|   | VSB Bancorp, Inc.                                              |   |
|--------|----------------------------------------------------------------|--------|
|   | (Exact name of registrant as specified in its charter)         |   |
|   |                                                           |   |
|   | New York                                                       |   |
|   | (State or other jurisdiction of incorporation or organization) |   |
|   |                                                           |   |
|   | 11 - 3680128                                                   |   |
|   | (I. R. S. Employer Identification No.)                         |   |
|   |                                                           |   |
|   | 4142 Hylan Boulevard, Staten Island, New York 10308            |   |
|   | (Address of principal executive offices)                       |   |
|   |                                                           |   |
|   | (718) 979-1100                                                 |   |
|   | Issuer’s telephone number                                |   |
|   |                                                           |   |
|   | Common Stock                                                   |   |
|   | (Title of Class)                                               |   |

----

|   | ● | deterioration in local, regional, national or global economic conditions which could result in, among other things, an increase in loan delinquencies, a decrease in property values, or a change in the real estate turnover rate; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ● | changes in market interest rates or changes in the speed at which market interest rates change;                                                                                                                                     |
|   | ● | changes in laws and regulations affecting the financial service industry;                                                                                                                                                           |
|   | ● | changes in the public’s perception of financial institutions in general and banks in particular;                                                                                                                              |
|   | ● | changes in competition; and                                                                                                                                                                                                         |
|   | ● | changes in consumer preferences by our customers or the customers of our business borrowers.                                                                                                                                        |

----

----

----

----

----

----

|                                                |   |   At December 31, |       |
|-----------------------------------------------------|--------|-----------------------------|------------|
|                                                |   | 2009                        |       |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                |   |                        |       |   | % |   |   |   |   |   | % |   |   |   |   |   | % |   |   |   |   |   | % of |   |   |   |   |   | % of |   |
|                                                |   |  Amount                |       |   | of Total |   |   | Amount |   |   | of Total |   |   | Amount |   |   | of Total |   |   | Amount |   |   | Total |   |   | Amount |   |   | Total |   |
|                                                |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial loans:                                   |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial secured                                  |   | $                           | 1,138,308  |   |   |   | 1.4 | % |   | $ | 1,177,796 |   |   |   | 1.8 |  % |   | $ | 1,171,152 |   |   |   | 1.9 | % |   | $ | 1,231,880 |   |   |   | 1.8 | % |   | $ | 1,584,484 |   |   |   | 2.1 | % |
| Commercial unsecured                                |   |                        | 10,966,874 |   |   |   | 13.9 |   |   |   | 9,558,296 |   |   |   | 14.4 |   |   |   | 10,981,044 |   |   |   | 17.5 |   |   |   | 10,882,002 |   |   |   | 16.3 |   |   |   | 11,078,101 |   |   |   | 14.9 |   |
| Total commercial loans                              |   |                        | 12,105,182 |   |   |   | 15.3 |   |   |   | 10,736,092 |   |   |   | 16.2 |   |   |   | 12,152,196 |   |   |   | 19.4 |   |   |   | 12,113,882 |   |   |   | 18.1 |   |   |   | 12,662,585 |   |   |   | 17.0 |   |
| Real Estate loans:                                  |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                          |   |                        | 48,767,729 |   |   |   | 61.7 |   |   |   | 39,918,879 |   |   |   | 60.1 |   |   |   | 31,607,039 |   |   |   | 50.6 |   |   |   | 33,215,627 |   |   |   | 49.9 |   |   |   | 29,794,108 |   |   |   | 40.1 |   |
| One-to-four family                                  |   |                        | 2,914,956  |   |   |   | 3.7 |   |   |   | 2,548,159 |   |   |   | 3.8 |   |   |   | 2,314,716 |   |   |   | 3.7 |   |   |   | 165,801 |   |   |   | 0.2 |   |   |   | 298,779 |   |   |   | 0.4 |   |
| Total real estate loans                             |   |                        | 51,682,685 |   |   |   | 65.4 |   |   |   | 42,467,038 |   |   |   | 63.9 |   |   |   | 33,921,755 |   |   |   | 54.3 |   |   |   | 33,381,428 |   |   |   | 50.1 |   |   |   | 30,092,887 |   |   |   | 40.5 |   |
| Construction loans:                                 |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                          |   |                        | 10,964,000 |   |   |   | 13.9 |   |   |   | 10,996,432 |   |   |   | 16.5 |   |   |   | 13,585,698 |   |   |   | 21.7 |   |   |   | 17,552,797 |   |   |   | 26.4 |   |   |   | 26,623,846 |   |   |   | 35.8 |   |
| Owner occupied one-to-four family                   |   |                        | 2,294,000  |   |   |   | 2.9 |   |   |   | 900,000 |   |   |   | 1.4 |   |   |   | 1,523,895 |   |   |   | 2.4 |   |   |   | 1,825,000 |   |   |   | 2.7 |   |   |   | 2,987,500 |   |   |   | 4.0 |   |
| Total construction loans                            |   |                        | 13,258,000 |   |   |   | 16.8 |   |   |   | 11,896,432 |   |   |   | 17.9 |   |   |   | 15,109,593 |   |   |   | 24.1 |   |   |   | 19,377,797 |   |   |   | 29.1 |   |   |   | 29,611,346 |   |   |   | 39.8 |   |
| Other loans:                                        |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consumer loans                                      |   |                        | 532,498    |   |   |   | 0.7 |   |   |   | 599,293 |   |   |   | 0.9 |   |   |   | 566,356 |   |   |   | 0.9 |   |   |   | 826,528 |   |   |   | 1.2 |   |   |   | 1,477,366 |   |   |   | 2.0 |   |
| Other loans                                         |   |                        | 1,455,224  |   |   |   | 1.8 |   |   |   | 757,481 |   |   |   | 1.1 |   |   |   | 827,122 |   |   |   | 1.3 |   |   |   | 974,278 |   |   |   | 1.5 |   |   |   | 486,009 |   |   |   | 0.7 |   |
| Total other loans                                   |   |                        | 1,987,722  |   |   |   | 2.5 |   |   |   | 1,356,774 |   |   |   | 2.0 |   |   |   | 1,393,478 |   |   |   | 2.2 |   |   |   | 1,800,806 |   |   |   | 2.7 |   |   |   | 1,963,375 |   |   |   | 2.7 |   |
|                                                |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                                         |   |                        | 79,033,589 |   |   |   | 100.0 | % |   |   | 66,456,336 |   |   |   | 100.0 |  % |   |   | 62,577,022 |   |   |   | 100.0 | % |   |   | 66,673,913 |   |   |   | 100.0 | % |   |   | 74,330,193 |   |   |   | 100.0 | % |
|                                                |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                               |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unearned discounts, net and deferred loan fees, net |   |                        | 199,433    |   |   |   |   |   |   |   | 209,684 |   |   |   |   |   |   |   | 203,944 |   |   |   |   |   |   |   | 263,236 |   |   |   |   |   |   |   | 386,088 |   |   |   |   |   |
| Allowance for loan losses                           |   |                        | 1,063,454  |   |   |   |   |   |   |   | 987,876 |   |   |   |   |   |   |   | 927,161 |   |   |   |   |   |   |   | 1,128,824 |   |   |   |   |   |   |   | 1,153,298 |   |   |   |   |   |
| Loans, net                                          |   | $                           | 77,770,702 |   |   |   |   |   |   | $ | 65,258,776 |   |   |   |   |   |   | $ | 61,445,917 |   |   |   |   |   |   | $ | 65,281,853 |   |   |   |   |   |   | $ | 72,790,807 |   |   |   |   |   |

