -                     |   |      | (570   | ) |   | 19,596 |   |
| Total securities available for sale                   | $             | 37,253 |                 |   | 2                     |   |      | (989   | ) |   | 36,266 |   |
|                                                  |          |   |                 |   |                  |   |      |   |   |   |   |   |
| Security held to maturity -                           |          |   |                 |   |                  |   |      |   |   |   |   |   |
| Mortgage-backed security                              | $             | 1,465  |                 |   | 17                    |   |      | -      |   |   | 1,482 |   |
|                                                  |          |   |                 |   |                  |   |      |   |   |   |   |   |
| 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 |   |

|   | Sales of securities available for sale are summarized as follows (in thousands): |
|--------|----------------------------------------------------------------------------------|

|                         | Year Ended December 31, |   |
|------------------------------|-------------------------|--------|
|                         | 2010                    |   | 2009 |   |
|                         |                    |   |   |   |
| Proceeds received from sales | $                       | 40,668 |   | $ | 33,641 |   |
|                         |                    |   |   |   |   |   |
| Gross gains                  | $                       | 809    |   | $ | 520 |   |

|   | Information pertaining to securities with gross unrealized losses at December 31, 2010, aggregated by investment category and length of time that individual securities available for sale have been in a continuous loss position, follows (in thousands): |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                       | Less Than Twelve Months |   |
|----------------------------|-------------------------|--------|
|                       | Gross Unrealized Losses |   | ApproximateFairValue |   |
| At December 31, 2010       |                    |   |   |   |
| Municipal bonds-taxable    | $                       | (157   | ) | $ | 1,902 |   |
| SBA securities             |                    | (60    | ) |   | 1,999 |   |
| Mortgage-backed securities |                    | (202   | ) |   | 12,670 |   |
| CMO securities             |                    | (570   | ) |   | 19,596 |   |
|                       |                    |   |   |   |   |   |
| Total                      | $                       | (989   | ) | $ | 36,167 |   |

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Table of Contents

| (2)   | Securities, continued |
|-----------------|-----------------------|

|                       | Available for Sale |         | Held to Maturity |
|----------------------------|--------------------|--------------|------------------|
|                       | AmortizedCost      |         | Fair Value  |   |  AmortizedCost |   |    Fair  Value |
|                       |               |         |             |   |   |   |   |
| Due in more than ten years |               | 2,059        |             |   | 1,902 |   |               - |   |              - |
| SBA securities             |               | 2 059        |             |   | 1,999 |   |               - |   |              - |
| Mortgage-backed securities |               | 12,969       |             |   | 12,769 |   |        1,465 |   |       1,482 |
| CMO securities             |               |  20,166 |             |   | 19,596 |   |   |        - |   |   |         - |
|                       |               |         |             |   |   |   |   |   |   |
|                       | $                  | 37,253       |             | $ | 36,266 |   |  $ |  1,465 |   |  $ |  1,482 |

|   | At December 31, 2010 and 2009, securities with a carrying value of $28,330,000 and $31,332,000, 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  The unrealized losses on twenty-two 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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Table of Contents

| (3)   | Loans |
|-----------------|-------|

|   | Our primary source of income is generated from the interest earned on our loan portfolio and fees generated from our lending activities.  We primarily focus our lending activities on commercial real estate lending to small and medium-sized businesses, including professionals, such as physicians, law firms and accountants. Our commercial mortgage loans include loans for acquisition/development, construction or rehabilitation of commercial, multi-family or residential real property. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We also emphasize commercial loans secured by assets other than real estate.  Our target commercial loan market includes companies in the medical services, retail construction, wholesale, manufacturing, and tourism industries. We also offer residential mortgage loans, as well as consumer loans, such as home equity lines of credit.  Our goal is to develop commercial lending opportunities where the loan relationships provide us with opportunities to develop depository relationships and other non-commercial loan relationships. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We offer Small Business Administration ("SBA"), 7(a) and 504 loans to small businesses throughout our market area. SBA loans are a complement to our focus on strengthening and supporting local communities. SBA loans are generally made pursuant to a federal government program designed to assist small businesses in obtaining financing. The federal government guarantees 75% to 90% of the SBA loan balances as an incentive for financial institutions to make loans to small businesses.  We generally sell the guaranteed portion of the SBA loan at a premium sale price between approximately 5% and 9%.  We had $14.5 million of outstanding SBA loans at December 31, 2010, of which $8.9 million is guaranteed. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following table summarizes our loan portfolio by type of loan as of the dates indicated (dollars in thousands): |
|--------|---------------------------------------------------------------------------------------------------------------------|

|                              | At December 31, |    |
|-----------------------------------|-----------------|---------|
|                              | 2010            |    | 2009 |   |
|                              |            |    |   |   |
| Commercial and Industrial         | $               | 59,003  |   |   | 63,815 |   |
| Commercial real estate            |            | 92,835  |   |   | 106,803 |   |
| Construction and development      |            | -       |   |   | 1,081 |   |
| Consumer                          |            | 6,175   |   |   | 8,329 |   |
| Residential real estate           |            | 9,182   |   |   | 9,668 |   |
|                              |            |    |   |   |   |   |
| Total loans                       |            | 167,195 |   |   | 189,696 |   |
|                              |            |    |   |   |   |   |
| Deduct:                           |            |    |   |   |   |   |
| Deferred loan costs and fees, net |            | (440    | ) |   | (654 | ) |
| Allowance for loan losses         |            | (4,809  | ) |   | (4,730 | ) |
|                              |            |    |   |   |   |   |
| Loans, net                        | $               | 161,946 |   |   | 184,312 |   |

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Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|   | The contractual maturity ranges of our loan portfolio and the amount of such loans with fixed and variable interest rates in each maturity range classified by borrower type as of December 31, 2010 is as follows (dollars in thousands): |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                | One Year or Less |   | After One Through Five Years |   | AfterFive Years |   |  Total |    |
|-------------------------------------|------------------|--------|------------------------------|--------|-----------------|--------|-------------|---------|
|                                |             |   |
| Commercial and Industrial           | $                | 10,108 |                         | $      | 17,229          |   | $           | 31,666  |   | $ | 59,003 |   |
| Commercial Real Estate              |             | 7,347  |                         |   | 8,873           |   |        | 76,615  |   |   | 92,835 |   |
| Consumer                            |             | 1,613  |                         |   | 4,256           |   |        | 306     |   |   | 6,175 |   |
| Residential Real Estate             |             | 1,904  |                         |   | 4,409           |   |        | 2,869   |   |   | 9,182 |   |
| Total loans                         | $                | 20,972 |                         | $      | 34,767          |   | $           | 111,456 |   | $ | 167,195 |   |
|                                |             |   |                         |   |            |   |        |    |   |   |   |   |
| Loans with a fixed interest rate    | $                | 17,739 |                         | $      | 23,998          |   | $           | 12,401  |   | $ | 54,138 |   |
| Loans with a variable interest rate |             | 3,233  |                         |   | 10,769          |   |        | 99,055  |   |   | 113,057 |   |
| Total loans                         | $                | 20,972 |                         | $      | 34,767          |   | $           | 111,456 |   | $ | 167,195 |   |

|   | As of December 31, 2010, our loan portfolio was composed of approximately 32.38% fixed interest rate loans and 67.62% variable interest rate loans. Scheduled contractual principal repayments do not reflect the actual maturities of loan. The average actual maturity of our loans is substantially less than their average contractual term because of prepayments. The average life of mortgage loans tends to increase when the current mortgage loan rates are substantially higher than rates on existing mortgage loans and, conversely, decrease when current mortgage loans rates are substantially lower than rates on existing mortgages due primarily to refinancing of adjustable rate and fixed rate loans at lower rates. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | An analysis of the change in the allowance for loan losses for the year ended December 31, 2010 follows (in thousands): |
|--------|-------------------------------------------------------------------------------------------------------------------------|

|                                   | Year Ended December 31, 2010                             |      |
|----------------------------------------|---------------------------------------------------------------|-----------|
|                                   | Commercial   and     Industrial |      | CommercialReal Estate |   | ConstructionandDevelopment |   | Consumer |   | ResidentialReal Estate |   | Total |   | 2009 |   |
|                                   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                      | $                                                             | 1,712     |   |   | 2,654 |   |   | 18 |   |   | 127 |   |   | 219 |   |   | 4,730 |   |   | 2,552 |   |
| Provision for loan losses              |                                                          | 2,706     |   |   | 2,125 |   |   | (18 | ) |   | 203 |   |   | 663 |   |   | 5,679 |   |   | 4,959 |   |
| Charge-offs                            |                                                          | (2,355    | ) |   | (2,856 | ) |   | - |   |   | (237 | ) |   | (343 | ) |   | (5,791 | ) |   | (2,998 | ) |
| Recoveries                             |                                                          |  129 |   |   | 8 |   |   | - |   |   | 42 |   |   | 12 |   |   | 191 |   |   | 217 |   |
|                                   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance                         | $                                                             | 2,192     |   |   | 1,931 |   |   | - |   |   | 135 |   |   | 551 |   |   | 4,809 |   |   | 4,730 |   |
|                                   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment: |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recorded investment                    | $                                                             | 9,224     |   |   | 13,574 |   |   | - |   |   | 49 |   |   | 232 |   |   | 23,079 |   |   | 20,586 |   |
| Balance in allowance for loan losses   | $                                                             | 546       |   |   | 229 |   |   | - |   |   | 1 |   |   | - |   |   | 776 |   |   | 2,086 |   |
|                                   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Collectively evaluated for impairment: |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recorded investment                    | $                                                             | 49,779    |   |   | 79,261 |   |   | - |   |   | 6,126 |   |   | 8,950 |   |   | 144,116 |   |   | 169,110 |   |
| Balance in allowance for loan losses   | $                                                             | 1,646     |   |   | 1,702 |   |   | - |   |   | 134 |   |   | 551 |   |   | 4,033 |   |   | 2,644 |   |