----

|                          |   | Year Ended   |        |   | Year Ended   |   |        | Year Ended   |   |
|-------------------------------|--------|--------------|-------------|--------|--------------|--------|-------------|--------------|--------|
|                          |   | December 31, |        |   | December 31, |   |        | December 31, |   |
|                          |   | 2009         |        |   | 2008         |   |        | 2007         |   |
|                          |   |         |        |   |         |   |        |         |   |
| Commercial Loans (gross):     |   |         |        |   |         |   |        |         |   |
|  At beginning of period  |   | $            | 10,736,092  |   |         | $      | 12,152,196  |         |   | $ | 12,113,882 |   |
| Commercial loans originated:  |   |         |        |   |         |   |        |         |   |   |   |   |
| Secured                       |   |         | 1,178,006   |   |         |   | 1,841,943   |         |   |   | 857,106 |   |
| Unsecured                     |   |         | 30,778,779  |   |         |   | 30,451,244  |         |   |   | 66,749,010 |   |
| Total commercial loans        |   |         | 31,956,785  |   |         |   | 32,293,187  |         |   |   | 67,606,116 |   |
| Principal repayments          |   |         | (30,587,695 | )      |         |   | (33,709,291 | )            |   |   | (67,567,802 | ) |
| At end of period              |   | $            | 12,105,182  |   |         | $      | 10,736,092  |         |   | $ | 12,152,196 |   |
|                          |   |         |        |   |         |   |        |         |   |   |   |   |
| Real Estate loans:            |   |         |        |   |         |   |        |         |   |   |   |   |
| At beginning of period        |   | $            | 42,467,038  |   |         | $      | 33,921,755  |         |   | $ | 33,381,428 |   |
| Real estate loans originated: |   |         |        |   |         |   |        |         |   |   |   |   |
| Commercial                    |   |         | 16,934,000  |   |         |   | 12,217,500  |         |   |   | 7,735,374 |   |
| One-to-four family            |   |         | 535,000     |   |         |   | 4,180,000   |         |   |   | 2,200,000 |   |
| Total real estate loans       |   |         | 17,469,000  |   |         |   | 16,397,500  |         |   |   | 9,935,374 |   |
| Principal repayments          |   |         | (8,253,353  | )      |         |   | (7,852,217  | )            |   |   | (9,395,047 | ) |
| At end of period              |   | $            | 51,682,685  |   |         | $      | 42,467,038  |         |   | $ | 33,921,755 |   |
| Construction loans            |   |         |        |   |         |   |        |         |   |   |   |   |
| At beginning of period        |   | $            | 11,896,432  |   |         | $      | 15,109,593  |         |   | $ | 19,377,797 |   |
| Construction loans originated |   |         | 5,938,000   |   |         |   | 8,422,000   |         |   |   | 17,280,000 |   |
| Principal repayments          |   |         | (4,576,432  | )      |         |   | (11,635,161 | )            |   |   | (21,548,204 | ) |
| At end of period              |   | $            | 13,258,000  |   |         | $      | 11,896,432  |         |   | $ | 15,109,593 |   |
| Other loans (gross):          |   |         |        |   |         |   |        |         |   |   |   |   |
| At beginning of period        |   | $            | 1,356,774   |   |         | $      | 1,393,478   |         |   | $ | 1,800,806 |   |
| Other loans originated        |   |         | 798,536     |   |         |   | 769,067     |         |   |   | 717,098 |   |
| Principal repayments          |   |         | (167,588    | )      |         |   | (805,771    | )            |   |   | (1,124,426 | ) |
| At end of period              |   | $            | 1,987,722   |   |         | $      | 1,356,774   |         |   | $ | 1,393,478 |   |

|                      |   |  At December 31, 2009 |       |
|---------------------------|--------|----------------------------|------------|
|                      |   |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      |   | Commercial                 |       |   | Commercial |   |   |   |   |   |   |   |   | Other |   |   |   |   |
|                      |   | Unsecured                  |       |   | Secured |   |   | Construction |   |   | Real Estate |   |   | Loans |   |   | Total |   |
|                      |   |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amounts due:              |   |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Within one year           |   | $                          | 7,376,870  |   |   | $ | 626,320 |   |   | $ | 11,190,500 |   |   | $ | 10,290,041 |   |   | $ | 1,851,091 |   |   | $ | 31,334,822 |   |
| After one year:           |   |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One to five years         |   |                       | 3,590,004  |   |   |   | 511,988 |   |   |   | 2,067,500 |   |   |   | 7,909,943 |   |   |   | 136,631 |   |   |   | 14,216,066 |   |
| After five years          |   |                       | —    |   |   |   | — |   |   |   | — |   |   |   | 33,482,701 |   |   |   | — |   |   |   | 33,482,701 |   |
| Total amount due          |   |                       | 10,966,874 |   |   |   | 1,138,308 |   |   |   | 13,258,000 |   |   |   | 51,682,685 |   |   |   | 1,987,722 |   |   |   | 79,033,589 |   |
|                      |   |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                     |   |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unearned fees             |   |                       | —    |   |   |   | — |   |   |   | 31,076 |   |   |   | 168,357 |   |   |   | — |   |   |   | 199,433 |   |
| Allowance for loan losses |   |                       | 460,474    |   |   |   | 8,124 |   |   |   | 71,968 |   |   |   | 458,517 |   |   |   | 64,371 |   |   |   | 1,063,454 |   |
| Loans, net                |   | $                          | 10,506,400 |   |   | $ | 1,130,184 |   |   | $ | 13,154,956 |   |   | $ | 51,055,811 |   |   | $ | 1,923,351 |   |   | $ | 77,770,702 |   |

----

|                       |   |  Due After December 31, 2010 |      |
|----------------------------|--------|-----------------------------------|-----------|
|                       |   | Fixed                             |      |   | Variable |   |   | Total |   |
|                       |   |                              |      |   |   |   |   |   |   |
| Commercial Business Loans: |   |                              |      |   |   |   |   |   |   |
| Unsecured                  |   | $                                 | 139,906   |   |   | $ | 3,450,098 |   |   | $ | 3,590,004 |   |
| Secured                    |   |                              | 349,531   |   |   |   | 162,457 |   |   |   | 511,988 |   |
| Real Estate                |   |                              |      |   |   |   |   |   |   |   |   |   |
| Commercial                 |   |                              | 5,809,626 |   |   |   | 34,868,062 |   |   |   | 40,677,688 |   |
| One-to-four                |   |                              | 714,956   |   |   |   | — |   |   |   | 714,956 |   |
| Construction               |   |                              | 880,000   |   |   |   | 1,187,500 |   |   |   | 2,067,500 |   |
| Other loans                |   |                              | 136,631   |   |   |   | — |   |   |   | 136,631 |   |
| Total loans                |   | $                                 | 8,030,650 |   |   | $ | 39,668,117 |   |   | $ | 47,698,767 |   |

----

----

----

|                             |   | At December 31, 2009 |    |
|----------------------------------|--------|----------------------|---------|
|                             |   | 60-89 Days           |    |   | 90 Days or more |   |
|                             |   | Number               |    |   | Principal |   |   | Number |   |   | Principal |   |
|                             |   |                 |    |   |   |   |   |   |   |   |   |   |
| Commercial real estate           |   |                 | 9       |   |   | $ | 3,848,990 |   |   |   | 7 |   |   | $ | 1,176,114 |   |
| Commercial construction          |   |                 | — |   |   |   | — |   |   |   | 2 |   |   |   | 480,000 |   |
| Commercial unsecured             |   |                 | 4       |   |   |   | 61,907 |   |   |   | 1 |   |   |   | 41,037 |   |
| Real Estate - one-to-four family |   |                 | 3       |   |   |   | 2,299,322 |   |   |   | — |   |   |   | — |   |
| Total                            |   |                 | 16      |   |   | $ | 6,210,219 |   |   |   | 10 |   |   | $ | 1,697,151 |   |
| Delinquent loans to total loans  |   |                 |    |   |   |   | 7.86 | % |   |   |   |   |   |   | 2.15 | % |

|                            |   |  At December 31, 2008 |    |
|---------------------------------|--------|----------------------------|---------|
|                            |   | 60-89 Days                 |    |   | 90 Days or more |   |
|                            |   | Number                     |    |   | Principal |   |   | Number |   |   | Principal |   |
|                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate          |   |                       | 2       |   |   | $ | 207,047 |   |   |   | 5 |   |   | $ | 1,453,846 |   |
| Commercial construction         |   |                       | — |   |   |   | — |   |   |   | 2 |   |   |   | 480,000 |   |
| Commercial unsecured            |   |                       | — |   |   |   | — |   |   |   | 7 |   |   |   | 345,221 |   |
| Total                           |   |                       | 2       |   |   | $ | 207,047 |   |   |   | 14 |   |   | $ | 2,279,067 |   |
| Delinquent loans to total loans |   |                       |    |   |   |   | 0.31 | % |   |   |   |   |   |   | 3.43 | % |

|                            |   |  At December 31, 2007 |    |
|---------------------------------|--------|----------------------------|---------|
|                            |   | 60-89 Days                 |    |   | 90 Days or more |   |
|                            |   | Number                     |    |   | Principal |   |   | Number |   |   | Principal |   |
|                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate          |   |                       | 2       |   |   | $ | 1,406,936 |   |   |   | 3 |   |   | $ | 459,371 |   |
| Commercial construction         |   |                       | 2       |   |   |   | 2,944,000 |   |   |   | 6 |   |   |   | 2,505,134 |   |
| Commercial unsecured            |   |                       | 1       |   |   |   | 300,000 |   |   |   | 2 |   |   |   | 14,970 |   |
| Other                           |   |                       | — |   |   |   | — |   |   |   | 1 |   |   |   | 5,877 |   |
| Total                           |   |                       | 5       |   |   | $ | 4,650,936 |   |   |   | 12 |   |   | $ | 2,985,352 |   |
| Delinquent loans to total loans |   |                       |    |   |   |   | 7.43 | % |   |   |   |   |   |   | 4.77 | % |

|                            |   | At December 31, 2006 |    |
|---------------------------------|--------|----------------------|---------|
|                            |   | 60-89 Days           |    |   | 90 Days or more |   |
|                            |   | Number               |    |   | Principal |   |   | Number |   |   | Principal |   |
|                            |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate          |   |                 | — |   |   | $ | — |   |   |   | 3 |   |   | $ | 773,924 |   |
| Commercial unsecured            |   |                 | 2       |   |   |   | 29,648 |   |   |   | 1 |   |   |   | 20,709 |   |
| Other                           |   |                 | 1       |   |   |   | 9,676 |   |   |   | — |   |   |   | — |   |
| Total                           |   |                 | 3       |   |   | $ | 39,324 |   |   |   | 4 |   |   | $ | 794,633 |   |
| Delinquent loans to total loans |   |                 |    |   |   |   | 0.06 | % |   |   |   |   |   |   | 1.19 | % |

|                            |   | At December 31, 2005 |    |
|---------------------------------|--------|----------------------|---------|
|                            |   |  60-89 Days     |    |   |  90 Days or more |   |
|                            |   | Number               |    |   | Principal |   |   | Number |   |   | Principal |   |
|                            |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate          |   |                 | — |   |   | $ | — |   |   |   | 6 |   |   | $ | 1,123,081 |   |
| Commercial construction         |   |                 | — |   |   |   | — |   |   |   | 2 |   |   |   | 579,000 |   |
| Commercial unsecured            |   |                 | 1       |   |   |   | 8,420 |   |   |   | — |   |   |   | — |   |
| Total                           |   |                 | 1       |   |   | $ | 8,420 |   |   |   | 8 |   |   | $ | 1,702,081 |   |
| Delinquent loans to total loans |   |                 |    |   |   |   | 0.01 | % |   |   |   |   |   |   | 2.29 | % |