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Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|   | An analysis of the change in the allowance for loan losses for the year ended December 31, 2009 follows (in thousands): |
|--------|-------------------------------------------------------------------------------------------------------------------------|

|                           | Year-endedDecember 31, 2009 |   |
|--------------------------------|-----------------------------|--------|
| Beginning balance              | $                           | 2,552  |   |
| Provision for loan losses      |                        | 4,959  |   |
| Charge-offs, net of recoveries |                        | (2,781 | ) |
|                           |                        |   |   |
| Ending balance                 | $                           | 4,730  |   |

|                                                        | At December 31, 2010 |
|-------------------------------------------------------------|----------------------|
|                                                        | Pass                 |   | PotentialProblem |   | OLEM(Other LoansEspeciallyMentioned) |   | Substandard |   | Doubtful |   | Loss |   | Total |
| Commercial and Industrial:                                  |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Equipment secured                                           | $                    |      6,819 |   | $ |    754 |   |  $ |       197 |   |  $ |    1,887 |   |  $ | - |   |  $ | - |   |  $ |      9,657 |
| Real estate secured                                         |                 |    31,245 |   |   | 3,362 |   |   |    1,238 |   |   |  10,154 |   |   | - |   |   | - |   |   |    45,999 |
| Other                                                       |                 |      2,759 |   |   |       - |   |   |         94 |   |   |       494 |   |   | - |   |   | - |   |   |      3,347 |
| Total commercial and industrial                             |  $              |    40,823 |   |  $ | 4,116 |   |  $ |    1,529 |   |  $ |  12,535 |   |  $ | - |   |  $ | - |   |  $ |    59,003 |
|                                                        |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Real Estate:                                     |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner-occupied                                              | $                    |      46,147  |   | $ | 1,762 |   | $ |    3,112 |   |  $ |    8,930 |   | $ | -  |   | $ | - |   |  $ |    59,951 |
| Nonowner-occupied                                           |                 |      16,836  |   |   | 1,186 |   |   |    3,120 |   |   |    3,657 |   |   | -  |   |   | - |   |   |    24,799 |
| Land                                                        |                 |      2,524 |   |   |    611 |   |   |    2,380 |   |   |    2,570 |   |   | -  |   |   | - |   |   |      8,085 |
| Total commercial Real Estate                           | $                    |     65,507 |   |  $ | 3,559 |   |  $ |    8,612 |   |  $ |  15,157 |   |  $ | -  |   |  $ | - |   |  $ |   92,835 |
|                                                        |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consumer:                                                   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |
| Vehicles and other tangible assets                     | $                    |     3,831 |   |  $ |     78 |   |  $ |           - |   |  $ |         39 |   |  $ | - |   |  $ | - |   |  $ |      3,948 |
| Other                                                       |                 |     2,217 |   |   |        - |   |   |         10 |   |   |          - |   |   | - |   |   | - |   |   |      2,227 |
|     Total consumer                           | $                    |     6,048 |   |  $ |      78 |   |  $ |         10 |   |  $ |         39 |   |  $ | - |   |  $ | - |   |  $ |      6,175 |
|                                                        |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential Real Estate:                                    |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HELOC                                                       | $                    |     4,029 |   |  $ |        85 |   | $ |           - |   |  $ |       268 |   |  $ | - |   |  $ |  - |   |  $ |      4,382 |
| Closed-end                                                  |                 |     4,430 |   |   |      162 |   |   |       113 |   |   |         95 |   |   | - |   |   |  - |   |   |     4,800 |
|      Total residential Real Estate | $                    |     8,459 |   |  $ |      247 |   |  $ |       113 |   |  $ |       363 |   |  $ | - |   |  $ |  - |   | $ |     9,182 |
|                                                        |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                       | $                    | 120,837 |   |  $ |   8,000 |   | $ |  10,264 |   |  $ |  28,094 |   |  $ | - |   | $ |  - |   |  $ | 167,195 |

|   | Pass – a Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary.  These are loans that conform in all aspects to bank policy and regulatory requirements, and no repayment risk has been identified. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|   | Potential Problem – a Potential Problem loan is considered performing, but may exhibit some weaknesses that warrant more frequent review by management. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | OLEM (Other Loans Especially Mentioned) – an Other Loan Especially Mentioned has potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Substandard – a Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Doubtful – a loan classified Doubtful has all the weaknesses inherent in one classified Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The Company fully charges off any loan classified as Doubtful. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loss – a loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.  The Company fully charges off any loan classified as Loss. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|   | Age analysis of past due loans is as follows at December 31, 2010 (in thousands): |
|--------|-----------------------------------------------------------------------------------|

|                          |  Year Ended December 31, 2010 |   |
|-------------------------------|------------------------------------|--------|
|                          | 30-59 DaysPast Due                 |   | 60-89 DaysPast Due |   | Greater Than 90 DaysPast Due |   | Total Past Due |   | Current |   | Total Loans |   | Past Due 90 Days or More but Still Accruing |   | Nonaccrual Loans |   |
| Commercial & Industrial   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equipment-secured             | $                                  | -      |   |   | 101 |   |   | 212 |   |   | 313 |   |   | 9,344 |   | $ | 9,657 |   | $ | - |   |   | 1,175 |   |
| RE - secured                  |                               | 314    |   |   | 1,201 |   |   | 2,944 |   |   | 4,459 |   |   | 41,540 |   |   | 45,999 |   |   | - |   |   | 4,521 |   |
| Other                         |                               | 6      |   |   | - |   |   | - |   |   | 6 |   |   | 3,341 |   |   | 3,347 |   |   | - |   |   | 524 |   |
| Subtotal                      | $                                  | 320    |   |   | 1,302 |   |   | 3,156 |   |   | 4,778 |   |   | 54,225 |   | $ | 59,003 |   | $ | - |   |   | 6,220 |   |
|                          |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Real Estate        |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner-Occupied                | $                                  | 382    |   |   | 976 |   |   | 3,339 |   |   | 4,697 |   |   | 55,254 |   | $ | 59,951 |   | $ | - |   |   | 5,369 |   |
| Non Owner Occupied            |                               | -      |   |   | - |   |   | - |   |   | - |   |   | 24,799 |   |   | 24,799 |   |   | - |   |   | - |   |
| Other                         |                               | -      |   |   | 584 |   |   | 465 |   |   | 1,049 |   |   | 7,036 |   |   | 8,085 |   |   | - |   |   | 465 |   |
| Subtotal                      | $                                  | 382    |   |   | 1,560 |   |   | 3,804 |   |   | 5,746 |   |   | 87,089 |   | $ | 92,835 |   | $ | - |   |   | 5,834 |   |
|                          |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consumer                      |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Vehicles & Other Tangible | $                                  | -      |   |   | 66 |   |   | - |   |   | 66 |   |   | 3,882 |   | $ | 3,948 |   | $ | - |   |   | 39 |   |
| Other                         |                               | -      |   |   | - |   |   | - |   |   | - |   |   | 2,227 |   |   | 2,227 |   |   | - |   |   | - |   |
| Subtotal                      | $                                  | -      |   |   | 66 |   |   | - |   |   | 66 |   |   | 6,109 |   | $ | 6,175 |   | $ | - |   |   | 39 |   |
|                          |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential Real Estate       |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HELOC                         | $                                  | -      |   |   | - |   |   | 160 |   |   | 160 |   |   | 4,222 |   | $ | 4,382 |   | $ | - |   |   | 232 |   |
| Closed - End                  |                               | 187    |   |   | 82 |   |   | - |   |   | 269 |   |   | 4,531 |   |   | 4,800 |   |   | - |   |   | - |   |
| Subtotal                      | $                                  | 187    |   |   | 82 |   |   | 160 |   |   | 429 |   |   | 8,753 |   | $ | 9,182 |   | $ | - |   |   | 232 |   |
|                          |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         | $                                  | 889    |   |   | 3,010 |   |   | 7,120 |   |   | 11,019 |   |   | 156,176 |   | $ | 167,195 |   | $ | - |   |   | 12,325 |   |

|   | Nonaccrual loans and loans past due ninety days or more but still accruing were as follows (in thousands): |
|--------|------------------------------------------------------------------------------------------------------------|

|                                            | At December 31,2009 |
|-------------------------------------------------|---------------------|
|                                            |                |
| Nonaccrual loans                                | $                   | 15,083 |
| Past due ninety days or more but still accruing |                |      907 |
|                                            | $                   | 15,990 |