----

|                                       |   | At December 31, |      |   | At December 31, |   |      | At December 31, |   |
|--------------------------------------------|--------|-----------------|-----------|--------|-----------------|--------|-----------|-----------------|--------|
|                                       |   | 2009            |      |   | 2008            |   |      | 2007            |   |
|                                       |   |            |      |   |            |   |      |            |   |
| Non-performing assets:                     |   |            |      |   |            |   |      |            |   |
| Commercial loans:                          |   |            |      |   |            |   |      |            |   |
| Unsecured                                  |   | $               | 41,037    |   |            | $      | 345,221   |            |   | $ | 14,970 |   |
| Commercial real estate                     |   |            | 1,176,114 |   |            |   | 1,453,846 |            |   |   | 459,371 |   |
| Construction                               |   |            | 480,000   |   |            |   | 480,000   |            |   |   | 480,000 |   |
| Consumer loan                              |   |            | —   |   |            |   | —   |            |   |   | 5,877 |   |
|                                       |   |            |      |   |            |   |      |            |   |   |   |   |
| Total non-performing assets           |   | $               | 1,697,151 |   |            | $      | 2,279,067 |            |   | $ | 960,218 |   |
|                                       |   |            |      |   |            |   |      |            |   |   |   |   |
|                                       |   |            |      |   |            |   |      |            |   |   |   |   |
| Non-performing loans to total loans   |   |            | 2.15      | %      |            |   | 3.43      | %               |   |   | 1.53 | % |
| Non-performing loans to total assets  |   |            | 0.72      | %      |            |   | 1.07      | %               |   |   | 0.47 | % |
| Non-performing assets to total assets |   |            | 0.72      | %      |            |   | 1.07      | %               |   |   | 0.47 | % |

|                                |   | At December 31, 2009 |   |
|-------------------------------------|--------|----------------------|--------|
|                                |   | Substandard          |   |   | Doubtful |   |
|                                |   | Number               |   |   | Amount |   |   | Number |   |   | Amount |   |
| Classification of assets:           |   |                 |   |   |   |   |   |   |   |   |   |   |
| Commercial Loans:                   |   |                 |   |   |   |   |   |   |   |   |   |   |
|     Unsecured   |   |                 | 4      |   |   | $ | 69,731 |   |   |   | — |   |   | $ | — |   |
| Commercial Real Estate              |   |                 | 11     |   |   |   | 3,548,909 |   |   |   | — |   |   |   | — |   |
| Construction                        |   |                 | 2      |   |   |   | 480,000 |   |   |   | — |   |   |   | — |   |
|     Total loans |   |                 | 17     |   |   | $ | 4,098,640 |   |   |   | — |   |   |   | — |   |

----

|   ● |   | $859,968 in three construction loans to a builder secured and cross-collateralized by first mortgage liens on three lots in Staten Island on which single family houses are near completion. The loans are past maturity and we commenced foreclosure actions in 2008.  The foreclosure sale was held in January 2010 and the Bank was the successful bidder.  We have an agreement with a builder to assign our bid to the builder upon the payment to us of an amount sufficient to exceed the value of the loans on our books, and thus we will not record any loss upon the foreclosure sale and the subsequent assignment of our bid to the builder. |
|----------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   ● |   | $396,996 in a loan to a local business in which we are a participant in the loan with another bank.  We are not the lead lender. The loan is in arrears and the lead lender has commenced a foreclosure action.  The loan is secured by a first mortgage on a commercial building, a security interest in the business, and the personal guaranties of the principals.                                                                                                                                                                                                                                                                                    |