----

Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|                                         | RecordedInvestment |                                                     | UnpaidPrincipal Balance |   | RelatedAllowance                                               |
|----------------------------------------------|--------------------|----------------------------------------------------------|-------------------------|--------|----------------------------------------------------------------|
| With no related allowance recorded:          |               |                                                     |                    |   |                                                           |
|   Commercial and Industrial        |               |                                                     |                    |   |                                                           |
|   Equipment-secured                | $                  |       487                       |                    | $      |       848                                  |   | $ |     - |
|   RE-secured                       |               |    3,942                                  |                    |   |    4,380                                             |   |   |     - |
|   Other                            |               |       447                  |                    |   |       456                                  |   |   |     - |
|       Subtotal |               |    4,876                                       |                    |   |    5,684                                             |   |   |     - |
|   Commercial Real Estate           |               |                                                     |                    |   |                                                           |   |   |   |
|   Owner-occupied                   |               |    6,866                                       |                    |   |    7,897                                        |   |   |     - |
|   Nonowner -occupied               |               |       264                       |                    |   |       310                             |   |   |     - |
|   Land                             |               |       201                            |                    |   |       397                             |   |   |     - |
|      Subtotal       |               |    7,331                                  |                    |   |    8,604                                             |   |   |     - |
|   Consumer                         |               |                                                     |                    |   |                                                           |   |   |   |
|   Vehicles & Other Tangible    |               |         39            |                    |   |         39                       |   |   |     - |
|   Other                            |               |          -            |                    |   |           -            |   |   |     - |
|      Subtotal       |               |         39                 |                    |   |         39             |   |   |     - |
|   Residential Real Estate          |               |                                                     |                    |   |                                                           |   |   |   |
|   HELOC                            |               |       232                       |                    |   |        321                       |   |   |     - |
|   Closed-end                       |               |           - |                    |   |            -      |   |   |     - |
|      Subtotal       |               |       232                       |                    |   |        321                            |   |   |     - |
|                                         |               |                                                     |                    |   |                                                           |   |   |   |
| Subtotal no related allowance                |               | 12,478                                                   |                    |   |   14,648                                                  |   |   |     - |
|                                         |               |                                                     |                    |   |                                                           |   |   |   |
| With allowance recorded:                     |               |                                                     |                    |   |                                                           |   |   |   |
|   Commercial and Industrial        |               |                                                     |                    |   |                                                           |   |   |   |
|   Equipment-secured                |               |       974                  |                    |   |     1,065                                       |   |   | 257 |
|   RE-secured                       |               |    3,374                                       |                    |   |     3,374                                       |   |   | 289 |
|   Other                            |               |           - |                    |   |            - |   |   |     - |
|      Subtotal       |               |    4,348                                       |                    |   |     4,439                                       |   |   | 546 |
|   Commercial Real Estate           |               |                                                     |                    |   |                                                           |   |   |   |
|   Owner-occupied                   |               |    3,757                                  |                    |   |     3,757                                       |   |   | 157 |
|   Nonowner -occupied               |               |    2,486                                  |                    |   |     2,486                                       |   |   |   72 |
|   Land                             |               |          -  |                    |   |            - |   |   |     - |
|      Subtotal       |               |    6,243                                       |                    |   |     6,243                                       |   |   | 229 |
|   Consumer                         |               |                                                     |                    |   |                                                           |   |   |   |
|   Vehicles & Other Tangible    |               |          -  |                    |   |            - |   |   |     - |
|   Other                            |               |        10                  |                    |   |          10            |   |   |     1 |
|      Subtotal       |               |        10             |                    |   |          10            |   |   |     1 |
|   Residential Real Estate          |               |                                                     |                    |   |                                                           |   |   |   |
|   HELOC                            |               |          -       |                    |   |            - |   |   |     - |
|   Closed-end                       |               |          -       |                    |   |            - |   |   |     - |
|      Subtotal       |               |          -       |                    |   |            - |   |   |     - |
|                                         |               |                                                     |                    |   |                                                           |   |   |   |
| Subtotal with related allowance              |               | 10,601                                                   |                    |   | 10,692                                                         |   |   | 776 |
|                                         |               |                                                     |                    |   |                                                           |   |   |   |
| Total                                        | $                  | 23,079                                                   |                    | $      | 25,340                                                         |   | $ | 776 |

----

Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|   | The average net investment in impaired loans and interest income recognized and received on impaired loans for the year ended 2010, are as follows (in thousands): |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          | For the Year Ended December 31, 2010 |
|-------------------------------|--------------------------------------|
|                          | Average Net Investment               |   | Interest Income Recognized |   | Interest Income Received |
| Commercial and Industrial     |                                 |   |   |   |   |
| Equipment-secured             | $                                    | 1,303 |   |   | 5 |   |   | 5 |
| RE-secured                    | $                                    | 7,032 |   |   | 180 |   |   | 177 |
| Other                         | $                                    | 483 |   |   | - |   |   | - |
|                          |                                 |   |   |   |   |   |   |   |
| Commercial Real Estate        |                                 |   |   |   |   |   |   |   |
| Owner-occupied                | $                                    | 7,888 |   |   | 200 |   |   | 196 |
| Nonowner -occupied            | $                                    | 1,791 |   |   | - |   |   | - |
| Land                          | $                                    | 215 |   |   | - |   |   | - |
|                          |                                 |   |   |   |   |   |   |   |
| Consumer                      |                                 |   |   |   |   |   |   |   |
| Vehicles & Other Tangible | $                                    | 3 |   |   | - |   |   | - |
| Other                         | $                                    | 3 |   |   | - |   |   | - |
|                          |                                 |   |   |   |   |   |   |   |
| Residential Real Estate       |                                 |   |   |   |   |   |   |   |
| HELOC                         | $                                    | 272 |   |   | - |   |   | - |
| Closed-end                    | $                                    | - |   |   | - |   |   | - |

|   | The following summarizes the amount of impaired loans at December 31, 2009 (in thousands): |
|--------|--------------------------------------------------------------------------------------------|

| Collateral-dependent loans identified as impaired:       |   |   |
|----------------------------------------------------------|--------|--------|
| Gross loans with no related allowance for losses (1)     | $      | 7,197  |   |
|                                                     |   |   |   |
| Gross loans with related allowance for losses recorded   |   | 8,443  |   |
| Less allowances on these loans                           |   | (2,007 | ) |
|                                                     |   |   |   |
| Net loans with related allowance                         |   | 6,436  |   |
|                                                     |   |   |   |
| Net investment in collateral dependent impaired loans    |   | 13,633 |   |
|                                                     |   |   |   |
| Noncollateral dependent loans identified as impaired:    |   |   |   |
| Gross loans with no related allowance for losses         |   | 1,945  |   |
|                                                     |   |   |   |
| Gross loans with related allowance for losses recorded   |   | 3,645  |   |
| Less allowance on these loans                            |   | (79    | ) |
|                                                     |   |   |   |
| Net loans with related allowance                         |   | 3,566  |   |
|                                                     |   |   |   |
| Net investment in noncollateral dependent impaired loans |   | 5,511  |   |
|                                                     |   |   |   |
| Net investment in impaired loans                         | $      | 19,144 |   |

| (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. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|                                         | Year ended December 31 |
|----------------------------------------------|------------------------|
|                                         | 2010                   |   | 2009 |
|                                         |                   |   |   |
| Average investment in impaired loans         | $                      | 18,990 |   |   | 21,202 |
|                                         |                   |   |   |   |   |
| Interest income recognized on impaired loans | $                      | 385 |   |   | 404 |
|                                         |                   |   |   |   |   |
| Interest income received on impaired loans   | $                      | 378 |   |   | 426 |

|   | Troubled debt restructurings during the year ended December 31, 2010 are as follows (dollars in thousands): |
|--------|-------------------------------------------------------------------------------------------------------------|

|                                                                                          |  Number of Contracts |     | Pre-ModificationOutstandingRecorded Investment |   | Post-ModificationOutstandingRecorded Investment |
|-----------------------------------------------------------------------------------------------|---------------------------|----------|------------------------------------------------|--------|-------------------------------------------------|
| Troubled Debt Restructurings:                                                                 |                      |     |                                           |   |                                            |
|   Commercial real estate                                                            |                      |     |                                           |   |                                            |
|       Owner-occupied                                            |                      |     |                                           |   |                                            |
|          Modified interest rate                  |                      |   1 |                                           | $      | 734                                             |   | $ | 728 |
|          Modified amortization                   |                      |   4 |                                           |   | 1,820                                           |   |   | 1,890 |
|          Modified interest rate and amortization |                      |   2 |                                           |   | 2,331                                           |   |   | 2,323 |
|       Non Owner-occupied                                        |                      |     |                                           |   |                                            |   |   |   |
|          Modified interest rate and amortization |                      |   1 |                                           |   | 2,486                                           |   |   | 2,486 |
|                                                                                          |                      |     |                                           |   |                                            |   |   |   |
|   Commercial                                                                        |                      |     |                                           |   |                                            |   |   |   |
|       Equipment secured                                         |                      |     |                                           |   |                                            |   |   |   |
|          Modified interest rate and amortization |                      |   1 |                                           |   | 94                                              |   |   | 92 |
|       Real-estate secured                                       |                      |     |                                           |   |                                            |   |   |   |
|          Modified amortization                   |                      |   1 |                                           |   | 34                                              |   |   | 31 |
|          Modified interest rate and amortization |                      |   5 |                                           |   | 3,326                                           |   |   | 3,194 |
|                                                                                          |                      |     |                                           |   |                                            |   |   |   |
|   Consumer                                                                          |                      |     |                                           |   |                                            |   |   |   |
|       Other                                                     |                      |     |                                           |   |                                            |   |   |   |
|          Modified interest rate and amortization |                      |   1 |                                           |   |  10                                        |   |   |  10 |
|                                                                                          |                      |     |                                           |   |                                            |   |   |   |
|   Total Troubled Debt Restructurings:                                               |                      | 16       |                                           | $      | 10,835                                          |   | $ | 10,754 |

|   | The allowance for loan losses on all loans that have been restructured and are considered troubled debt restructurings (“TDR”) is included in the Company’s specific reserve.  The specific reserve is determined on a loan by loan basis by either the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent.  TDR’s that have subsequently defaulted are considered collateral dependent. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (3)   | Loans, Continued |
|-----------------|------------------|

|                                                                                                                      | Number ofContracts |   | RecordedInvestment |
|---------------------------------------------------------------------------------------------------------------------------|--------------------|--------|--------------------|
| Troubled Debt Restructurings That Subsequently Defaulted  During the Last Twelve Months (dollars in thousands): |               |   |               |
| Commercial real estate                                                                                                    |               |   |               |
|   Owner-occupied                                                                                                |               | 3      |               | $ | 3,052 |
|   Non owner-occupied                                                                                            |               | 1      |               |   | 2,486 |
|                                                                                                                      |               |   |               |   |   |
| Commercial                                                                                                                |               |   |               |   |   |
|   Real estate secured                                                                                           |               | 4      |               |   | 2,834 |
|                                                                                                                      |               |   |               |   |   |
| Consumer                                                                                                                  |               |   |               |   |   |
|   Other                                                                                                         |               | 1      |               |   |  10 |
|                                                                                                                      |               |   |               |   |   |
| Total                                                                                                                     |               | 9      |               | $ | 8,382 |

| (4)   | Premises and Equipment |
|-----------------|------------------------|

|   | A summary of premises and equipment follows (in thousands): |
|--------|-------------------------------------------------------------|

|                                           | At December 31, |   |
|------------------------------------------------|-----------------|--------|
|                                           | 2010            |   |   | 2009 |   |
|                                           |            |   |   |   |   |
| Building and improvements                      | $               | 3,937  |   |   |   | 3,936 |   |
| Land                                           |            | 552    |   |   |   | 552 |   |
| Furniture, fixtures and equipment              |            | 2,077  |   |   |   | 2,072 |   |
| Leasehold improvements                         |            | 966    |   |   |   | 965 |   |
|                                           |            |   |   |   |   |   |   |
| Total, at cost                                 |            | 7,532  |   |   |   | 7,525 |   |
|                                           |            |   |   |   |   |   |   |
| Less accumulated depreciation and amortization |            | (2,526 | ) |   |   | (2,093 | ) |
|                                           |            |   |   |   |   |   |   |
| Premises and equipment, net                    | $               | 5,006  |   |   |   | 5,432 |   |

|   | The Company leases its Stuart, Vero Beach, Palm City, and Jensen Beach (Operations Center), Florida branch office facilities under leases with various terms. The Company owns the Gatlin, Florida branch office but leases the land under a 50 year lease. 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, 2010 and 2009 was approximately $642,000 and $655,000, 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 $136,000 and $141,000 in 2010 and 2009, respectively |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (4)   | Premises and Equipment, Continued |
|-----------------|-----------------------------------|

|   | At December 31, 2010, future minimum rental commitments, including certain renewal options, under these non-cancelable leases were approximately as follows (in thousands): |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  Year EndingDecember 31, |   | OperatingLeaseExpense |                               | OperatingLeaseIncome |
|-------------------------------|--------|-----------------------|------------------------------------|----------------------|
|                          |   |                  |                               |                 |
| 2011                          |   | $                     |       521 |                 |   | 17 |
| 2012                          |   |                  |       539 |                 |   | 17 |
| 2013                          |   |                  |      548  |                 |   | 17 |
| 2014                          |   |                  |      559       |                 |   | 11 |
| 2015                          |   |                  |      571       |                 |   |   - |
| Thereafter                    |   |                  | 14,638                             |                 |   |   - |
|                          |   |                  |                               |                 |   |   |
| Total                         |   | $                     | 17,376                             |                 |   | 62 |

| (5)   | Foreclosed Assets |
|-----------------|-------------------|

|                                           | Year Ended December 31, |        |
|------------------------------------------------|------------------------------|-------------|
|                                           |                         |  2010  |   | 2009 |   |
|                                           |                         |        |   |   |   |   |   |
| Total foreclosed assets at beginning of period | $                            | 6,763  |   |   | $ | 1,714 |   |
|                                           |                         |        |   |   |   |   |   |
| Additions to foreclosed assets:                |                         |        |   |   |   |   |   |
|  Commercial real estate                   |                         | 4,546       |   |   |   | 4,256 |   |
|  Residential real estate                  |                         | -           |   |   |   | 2,346 |   |
|  Vacant land                              |                         | 436         |   |   |   | 1,083 |   |
|  Other                                    |                         | 586         |   |   |   | 1,599 |   |
|  Total                                    |                         | 5,568       |   |   |   | 9,284 |   |
|                                           |                         |        |   |   |   |   |   |
| Sales of foreclosed assets:                    |                         |        |   |   |   |   |   |
|  Commercial real estate                   |                         | (282        | ) |   |   | (2,342 | ) |
|  Residential real estate                  |                         | (445        | ) |   |   | (719 | ) |
|  Vacant land                              |                         | (468        | ) |   |   | (152 | ) |
|  Other                                    |                         | (41         | ) |   |   | - |   |
|  Total                                    |                         | (1,236      | ) |   |   | (3,213 | ) |
|                                           |                         |        |   |   |   |   |   |
| Write-down of foreclosed assets                |                         | (1,211      | ) |   |   | (880 | ) |
|                                           |                         |        |   |   |   |   |   |
| Pay-down on foreclosed assets                  |                         | (300        | ) |   |   | - |   |
|                                           |                         |        |   |   |   |   |   |
| Loss on sale of foreclosed assets              |                         | (152        | ) |   |   | (142 | ) |
|                                           |                         |        |   |   |   |   |   |
| Provision for losses on foreclosed assets      |                         | (242        | ) |   |   | - |   |
|                                           |                         |        |   |   |   |   |   |
| Foreclosed assets at end of period             | $                            | 9,190       |   |   | $ | 6,763 |   |