----

|                                                                                                          |   |               |      |               |   |   |     |   |   |   |      |   |   |   |      |
|---------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------------------|--------|--------|----------|--------|--------|--------|-----------|--------|--------|--------|-----------|
|                                                                                                          |   |               |      | For the Year Ended |   |   |     |   |   |   |      |
|                                                                                                          |   |  December 31, |      |
|                                                                                                          |   | 2009               |      |               | 2008   |   |     | 2007   |   |   | 2006      |   |   | 2005   |      |
|                                                                                                          |   |               |      |               |   |   |     |   |   |   |      |   |   |   |      |
| Allowance for Loan Losses:                                                                                    |   |               |      |               |   |   |     |   |   |   |      |   |   |   |      |
|    Balance at beginning of period                                                              |   | $                  | 987,876   |               |   | $      | 927,161  |   |   | $      | 1,128,824 |   |   | $      | 1,153,298 |   |   | $ | 1,299,520 |   |
|    Charge-offs:                                                                                |   |               |      |               |   |   |     |   |   |   |      |   |   |   |      |   |   |   |   |   |
|    Real estate loans:                                                                          |   |               |      |               |   |   |     |   |   |   |      |   |   |   |      |   |   |   |   |   |
|      Commercial                                                                      |   |               | (110,241  | )                  |   |   | —  |   |   |   | —   |   |   |   | —   |   |   |   | — |   |
|    Commercial loans:                                                                           |   |               |      |               |   |   |     |   |   |   |      |   |   |   |      |   |   |   |   |   |
|      Unsecured                                                                       |   |               | (412,112  | )                  |   |   | (483,326 | )      |   |   | (254,986  | )      |   |   | (62,181   | ) |   |   | (318,399 | ) |
|    Consumer loan                                                                               |   |               | (18,606   | )                  |   |   | (7,959   | )      |   |   | —   |   |   |   | (17,511   | ) |   |   | — |   |
|    Other loans                                                                                 |   |               | (15,679   | )                  |   |   | (3,503   | )      |   |   | (8,639    | )      |   |   | (28,111   | ) |   |   | (25,302 | ) |
| Total charge-offs                                                                                             |   |               | (556,638  | )                  |   |   | (494,788 | )      |   |   | (263,625  | )      |   |   | (107,803  | ) |   |   | (343,701 | ) |
| Recoveries                                                                                                    |   |               | 72,216    |               |   |   | 270,503  |   |   |   | 66,962    |   |   |   | 148,329   |   |   |   | 257,479 |   |
| Net (charge-offs) / recoveries                                                                                |   |               | (484,422  | )                  |   |   | (224,285 | )      |   |   | (196,663  | )      |   |   | 40,526    |   |   |   | (86,222 | ) |
| Provision charged to income                                                                                   |   |               | 560,000   |               |   |   | 285,000  |   |   |   | (5,000    | )      |   |   | (65,000   | ) |   |   | (60,000 | ) |
| Balance at end of period                                                                                      |   | $                  | 1,063,454 |               |   | $      | 987,876  |   |   | $      | 927,161   |   |   | $      | 1,128,824 |   |   | $ | 1,153,298 |   |
|                                                                                                          |   |               |      |               |   |   |     |   |   |   |      |   |   |   |      |   |   |   |   |   |
| Ratio of net charge-offs / (recoveries) during the period to average loans outstanding during the period |   |               | 0.68      | %                  |   |   | 0.35     | %      |   |   | 0.32      | %      |   |   | -0.06     | % |   |   | 0.12 | % |
| Ratio of allowance for loan losses to total loans at the end of period                                   |   |               | 1.35      | %                  |   |   | 1.49     | %      |   |   | 1.48      | %      |   |   | 1.69      | % |   |   | 1.55 | % |
| Ratio of allowance for loan losses to non-performing loans at the end of the period                      |   |               | 62.66     | %                  |   |   | 43.35    | %      |   |   | 96.56     | %      |   |   | 538.61    | % |   |   | 72.03 | % |
| Ratio of allowance for loan losses to non-performing assets at the end of the period                     |   |               | 62.66     | %                  |   |   | 43.35    | %      |   |   | 96.56     | %      |   |   | 538.61    | % |   |   | 72.03 | % |

|                    |   | At December 31, |      |        | At December 31, |   |   |  At December 31, |        |    | At December 31, |   |   | At December 31, |   |
|-------------------------|--------|-----------------|-----------|-------------|-----------------|--------|--------|-----------------------|-------------|---------|-----------------|--------|--------|-----------------|--------|
|                    |   |  2009      |      |        |  2008      |   |   | 2007                  |        |    | 2006            |   |   |  2005      |   |
|                    |   |            |      | % of Loans  |            |   |   |                  | % of Loans  |    |            |   |   | % of Loans      |   |   |   |   | % of Loans |   |   |   |   | % of Loans |   |
|                    |   |            |      | in Category |            |   |   |                  | in Category |    |            |   |   | in Category     |   |   |   |   | in Category |   |   |   |   | in Category |   |
|                    |   |            |      | to          |            |   |   |                  | to          |    |            |   |   | to              |   |   |   |   | to |   |   |   |   | to |   |
|                    |   | Amount          |      | Total Loans |            |   | Amount |                  | Total Loans |    |            | Amount |   | Total Loans     |   |   | Amount |   | Total Loans |   |   | Amount |   | Total Loans |   |
|                    |   |            |      |        |            |   |   |                  |        |    |            |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Allowance:              |   |            |      |        |            |   |   |                  |        |    |            |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Commercial loans:       |   |            |      |        |            |   |   |                  |        |    |            |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Unsecured               |   | $               | 460,474   |        |            | 13.9   | %      |                  | $           | 372,803 |            |   | 14.4   | %               |   | $ | 330,355 |   |   | 17.5 | % |   | $ | 337,054 |   |   | 16.3 | % |   | $ | 360,532 |   |   | 14.9 | % |
| Secured                 |   |            | 8,124     |        |            | 1.4    |   |                  |        | 7,451   |            |   | 1.8    |            |   |   | 19,877 |   |   | 1.9 |   |   |   | 10,859 |   |   | 1.8 |   |   |   | 2,349 |   |   | 2.1 |   |
| Commercial real estate  |   |            | 418,215   |        |            | 61.7   |   |                  |        | 449,525 |            |   | 60.1   |            |   |   | 345,407 |   |   | 50.6 |   |   |   | 518,620 |   |   | 49.9 |   |   |   | 363,072 |   |   | 40.1 |   |
| Residential real estate |   |            | 40,302    |        |            | 3.7    |   |                  |        | 25,686  |            |   | 3.8    |            |   |   | 15,887 |   |   | 3.7 |   |   |   | 12,501 |   |   | 0.2 |   |   |   | 7,835 |   |   | 0.4 |   |
| Construction loans      |   |            | 71,968    |        |            | 16.8   |   |                  |        | 100,737 |            |   | 17.9   |            |   |   | 166,437 |   |   | 24.1 |   |   |   | 198,901 |   |   | 29.1 |   |   |   | 362,590 |   |   | 39.8 |   |
| Other loans             |   |            | 64,371    |        |            | 2.5    |   |                  |        | 31,674  |            |   | 2.0    |            |   |   | 49,198 |   |   | 2.2 |   |   |   | 50,889 |   |   | 2.7 |   |   |   | 56,920 |   |   | 2.7 |   |
| Total allowances        |   | $               | 1,063,454 |        |            | 100.0  | %      |                  | $           | 987,876 |            |   | 100.0  | %               |   | $ | 927,161 |   |   | 100.0 | % |   | $ | 1,128,824 |   |   | 100.0 | % |   | $ | 1,153,298 |   |   | 100.0 | % |