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Table of Contents

| (5)   | Foreclosed Assets, Continued |
|-----------------|------------------------------|

|   | An analysis of the allowance for losses on foreclosed assets is as follows (in thousands): |
|--------|--------------------------------------------------------------------------------------------|

|                                                  | Year Ended        |
|-------------------------------------------------------|-------------------|
|                                                  | December 31, 2010 |
|   Balance at the beginning of the year      | $                 |     - |
|   Provision for losses on foreclosed assets |              | (242) |
|   Charge-offs                               |              |     - |
|                                                  |              |   |
|   Balance at the end of the year            | $                 | (242) |

|                                     | Year Ended December 31, |
|------------------------------------------|-------------------------|
|                                     | 2010                    |   | 2009 |
|                                     |                    |   |   |
| Net loss on sales of real estate         | $                       | 152 |   |   | 142 |
| Provision for losses                     |                    | 242 |   |   | - |
| Operating expenses, net of rental income |                    | 1,860 |   |   | 1,796 |
|                                     |                    |   |   |   |   |
|                                     | $                       | 2,254 |   |   | 1,938 |

| (6)  | Deposits |
|-----------|----------|

|   | The aggregate amount of time deposits with a minimum denomination of $100,000 was approximately $45,711,000 and $44,702,000 at December 31, 2010 and 2009, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year EndingDecember 31, |   | Amount |
|-------------------------|--------|--------|
|                    |   |   |
| 2011                    |   | $      |   86,681 |
| 2012                    |   |   |   36,790 |
| 2013                    |   |   |     9,712 |
| 2014                    |   |   |     2,653 |
| 2015                    |   |   |     2,728 |
|                    |   |   |   |
| Total                   |   | $      | 138,564 |

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Table of Contents

| (7)   | Federal Home Loan Bank Advances |
|-----------------|---------------------------------|

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

| MaturityYear Ending |   | Fixed or Variable |   |          |            |   | At December 31, |
|---------------------|--------|-------------------|--------|---------------|-----------------|--------|-----------------|
| December 31,        |   | Rate              |   | Interest Rate |            |   | 2010            |   | 2009 |
|                |   |              |   |          |            |   |            |   |   |
| 2010                |   | Fixed             |   |          | 1.81            | %      |            | $ | - |   |   | 3,000 |
| 2011                |   | Variable          |   |          | .36% –.47 | %      |            |   | 5,500 |   |   | 2,500 |
| 2011                |   | Fixed             |   |          | 2.31            | %      |            |   | 1,000 |   |   | 1,000 |
| 2011                |   | Fixed             |   |          | 1.41            | %      |            |   | 4,000 |   |   | 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 |   |   | 14,600 |

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

|   | The advances were collateralized by securities available for sale with a carrying value of approximately $14,634,000 and $10,039,000 at December 31, 2010 and 2009, respectively. In addition, at December 31, 2010 and 2009, advances were also collateralized by $5,037,000 and $8,107,000, respectively in residential real estate, home equity lines of credit and multi-family loans. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8)   | Financial Instruments |
|-----------------|-----------------------|

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

|                                    | At December 31, 2010 |    | At December 31, 2009 |
|-----------------------------------------|----------------------|---------|----------------------|
|                                    | CarryingAmount       |    | FairValue            |   | CarryingAmount |   | FairValue |
| Financial assets:                       |                 |    |                 |   |   |   |   |
| Cash and cash equivalents               | $                    | 12,229  |                 |   | 12,229 |   |   | 12,932 |   |   | 12,932 |
| Securities available for sale           |                 | 36,266  |                 |   | 36,266 |   |   | 31,752 |   |   | 31,752 |
| Securities held to maturity             |                 | 1,465   |                 |   | 1,482 |   |   | - |   |   | - |
| Loans, net                              |                 | 161,946 |                 |   | 157,376 |   |   | 184,312 |   |   | 184,701 |
| Federal Home Loan Bank stock            |                 | 1,087   |                 |   | 1,087 |   |   | 1,087 |   |   | 1,087 |
| Accrued interest receivable             |                 | 884     |                 |   | 884 |   |   | 1,201 |   |   | 1,201 |
|                                    |                 |    |                 |   |   |   |   |   |   |   |   |
| Financial liabilities:                  |                 |    |                 |   |   |   |   |   |   |   |   |
| Deposit liabilities                     | $                    | 208,366 |                 |   | 209,757 |   |   | 216,374 |   |   | 218,124 |
| Federal Home Loan Bank advances         |                 | 14,600  |                 |   | 14,794 |   |   | 14,600 |   |   | 14,618 |
| Off-balance-sheet financial instruments |                 | -       |                 |   | - |   |   | - |   |   | - |

| (9)   | Off-Balance Sheet Financial Instruments |
|-----------------|-----------------------------------------|

|   | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (9)   | Off-Balance Sheet Financial Instruments, Continued |
|-----------------|----------------------------------------------------|

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Commitments to extend credit, available lines of credit, and standby letters of 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, 2010 follows (in thousands): |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Commitments to extend credit | $      | 509    |
|------------------------------|--------|--------|
|                         |   |   |
| Available lines of credit    | $      | 10,220 |
|                         |   |   |
| Standby letters of credit    | $      | 26     |

| (10)   | Credit Risk |
|------------------|-------------|

|   | 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 fourteen loans aggregating $9.6 million and fifteen loans aggregating $11.6 million at December 31, 2010 and 2009 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (10)   | Credit Risk, Continued |
|------------------|------------------------|

|   | 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, 2010 is adequate. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11)   | Fair Value Measurements |
|------------------|-------------------------|

|   | The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2010 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands): |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              |                   |   | Fair Value Measurements at Reporting Date Using            |
|-----------------------------------|------------------------|--------|------------------------------------------------------------|
|                              |   Fair Value |   | Quoted PricesIn ActiveMarkets forIdentical Assets(Level 1) |   | Significant OtherObservableInputs(Level 2) |   | SignificantUnobservableInputs(Level 3) |
| As of December 31, 2010:          |                   |   |                                                       |   |   |   |   |
| Municipal bonds-taxable           | $                      | 1,902  |                                                       |   | - |   |   | 1,902 |   |   | - |
| SBA securities                    |                   | 1,999  |                                                       |   | 1,999 |   |   | - |   |   | - |
| Mortgage-backed securities        |                   | 12,769 |                                                       |   | - |   |   | 12,769 |   |   | - |
| CMO securities                    |                   | 19,596 |                                                       |   | - |   |   | 19,596 |   |   | - |
|                              | $                      | 36,266 |                                                       |   | 1,999 |   |   | 34,267 |   |   | - |
|                              |                   |   |                                                       |   |   |   |   |   |   |   |   |
| As of December 31, 2009:          |                   |   |                                                       |   |   |   |   |   |   |   |   |
| U.S. government agency securities | $                      | 14,332 |                                                       |   | - |   |   | 14,332 |   |   | - |
| Mortgage-backed securities        |                   | 5,087  |                                                       |   | - |   |   | 5,087 |   |   | - |
| Asset-backed securities           |                   | 6,097  |                                                       |   | - |   |   | 6,097 |   |   | - |
| CMO securities                    |                   | 6,236  |                                                       |   | - |   |   | 6,236 |   |   | - |
|                              | $                      | 31,752 |                                                       |   | - |   |   | 31,752 |   |   | - |

|   | During the year ended December 31, 2010 or 2009, no securities were transferred in or out of Level 1, Level 2, and Level 3. |
|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | Impaired collateral-dependent loans and foreclosed assets are carried at fair value when the current collateral value is lower than the carrying value of the assets. Those impaired collateral-dependent assets which are measured at fair value on a nonrecurring basis are as follows (in thousands): |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (11)   | Fair Value Measurements, Continued |
|------------------|------------------------------------|

|                        | At December 31, 2010 |   |    |   |
|-----------------------------|----------------------|--------|---------|--------|
|                        | FairValue(1)         |   | Level 1 |   | Level 2 |   | Level 3 |   | TotalLosses |   | Losses Recorded in Operations For the Year EndedDecember 31,2010 |   |
| Commercial & Industrial |                 |   |    |   |   |   |   |   |   |   |   |   |
| Equipment-secured           | $                    | 937    |    |   | - |   |   | - |   |   | 937 |   | $ | 646 |   | $ | 371 |   |
| RE - secured                |                 | 3,080  |    |   | - |   |   | - |   |   | 3,080 |   |   | 718 |   |   | 485 |   |
| Other                       |                 | -      |    |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Subtotal                    | $                    | 4,017  |    |   | - |   |   | - |   |   | 4,017 |   | $ | 1,364 |   | $ | 856 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Real Estate      |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner-Occupied              | $                    | 3,739  |    |   | - |   |   | - |   |   | 3,739 |   | $ | 1,139 |   | $ | 974 |   |
| Non Owner Occupied          |                 | 264    |    |   | - |   |   | - |   |   | 264 |   |   | 46 |   |   | - |   |
| Other                       |                 | 190    |    |   | - |   |   | - |   |   | 190 |   |   | 154 |   |   | 125 |   |
| Subtotal                    | $                    | 4,193  |    |   | - |   |   | - |   |   | 4,193 |   | $ | 1,339 |   | $ | 1,099 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential Real Estate     |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HELOC                       | $                    | 160    |    |   | - |   |   | - |   |   | 160 |   | $ | 89 |   | $ | 46 |   |
| Closed - End                |                 | -      |    |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Subtotal                    | $                    | 160    |    |   | - |   |   | - |   |   | 160 |   | $ | 89 |   | $ | 46 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans        | $                    | 8,370  |    |   | - |   |   | - |   |   | 8,370 |   | $ | 2,792 |   | $ | 2,001 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed assets           | $                    | 9,190  |    |   | - |   |   | - |   |   | 9,190 |   | $ | 1,667 |   | $ | 1,428 |   |

|   |           (1) | In addition, impaired loans with a carrying value of $3.4 million were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value. |
|--------|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following table summarizes financial assets measured at fair value on a nonrecurring 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): |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (11)   | Fair Value Measurements, Continued |
|------------------|------------------------------------|

|                        | At December 31, 2009 |   |    |   |
|-----------------------------|----------------------|--------|---------|--------|
|                        | FairValue(1)         |   | Level 1 |   | Level 2 |   | Level 3 |   | TotalLosses |   | Losses Recorded in Operations For the Year EndedDecember 31,2009 |   |
| Commercial & Industrial |                 |   |    |   |   |   |   |   |   |   |   |   |
| Equipment-secured           | $                    | 1,036  |    |   | - |   |   | - |   |   | 1,036 |   | $ | 718 |   | $ | 618 |   |
| RE - secured                |                 | 1,178  |    |   | - |   |   | - |   |   | 1,178 |   |   | 443 |   |   | 424 |   |
| Other                       |                 | -      |    |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Subtotal                    | $                    | 2,214  |    |   | - |   |   | - |   |   | 2,214 |   | $ | 1,161 |   | $ | 1,042 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Real Estate      |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner-Occupied              | $                    | 4,870  |    |   | - |   |   | - |   |   | 4,870 |   | $ | 1,847 |   | $ | 1,218 |   |
| Non Owner Occupied          |                 | -      |    |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Other                       |                 | -      |    |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Subtotal                    | $                    | 4,870  |    |   | - |   |   | - |   |   | 4,870 |   | $ | 1,847 |   | $ | 1,218 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential Real Estate     |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HELOC                       | $                    | 207    |    |   | - |   |   | - |   |   | 207 |   | $ | 43 |   | $ | 43 |   |
| Closed - End                |                 | 60     |    |   | - |   |   | - |   |   | 60 |   |   | 122 |   |   | 122 |   |
| Subtotal                    | $                    | 267    |    |   | - |   |   | - |   |   | 267 |   | $ | 165 |   | $ | 165 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans        | $                    | 7,351  |    |   | - |   |   | - |   |   | 7,351 |   | $ | 3,173 |   | $ | 2,425 |   |
|                        |                 |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed assets           | $                    | 6,763  |    |   | - |   |   | - |   |   | 6,763 |   | $ | 336 |   | $ | 336 |   |

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

| (12)  | Benefit Agreements |
|------------|--------------------|

|   | 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 $121,000 in 2010 and $96,000 in 2009. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (13)   | Income Taxes (Benefit) |
|------------------|------------------------|

|                   | Year Ended December 31, |   |
|------------------------|-------------------------|--------|
|                   | 2010                    |   |   | 2009 |   |
| Current:               |                    |   |   |   |   |
| Federal                | $                       | -      |   |   |   | (247 | ) |
| State                  |                    | -      |   |   |   | - |   |
| Total current          | $                       | -      |   |   |   | (247 | ) |
|                   |                    |   |   |   |   |   |   |
| Deferred:              |                    |   |   |   |   |   |   |
| Federal                | $                       | (2,462 | ) |   |   | (2,241 | ) |
| State                  |                    | (422   | ) |   |   | (426 | ) |
| Valuation allowance    |                    | 3,256  |   |   |   | 4,433 |   |
| Total deferred         | $                       | 372    |   |   |   | 1,766 |   |
|                   |                    |   |   |   |   |   |   |
| Income taxes (benefit) | $                       | 372    |   |   |   | 1,519 |   |

|   | The reasons for the differences between the statutory Federal income tax rate and the effective tax rate are summarized as follows (dollars in thousands): |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     | Year Ended December 31, |   |
|------------------------------------------|-------------------------|--------|
|                                     | 2010                    |   |   | 2009 |   |
|                                     | Amount                  |   |   | % of Pretax Loss |   |   | Amount |   | % of Pretax Loss |   |
|                                     |                    |   |   |   |   |   |   |   |   |   |
| Income taxes (benefit) at statutory rate | $                       | (2,579 | ) |   |   | (34 | )% |   | $ | (2,614 | ) |   | (34 | )% |
| Increase (decrease) resulting from:      |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State taxes, net of Federal tax benefit  |                    | (278   | ) |   |   | (4 | ) |   |   | (281 | ) |   | (4 | ) |
| Change in Valuation allowance            |                    | 3,256  |   |   |   | 43 |   |   |   | 4,433 |   |   | 58 |   |
| Income from bank-owned life insurance    |                    | (47    | ) |   |   | (1 | ) |   |   | (46 | ) |   | (1 | ) |
| Nondeductible expenses                   |                    | 14     |   |   |   | 1 |   |   |   | 12 |   |   | - |   |
| Share-based compensation                 |                    | 6      |   |   |   |  - |   |   |   | 15 |   |   | 1 |   |
| Income taxes (benefit)                   | $                       | 372    |   |   |   | 5 | % |   | $ | 1,519 |   |   | 20 | % |

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Table of Contents

| (13)   | Income Taxes (Benefit), Continued |
|------------------|-----------------------------------|

|   | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                    | At December 31, |   |
|---------------------------------------------------------|----------------------|--------|
|                                                    |    2010    |   |    2009 |   |
| Deferred tax assets:                                    |                 |   |   |   |
| Allowance for loan losses                               | $                    | 958    |   |   | 1,208 |   |
| Net operating loss carryforward                         |                 | 5,013  |   |   | 2,772 |   |
| Foreclosed property expenses                            |                 | 1,083  |   |   | 354 |   |
| Deferred compensation                                   |                 | 201    |   |   | 181 |   |
| Tax on unrealized gain on securities available for sale |                 | 371    |   |   | - |   |
| Other                                                   |                 | 226    |   |   | 192 |   |
|                                                    |                 |   |   |   |   |   |
| Gross deferred tax assets                               |                 | 7,852  |   |   | 4,707 |   |
| Less: Valuation allowance                               |                 | 7,689  |   |   | 4,433 |   |
| Net deferred tax asset                                  |                 | 163    |   |   | 274 |   |
|                                                    |                 |   |   |   |   |   |
| Deferred tax liabilities:                               |                 |   |   |   |   |   |
| Accrual to cash adjustment                              |                 | -      |   |   | - |   |
| Premises and equipment                                  |                 | (44    | ) |   | (147 | ) |
| Deferred loan costs                                     |                 | (119   | ) |   | (127 | ) |
|                                                    |                 |   |   |   |   |   |
| Deferred tax liabilities                                |                 | (163   | ) |   | (274 | ) |
|                                                    |                 |   |   |   |   |   |
| Net deferred tax asset                                  | $                    | -      |   |   | - |   |

|   | During the year ended December 31, 2010 and 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, 2010, 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 2007. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (14)   | Related Party Transactions |
|------------------|----------------------------|

|   | In the ordinary course of business, the Company may make loans at terms and rates prevailing at the time to officers and directors of the Company or their affiliates. The Company also accepts deposits from these same related parties. These are summarized as follows (in thousands): |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                         |    2010 |   |   |     2009 |   |
|------------------------------|-------------------|--------|--------|-------------------------|--------|
| Loans:                       |              |   |   |                    |   |
| Balance at beginning of year | $                 | 4,523  |   |                    |   | 3,878 |   |
| Borrowings                   |              | 171    |   |                    |   | 1,140 |   |
| Repayments                   |              | (670   | )      |                    |   | (495 | ) |
|                         |              |   |   |                    |   |   |   |
| Balance at end of year       | $                 | 4,024  |   |                    |   | 4,523 |   |
|                         |              |   |   |                    |   |   |   |
| Deposits                     | $                 | 2,803  |   |                    |   | 3,507 |   |

| (15)   | Stock Options and Warrants |
|------------------|----------------------------|

|   | 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, 2010, no shares remain available for grant, as the Plan Agreement terminated on December 8, 2008. A summary of stock option information follows related to the 1998 Plan ($ in thousands, except per share amounts): |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                | Number ofOptions |   | Weighted-AverageExercisePrice |   | Weighted-AverageRemainingContractualTerm |   | AggregateIntrinsicValue |
|-----------------------------------------------------|------------------|--------|-------------------------------|--------|------------------------------------------|--------|-------------------------|
|                                                |             |   |                          |   |                                     |   |                    |
| 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                                    |   |                    |   |   |
| Options forfeited                                   |             | (2,791 | )                             |   | 9.52                                     |   |                    |   |   |
|                                                |             |   |                          |   |                                     |   |                    |   |   |
| Options outstanding at December 31, 2010            |             | 27,909 |                          | $      | 12.18                                    |   |                    | 3.43 years |   | $ | - |
|                                                |             |   |                          |   |                                     |   |                    |   |   |   |
| Options exercisable at  December 31, 2010 |             | 27,562 |                          | $      | 12.23                                    |   |                    | 3.38 years |   | $ | - |