----

|                                       |   | At December 31, |        |
|--------------------------------------------|--------|-----------------|-------------|
|                                       |   | 2009            |        |   | 2008 |   |   | 2007 |   |
|                                       |   | Amortized       |        |   | Fair |   |   | Amortized |   |   | Fair |   |   | Amortized |   |   | Fair |   |
|                                       |   | Cost            |        |   | Value |   |   | Cost |   |   | Value |   |   | Cost |   |   | Value |   |
|                                       |   |            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments securities, available for sale |   |            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FNMA                                       |   | $               | 4,855,213   |   |   | $ | 5,040,820 |   |   | $ | 6,646,320 |   |   | $ | 6,690,593 |   |   | $ | 5,762,683 |   |   | $ | 5,746,955 |   |
| FHLMC                                      |   |            | —     |   |   |   | — |   |   |   | 37,411 |   |   |   | 37,643 |   |   |   | 161,513 |   |   |   | 162,752 |   |
| GNMA                                       |   |            | 1,265,428   |   |   |   | 1,321,240 |   |   |   | 1,576,764 |   |   |   | 1,632,790 |   |   |   | 1,892,949 |   |   |   | 1,849,267 |   |
| Whole Loan MBS                             |   |            | 1,860,603   |   |   |   | 1,856,893 |   |   |   | 2,620,965 |   |   |   | 2,559,037 |   |   |   | 3,135,102 |   |   |   | 3,103,907 |   |
| Collateralized mortgage obligations        |   |            | 102,933,529 |   |   |   | 105,693,451 |   |   |   | 108,331,330 |   |   |   | 109,368,525 |   |   |   | 107,571,610 |   |   |   | 106,951,236 |   |
|                                       |   |            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   | $               | 110,914,773 |   |   | $ | 113,912,404 |   |   | $ | 119,212,790 |   |   | $ | 120,288,588 |   |   | $ | 118,523,857 |   |   | $ | 117,814,117 |   |

|                                |   | At December 31, 2009 |    |
|-------------------------------------|--------|----------------------|---------|
|                                |   |                 |    |   | Weighted |   |   |   |   |   | Weighted |   |   |   |   |   | Weighted |   |   |   |   |   | Weighted |   |   |   |   |
|                                |   | Less Than            |    |   | Average |   |   | 1 To 5 |   |   | Average |   |   | 5 To 10 |   |   | Average |   |   | Over 10 |   |   | Average |   |   |   |   |
|                                |   | 1 Year               |    |   | Yield |   |   | Years |   |   | Yield |   |   | Years |   |   | Yield |   |   | Years |   |   | Yield |   |   | Total |   |
|                                |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment Securities:              |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FNMA                                |   | $                    | — |   |   | - | % |   |   | $ | 1,390,603 |   |   | 4.49 | % |   |   | $ | 1,682,752 |   |   | 4.42 | % |   |   | $ | 1,781,857 |   |   | 3.95 | % |   |   | $ | 4,855,212 |   |
| FHLMC                               |   |                 | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | — |   |
| GNMA                                |   |                 | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | 1,265,428 |   |   | 4.38 |   |   |   |   | — |   |   | — |   |   |   |   | 1,265,428 |   |
| Whole Loan MBS                      |   |                 | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | 1,860,603 |   |   | 4.64 |   |   |   |   | — |   |   | — |   |   |   |   | 1,860,603 |   |
| Collateralized Mortgage Obligations |   |                 | — |   |   | — |   |   |   |   | 1,941,530 |   |   | 4.82 |   |   |   |   | 37,530,714 |   |   | 4.43 |   |   |   |   | 63,461,286 |   |   | 4.32 |   |   |   |   | 102,933,530 |   |
|                                |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                               |   | $                    | — |   |   | - | % |   |   | $ | 3,332,133 |   |   | 4.68 | % |   |   | $ | 42,339,497 |   |   | 4.44 | % |   |   | $ | 65,243,143 |   |   | 4.31 | % |   |   | $ | 110,914,773 |   |

----

|                                     |   | At December 31, 2008 |    |
|------------------------------------------|--------|----------------------|---------|
|                                     |   |                 |    |   | Weighted |   |   |   |   |   | Weighted |   |   |   |   |   | Weighted |   |   |   |   |   | Weighted |   |   |   |   |
|                                     |   | Less Than            |    |   | Average |   |   | 1 To 5 |   |   | Average |   |   | 5 To 10 |   |   | Average |   |   | Over 10 |   |   | Average |   |   |   |   |
|                                     |   | 1 Year               |    |   | Yield |   |   | Years |   |   | Yield |   |   | Years |   |   | Yield |   |   | Years |   |   | Yield |   |   | Total |   |
|                                     |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment Securities:                   |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FNMA                                     |   | $                    | — |   |   | - | % |   |   | $ | 1,897,587 |   |   | 4.47 | % |   |   | $ | 2,190,239 |   |   | 4.41 | % |   |   | $ | 2,558,494 |   |   | 3.74 | % |   |   | $ | 6,646,320 |   |
| FHLMC                                    |   |                 | 37,411  |   |   | 2.79 |   |   |   |   | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | 37,411 |   |
| GNMA                                     |   |                 | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | 1,576,764 |   |   | 4.39 |   |   |   |   | — |   |   | — |   |   |   |   | 1,576,764 |   |
| Whole Loan MBS                           |   |                 | — |   |   | — |   |   |   |   | — |   |   | — |   |   |   |   | 2,620,965 |   |   | 4.44 |   |   |   |   | — |   |   | — |   |   |   |   | 2,620,965 |   |
| Collateralized Mortgage Obligations |   |                 | — |   |   | — |   |   |   |   | 2,187,168 |   |   | 5.13 |   |   |   |   | 47,617,983 |   |   | 4.41 |   |   |   |   | 58,526,179 |   |   | 4.76 |   |   |   |   | 108,331,330 |   |
|                                     |   |                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                    |   | $                    | 37,411  |   |   | 2.79 | % |   |   | $ | 4,084,755 |   |   | 4.82 | % |   |   | $ | 54,005,951 |   |   | 4.41 | % |   |   | $ | 61,084,673 |   |   | 4.72 | % |   |   | $ | 119,212,790 |   |