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| (15)   | Stock Options and Warrants, Continued |
|------------------|---------------------------------------|

|   | 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, 2010, 50,507 shares remain available for grant.  A summary of stock option information related to the 2005 Plan follows ($ in thousands, except per share amounts): |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     | Number ofOptions |    | Weighted-AverageExercisePrice |   | Weighted-AverageRemainingContractualTerm |   | AggregateIntrinsicValue |       |
|------------------------------------------|------------------|---------|-------------------------------|--------|------------------------------------------|--------|-------------------------|------------|
|                                     |             |    |                          |   |                                     |   |                    |       |
| 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                                    |   |                    |       |   |   |
| Options forfeited                        |             | (8,880  | )                             |   | 13.13                                    |   |                    |       |   |   |
|                                     |             |    |                          |   |                                     |   |                    |       |   |   |
| Options outstanding at December 31, 2010 |             | 108,236 |                          | $      | 14.24                                    |   |                    | 5.73 years |   | $ | - |   |
|                                     |             |    |                          |   |                                     |   |                    |       |   |   |   |
| Options exercisable at December 31, 2010 |             | 97,611  |                          | $      | 14.88                                    |   |                    | 5.56 years |   | $ | - |   |

| The fair value of each option granted during the year ended December 31, 2009, was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Dividend yield                                                           | -                                             | %      |
|--------------------------------------------------------------------------|-----------------------------------------------|--------|
| Expected life                                                            |         6 years |   |
| Expected volatility                                                      | 86.14                                         | %      |
| Risk-free interest rate                                                  | 3.76                                          | %      |
| Weighted-average grant-date fair value of options issued during the year | $                                             | 1.18   |   |

|   | The Company 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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| (15)   | Stock Options and Warrants, Continued |
|------------------|---------------------------------------|

|   | The total fair value of shares vested and recognized as compensation expense was $25,000 and $51,000 for 2010 and 2009 respectively. As of December 31, 2010, the Company had 10,972 stock options not fully vested and there was $12,000 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 .49 years on a straight-line basis. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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, 2010, none of these options had been exercised. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In addition, as discussed in more detail in Note 16, 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. As of December 31, 2010, this warrant had not yet been exercised. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16)   | Profit Sharing Plan |
|------------------|---------------------|

|   | The Company sponsors a section 401(k) profit sharing plan (the "Plan") which is available to all employees electing to participate. The Company did not approve any matching contributions during 2010 or 2009. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (17)   | Stockholders’ Equity |
|------------------|----------------------------|

|   | 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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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| (17)   | Stockholders' Equity, Continued |
|------------------|---------------------------------|

|   | While the Preferred Shares are outstanding, certain restrictions apply to the Company, including, among others, those that are discussed below. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | At December 31, 2010 the Company had $290,000 in unpaid dividends. |
|--------|--------------------------------------------------------------------|

| (18)   | Restrictions on Dividends |
|------------------|---------------------------|

|   | The Company’s ability to pay cash dividends on its common and preferred 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 17 and Note 19. 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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Table of Contents

| (19)   | Regulatory Matters |
|------------------|--------------------|

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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).  As of December 31, 2010, the Bank did not meet the capital adequacy requirements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 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). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   | Actual |   | Minimum forCapital AdequacyPurposes |   | MinimumTo Be WellCapitalized UnderPrompt CorrectiveAction Provisions |   | Requirementsof Consent Order |   |
|----------------------------------------|--------|--------|-------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------|--------|
|                                   | Amount |   | %                                   |   | Amount                                                               |   |   %                     |   | Amount |   |   % |   | Amount |   |   % |   |
| As of December 31, 2010:               |   |   |                                |   |                                                                 |   |                         |   |   |   |   |   |   |   |   |   |
| Total Capital to Risk-Weighted Assets  | $      | 9,373  |                                | 5.57   | %                                                                    | $      | 13,472                       |   | 8.00 | % | $ | 16,840 |   | 10.00 | % | $ | 18,524 |   | 11.00 | % |
| Tier 1 Capital to Risk-Weighted Assets |   | 7,235  |                                | 4.30   |                                                                 |   | 6,736                        |   | 4.00 |   |   | 10,104 |   | 6.00 |   |   | N/A |   | N/A |   |
| Tier 1 Capital To Average Assets       |   | 7,235  |                                | 3.02   |                                                                 |   | 9,588                        |   | 4.00 |   |   | 11,985 |   | 5.00 |   |   | 19,176 |   | 8.00 |   |
|                                   |   |   |                                |   |                                                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2009:               |   |   |                                |   |                                                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Capital to Risk-Weighted Assets  |   | 17,324 |                                | 8.96   |                                                                 |   | 15,461                       |   | 8.00 |   |   | 19,326 |   | 10.00 |   |   | N/A |   | N/A |   |
| Tier 1 Capital to Risk-Weighted Assets |   | 14,880 |                                | 7.70   |                                                                 |   | 7,730                        |   | 4.00 |   |   | 11,596 |   | 6.00 |   |   | N/A |   | N/A |   |
| Tier 1 Capital To Average Assets       |   | 14,880 |                                | 5.65   |                                                                 |   | 10,538                       |   | 4.00 |   |   | 13,172 |   | 5.00 |   |   | N/A |   | N/A |   |

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Table of Contents

| (19)   | Regulatory Matters, Continued |
|------------------|-------------------------------|

|   | 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 meeting. These resolutions also prohibit us from paying dividends on, or redeeming, the Series A Preferred Stock without Federal Reserve approval. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Consent Order.  Effective March 18, 2010, the Bank entered into a Stipulation to the Issuance of a Consent Order (“Stipulation”) with the Federal Deposit Insurance Corporation (the “FDIC”) and the Florida Office of Financial Regulation (the “OFR”). Pursuant to the Stipulation, the Bank consented, without admitting or denying any charges of unsafe or unsound banking practices or violations of law or regulation, to the issuance of a Consent Order by the FDIC and the OFR, also effective as of March 18, 2010. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | The Bank’s Board of Directors is required to increase its participation in the affairs of the Bank. This participation shall include comprehensive, documented meetings to be held no less frequently than monthly. Prior to the entry of the Consent Order, the Board conducted such meetings, but it now requires more detailed management reports. The Board has also established a committee to oversee the Bank’s compliance with the Consent Order. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | By June 16, 2010, and during the life of the Consent Order, the Bank shall achieve and maintain a Tier 1 leverage capital ratio of not less than 8% and a total risk-based capital ratio of not less than 11%. At December 31, 2010, the Bank’s Tier 1 leverage capital ratio was 3.02% and its total risk-based capital ratio was 5.57%. As of December 31, 2010, an additional $12 million in capital would be required by the Bank to attain the required capital levels. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | The Bank must maintain a fully funded Allowance for Loan and Lease Losses (“ALLL”), which must be satisfactory to the FDIC and the OFR. The Board of Directors shall quarterly review the adequacy of the ALLL. The Bank has always endeavored to maintain a fully funded, adequate ALLL and believes its ALLL is adequate. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (19)   | Regulatory Matters, Continued |
|------------------|-------------------------------|

| Ø   | The Bank shall also reduce the aggregate balance of assets classified “Substandard” by the FDIC in October 2009: (i) by June 16, 2010, to not more than 140% of Tier 1 capital plus the ALLL; (ii) by September 14, 2010, to not more than 120% of Tier 1 capital plus the ALLL; (iii) by December 13, 2010, to not more than 100% of Tier 1 capital plus the ALLL; (iv) by March 23, 2011, to not more than 80% of Tier 1 capital plus the ALLL; and (v) by September 19, 2011, to not more than 60% of Tier 1 capital plus the ALLL. As of December 31, 2010, the Bank’s ratio was 187%. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | The Bank shall not extend any credit to, or for the benefit of, any borrower who has a loan that has been charged off or classified “Substandard” and is uncollected, unless the Bank documents that such extension of credit is in the Bank’s best interest. The Bank had, and has, no intention of extending credit to such borrowers in violation of these requirements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | By May 2, 2010, the Bank shall perform a risk segmentation analysis with respect to any concentration cited by the FDIC, including commercial real estate loans. The Bank shall also develop a plan to reduce any segment of the portfolio deemed by the FDIC or OFR to be an undue concentration of credit. Both were completed and submitted on April 29, 2010. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | By June 16, 2010, the Bank shall formulate and implement a strategic plan and a plan to improve and sustain Bank earnings. Additionally, the Bank must prepare a budget and update the profit plan by November 30th of each year. All such items must be submitted to the FDIC and the OFR. The Bank was granted an extension to September 28, 2010 to submit its strategic plan and submitted it prior to that date. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | By May 17, 2010, the Bank must review, revise and adopt its liquidity, contingency funding and funds management policy, including implementing any changes recommended by the FDIC or the OFR. These were completed and submitted on May 27, 2010, following an extension granted to May 28, 2010. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | Throughout the life of the Consent Order, the Bank shall not accept, renew, or rollover any brokered deposit, and shall comply with the restrictions on the effective yields on deposits exceeding national averages. In addition, by March 28, 2010, the Bank was required to submit to the FDIC and the OFR a plan to reduce reliance on brokered deposits, which it has done. The Bank has not accepted, renewed or rolled over any brokered deposits since July 2009. With respect to the yield limitations, it is possible that the Bank could experience a decrease in deposit inflows, or the migration of current deposits to competitor institutions, if other institutions offer higher interest rates than those permitted to be offered by the Bank. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | During the life of the Consent Order, the Bank shall limit its asset growth to 10% per year, unless the FDIC and the OFR consent to greater growth. Under the recently adopted strategic plan, the growth percentage will not exceed these growth parameters. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | While the Consent Order is in effect, the Bank shall not declare or pay dividends, or any other form of payment representing a reduction in capital without the prior written approval of the FDIC and the OFR. The Bank has never paid a dividend to the holding company. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (19)   | Regulatory Matters, Continued |
|------------------|-------------------------------|

| Ø   | Within 30 days of the end of each calendar quarter, the Bank shall furnish written progress reports to the FDIC and the OFR detailing the form, manner, and results of any actions taken to secure compliance. The Bank has, and will continue to prepare and submit such reports. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (20)   | Subsequent Events |
|------------------|-------------------|

|   | The Federal Deposit Insurance Corporation (“FDIC”) and the Florida Office of Financial Regulation (“OFR”) recently completed the fieldwork for their joint examination of the Bank.  As a result of the examination, the Bank, with the concurrence of the FDIC and OFR, will record an additional provision for loan losses during the quarter ended March 31, 2011.  The range of additional losses to be recorded is $2.0 million to $2.7 million. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (21)   | Holding Company Financial Information |
|------------------|---------------------------------------|

|                                             | At December 31, |
|--------------------------------------------------|-----------------|
|                                             | 2010            |   | 2009 |
| Assets                                           |            |   |   |
|                                             |            |   |   |
| Cash and cash equivalents                        | $               | 57 |   |   | 379 |
| Investment in subsidiary                         |            | 6,619 |   |   | 14,255 |
| Other assets                                     |            | 405 |   |   | 192 |
|                                             |            |   |   |   |   |
| Total assets                                     | $               | 7,081 |   |   | 14,826 |
|                                             |            |   |   |   |   |
| Liabilities                                      |            |   |   |   |   |
|                                             |            |   |   |   |   |
| Total liabilities                                | $               | 369 |   |   | 187 |
|                                             |            |   |   |   |   |
| Stockholders’ Equity                       |            |   |   |   |   |
|                                             |            |   |   |   |   |
| Stockholders’ Equity                       |            | 6,712 |   |   | 14,639 |
|                                             |            |   |   |   |   |
| Total Liabilities and Stockholders’ Equity | $               | 7,081 |   |   | 14,826 |

|                           | Year Ended December 31, |   |
|--------------------------------|-------------------------|--------|
|                           | 2010                    |   | 2009 |   |
|                           |                    |   |   |   |
| Revenues                       | $                       | -      |   |   | - |   |
| Expenses                       |                    | (313   | ) |   | (225 | ) |
|                           |                    |   |   |   |   |   |
| Loss before loss of subsidiary |                    | (313   | ) |   | (225 | ) |
| Loss of subsidiary             |                    | (7,645 | ) |   | (8,983 | ) |
|                           |                    |   |   |   |   |   |
| Net loss                       | $                       | (7,958 | ) |   | (9,208 | ) |

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Table of Contents

| (21)   | Holding Company Financial Information, Continued |
|------------------|--------------------------------------------------|

|                                                                                                                                            | Year Ended December 31, |         |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------|--------------|
|                                                                                                                                            |     2010      |         |   |     2009 |   |
| Cash flows from operating activities:                                                                                                           |                         |    |   |   |   |
| Net loss                                                                                                                                        | $                            | (7,958       | ) |   |   | (9,208 | ) |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                                                       |                         |         |   |   |   |   |   |
| Share-based compensation                                                                                                                        |                         | 25           |   |   |   | 51 |   |
| Undistributed losses of subsidiary                                                                                                              |                         | 7,645        |   |   |   | 8,983 |   |
| (Increase) decrease in other assets                                                                                                             |                         | (213         | ) |   |   | 150 |   |
| Increase in other liabilities                                                                                                                   |                         | 179          |   |   |   | 76 |   |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Net cash (used in) provided by operating activities                                                                                             |                         | (322         | ) |   |   | 52 |   |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Cash flows from investing activity -                                                                                                            |                         |         |   |   |   |   |   |
| Investment in subsidiary                                                                                                                        |                         | -            |   |   |   | (3,800 | ) |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Cash flows from financing activities -                                                                                                          |                         |         |   |   |   |   |   |
|    Cash dividends paid to preferred shareholder                                                                                  |                         | -            |   |   |   | (275 | ) |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Net decrease in cash and cash equivalents                                                                                                       |                         | (322         | ) |   |   | (4,023 | ) |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Cash and cash equivalents at beginning of year                                                                                                  |                         | 379          |   |   |   | 4,402 |   |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Cash and cash equivalents at end of year                                                                                                        | $                            | 57           |   |   |   | 379 |   |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Non-cash transactions:                                                                                                                          |                         |         |   |   |   |   |   |
|                                                                                                                                            |                         |         |   |   |   |   |   |
| Accumulated other comprehensive loss of subsidiary, net change in unrealized loss (gain) on securities available for sale, net of tax | $                            | 9            |   |   |   | (810 | ) |
|                                                                                                                                            |                         |         |   |   |   |   |   |
|       Accrual of preferred stock dividend                                                                         | $                            | 3            |   |   |   | 290 |   |

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Report of Independent Registered Public Accounting Firm

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Table of Contents

BOARD OF DIRECTORS

NON-DIRECTOR EXECUTIVE 

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BOARD OF DIRECTORS

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Table of Contents

GENERAL INFORMATION

| Annual Meeting     |   | The Annual Meeting of the Stockholders has not been scheduled.                                                                                                                                                                                                                        |
|--------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |   |                                                                                                                                                                                                                                                                                  |
| Transfer Agent and |   | Registrar and Transfer Co.                                                                                                                                                                                                                                                            |
| Registrar          |   | 10 Commerce Drive                                                                                                                                                                                                                                                                     |
|               |   | Cranford, NJ 07016                                                                                                                                                                                                                                                               |
|               |   | (800) 368-5948                                                                                                                                                                                                                                                                   |   |
|               |   |                                                                                                                                                                                                                                                                                  |   |
| Corporate Counsel  |   | Igler & Dougherty, P.A.                                                                                                                                                                                                                                                           |
|               |   | 2457 Care Drive                                                                                                                                                                                                                                                                       |
|               |   | Tallahassee, Florida 32308                                                                                                                                                                                                                                                  |
|               |   |                                                                                                                                                                                                                                                                                  |   |
| Independent        |   | Hacker, Johnson & Smith PA                                                                                                                                                                                                                                                        |
| Auditors           |   | Independent Registered Public Accountants                                                                                                                                                                                                                                             |
|               |   | 500 West Cypress Creek Road, Suite 450                                                                                                                                                                                                                                                |
|               |   | Fort Lauderdale, Florida 33309                                                                                                                                                                                                                                                   |
|               |   |                                                                                                                                                                                                                                                                                  |   |
| Form 10-K          |   | A copy of the Form 10-K as filed with the Securities and Exchange Commission may be obtained by stockholders without charge upon written request to Nancy E. Aumack, Senior Vice President and Chief Financial Officer, 1792 NE Jensen Beach Blvd., Jensen Beach, Florida 34957. |

COMMON STOCK PRICES AND DIVIDENDS

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Table of Contents

Office Locations

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