----

|                                                                                 |   |         |        |   |         |   |        |         |   |
|--------------------------------------------------------------------------------------|--------|--------------|-------------|--------|--------------|--------|-------------|--------------|--------|
|                                                                                 |   | Year Ended   |        |   | Year Ended   |   |        | Year Ended   |   |
|                                                                                 |   | December 31, |        |   | December 31, |   |        | December 31, |   |
|                                                                                 |   | 2009         |        |   | 2008         |   |        | 2007         |   |
|                                                                                 |   |         |        |   |         |   |        |         |   |
| Beginning balance                                                                    |   | $            | 188,109,449 |   |         | $      | 176,334,443 |         |   | $ | 186,683,150 |   |
|       Net increase/(decrease) before interest credited |   |         | 21,511,428  |   |         |   | 9,646,073   |         |   |   | (13,454,165 | ) |
|       Interest credited on deposits                    |   |         | 1,365,209   |   |         |   | 2,128,933   |         |   |   | 3,105,458 |   |
|                                                                                 |   |         |        |   |         |   |        |         |   |   |   |   |
| Ending balance                                                                       |   | $            | 210,986,086 |   |         | $      | 188,109,449 |         |   | $ | 176,334,443 |   |

|      Maturity Period   |   | Amount |       |
|-------------------------------------------------|--------|--------|------------|
|                                            |   |   |       |
|    Three months or less          |   | $      | 27,672,441 |   |
|    Over three through six months |   |   | 19,101,428 |   |
|    Over six through 12 months    |   |   | 1,924,642  |   |
|    Over 12 months                |   |   | 5,429,035  |   |
|        Total |   | $      | 54,127,546 |   |

|                             |   |       |       |   | Over Six Mos. |   |      | Over One Year |   |   | Over Two Years |   |   |       |    |   |   |   |
|----------------------------------|--------|------------|------------|--------|---------------|--------|-----------|---------------|--------|--------|----------------|--------|--------|------------|---------|--------|--------|--------|
|                             |   | Six Months |       |   | Through One   |   |      | Through Two   |   |   | Through Three  |   |   | Over Three |    |   |   |   |
|                             |   | And Less   |       |   | Year          |   |      | Years         |   |   | Years          |   |   | Years      |    |   | Total  |   |
| Certificate accounts:            |   |       |       |   |          |   |      |          |   |   |           |   |   |       |    |   |
|    0.50% to 1.99% |   | $          | 51,945,231 |   |          | $      | 3,112,912 |          |   | $      | 6,397,000      |   |   | $          | — |   |   | $      | — |   |   | $ | 61,455,143 |   |
|    2.00% to 2.99% |   |       | —    |   |          |   | 335,000   |          |   |   | —        |   |   |       | 748,000 |   |   |   | 2,130,985 |   |   |   | 3,213,985 |   |
|                             |   |       |       |   |          |   |      |          |   |   |           |   |   |       |    |   |   |   |   |   |   |   |   |   |
|                             |   | $          | 51,945,231 |   |          | $      | 3,447,912 |          |   | $      | 6,397,000      |   |   | $          | 748,000 |   |   | $      | 2,130,985 |   |   | $ | 64,669,128 |   |

----

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----

|                                                |   |   |              |   |              |        |   |                    |   |   | To be well-capitalized |
|-----------------------------------------------------|--------|--------|-------------------|--------|-------------------|-------------|--------|-------------------------|--------|--------|------------------------|
|                                                |   |   |              |   |              | For capital |   | under prompt corrective |
|                                                | Actual |   | adequacy purposes |   | action provisions |
|                                                | Amount |   |              | Ratio  |              | Amount      |   |                    | Ratio  |   | Amount                 |   |   | Ratio |
|                                                |   |   |              |   |              |        |   |                    |   |   |                   |   |   |   |   |
| As of December 31, 2009                             |   |   |              |   |              |        |   |                    |   |   |                   |   |   |   |   |
| Tier 1 Capital  (to Average Assets)            |   | $      | 22,468,000        |   |              |        | 9.51   | %                  |   | $      | 9,454,548              |   |   |   | 4.00 | %  |   | $ | 11,818,185 |   |   |   | 5.00 | %  |
| Tier 1 Capital  (to Risk Weighted Assets) |   |   | 22,468,000        |   |              |        | 21.94  | %                  |   |   | 4,095,720              |   |   |   | 4.00 | %  |   |   | 6,143,580 |   |   |   | 6.00 | %  |
| Total Capital  (to Risk Weighted Assets)       |   |   | 23,531,000        |   |              |        | 22.98  | %                  |   |   | 8,191,440              |   |   |   | 8.00 | %  |   |   | 10,239,300 |   |   |   | 10.00 | %  |

----

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----

|                                              |          |   |      |   | Original  |   |       |   | Net Book Value    |      |
|---------------------------------------------------|---------------|--------|-----------|--------|-----------|--------|------------|--------|-------------------|-----------|
|                                              |          |   |      |   | Date      |   | Date of    |   | of Leasehold      |      |
|                                              |          |   | Leased or |   | Leased or |   | Lease      |   | Improvements at   |      |
| Location                                          | Description   |   | Owned     |   | Acquired  |   | Expiration |   | December 31, 2009 |      |
|                                              |          |   |      |   |      |   |       |   |              |      |
| 4142 Hylan BoulevardStaten Island, N.Y. 10308     | Main Office   |   | Leased    |   | 2005      |   | 3/25/2020  |   | $                 | 1,826,318 |   |
|                                              |          |   |      |   |      |   |       |   |              |      |   |
| 755 Forest AvenueStaten Island, N.Y. 10310        | Branch        |   | Leased    |   | 1999      |   | 11/30/2013 |   | $                 | 40,444    |   |
|                                              |          |   |      |   |      |   |       |   |              |      |   |
| One Hyatt StreetStaten Island, N.Y. 10301         | Branch        |   | Leased    |   | 1999      |   | 10/30/2014 |   | $                 | 14,524    |   |
|                                              |          |   |      |   |      |   |       |   |              |      |   |
| 1762 Hylan BoulevardStaten Island, N.Y. 10305     | Branch        |   | Leased    |   | 2001      |   | 6/30/2016  |   | $                 | 278,209   |   |
|                                              |          |   |      |   |      |   |       |   |              |      |   |
| 1766 Hylan Boulevard (1)Staten Island, N.Y. 10305 | Retail Stores |   | Leased    |   | 2001      |   | 6/30/2016  |   | $                 | 67,095    |   |
|                                              |          |   |      |   |      |   |       |   |              |      |   |
| 1065 Bay StreetStaten Island, N.Y. 10305          | Branch        |   | Leased    |   | 2006      |   | 04/26/2021 |   | $                 | 138,724   |   |
|                                              |          |   |      |   |      |   |       |   |              |      |   |
| Total net book value                              |          |   |      |   |      |   |       |   | $                 | 2,365,314 |   |

| (1)  |  We leased the retail stores at 1766 Hylan Boulevard as a component of the lease for the 1762 Hylan Boulevard branch and we sublease the property to retail tenants. |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|     |   | 2009          |   |
|----------|--------|---------------|--------|
|     |   | First Quarter |   |   | Second Quarter |   |   | Third Quarter |   |   | Fourth Quarter |   |
| High Bid |   | $             | 8.90   |   |   | $ | 12.98 |   |   | $ | 12.50 |   |   | $ | 11.90 |   |
| Low Bid  |   | $             | 7.65   |   |   | $ | 8.08 |   |   | $ | 10.21 |   |   | $ | 10.92 |   |

|     |   |          |   |
|----------|--------|---------------|--------|
|     |   | 2008          |   |
|     |   | First Quarter |   |   | Second Quarter |   |   | Third Quarter |   |   | Fourth Quarter |   |
| High Bid |   | $             | 12.25  |   |   | $ | 10.25 |   |   | $ | 13.00 |   |   | $ | 11.24 |   |
| Low Bid  |   | $             | 10.00  |   |   | $ | 9.09 |   |   | $ | 9.09 |   |   | $ | 8.00 |   |

----

| Period                               |   | (a) Total Numberof Shares Purchased |   |   | (b) Average Price Paid Per Share |   |   | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |   |   | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |   |
|--------------------------------------|--------|-------------------------------------|--------|--------|----------------------------------|--------|--------|------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|
| October 1, 2009 toOctober 31, 2009   |   | None                                |   |   | None                             |   |   |                                                                                     | 94,643 |   |                                                                                                                        |   | 105,357 |   |
| November 1, 2009 toNovember 30, 2009 |   |                                | 85,800 |   |                             | $      | 11.06  |                                                                                     |   |   | 180,443                                                                                                                     |   |   |   | 19,557 |   |
| December 1, 2009 toDecember 31, 2009 |   |                                | 2,500  |   |                             | $      | 11.13  |                                                                                     |   |   | 182,943                                                                                                                     |   |   |   | 17,057 |   |
| Total                                |   |                                | 88,300 |   |                             | $      | 11.06  |                                                                                     |   |   | 182,943                                                                                                                     |   |   |   | 17,057 |   |

| Equity Compensation Plan Information                       |
|------------------------------------------------------------|
| Plan category                                              |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights(a) |   | Weighted-average exercise price of outstanding options, warrants and rights(b) |   | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(c) |
| Equity compensation plans approved by security holders     |   |  118,498 |   |   | $12.21 |   |  24,727 |
| Equity compensation plans not approved by security holders |   | None |   |   | N/A |   | None |
| Total                                                      |   |  118,498 |   |   | $12.21 |   |  24,727 |

----

----

----

|  · |    | As explained above, an increase in the target federal funds rate, which normally presages an immediate increase in the prime rate, will not have an immediate positive effect on most of our adjustable rate loans because they have interest rate floors that must be surpassed before yields on those assets being to increase. However, the increase in the prime rate is likely to put prompt upward pressure on the rates we pay to depositors, at least in the case of certificates of deposit. |
|--------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  · |    | The gap table does not consider the effects of customer discretion. When market interest rates are very low, the difference between the rates paid on different deposit types is relatively small, and customers may elect to keep funds in very liquid deposits with the lowest interest rates because those deposits provide the greatest flexibility when market rates increase. Those customers may elect to switch a deposit to a higher cost category, such as from NOW accounts to a time deposit, if the increase in market rates makes the difference in rates between those two deposit types more meaningful. Our cost of a specific customer’s deposit could go up faster than market rates are rising if the customer decides to do so. |
|--------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  · |    | The gap table does not take into account discretion by the Bank in making deposit pricing decisions. Other external factors, such as changes in competition or the decision by a local competitor to aggressively seek local deposits by offering premium rates on deposits, may cause the Bank to increase deposit rates more rapidly to match competitors. |
|--------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                         |   | At December 31, 2009 |        |
|----------------------------------------------------------------------------------------------|--------|----------------------|-------------|
|                                                                                         |   | Three                |        |   | Four |   |   | More than |   |   |   |   |   |   |   |
|                                                                                         |   | months               |        |   | to twelve |   |   | One year to |   |   | More than |   |   |   |   |
|                                                                                         |   | or less              |        |   | months |   |   | five years |   |   | five years |   |   | Total |   |
| Interest-earning assets:                                                                     |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial loans (1)                                                                         |   | $                    | 63,344,045  |   |   | $ | 298,518 |   |   | $ | 1,409,553 |   |   | $ | 4,691,145 |   |   | $ | 69,743,261 |   |
| Consumer loans (1)                                                                           |   |                 | 3,743,192   |   |   |   | 1,833,918 |   |   |   | 1,868,733 |   |   |   | 150,834 |   |   |   | 7,596,677 |   |
| Mortgage-backed securities                                                                   |   |                 | 9,313,796   |   |   |   | 27,941,388 |   |   |   | 73,416,812 |   |   |   | — |   |   |   | 110,671,996 |   |
| Other interest-earning assets                                                                |   |                 | 34,089,544  |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 34,089,544 |   |
| Total interest-earning assets                                                                |   |                 | 110,490,577 |   |   |   | 30,073,824 |   |   |   | 76,695,098 |   |   |   | 4,841,979 |   |   |   | 222,101,478 |   |
| Less:                                                                                        |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unearned (discount) and deferred fees(2)                                                     |   |                 | (29,427     | ) |   |   | (88,281 | ) |   |   | 161,051 |   |   |   | — |   |   |   | 43,343 |   |
| Net interest-earning assets                                                                  |   |                 | 110,461,150 |   |   |   | 29,985,543 |   |   |   | 76,856,149 |   |   |   | 4,841,979 |   |   |   | 222,144,821 |   |
|                                                                                         |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                                |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings accounts                                                                             |   |                 | 15,001,936  |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 15,001,936 |   |
| NOW accounts                                                                                 |   |                 | 32,501,930  |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 32,501,930 |   |
| Money market accounts                                                                        |   |                 | 28,124,315  |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 28,124,315 |   |
| Certificate accounts                                                                         |   |                 | 31,346,739  |   |   |   | 24,046,404 |   |   |   | 9,275,984 |   |   |   | — |   |   |   | 64,669,127 |   |
| Total interest-bearing liabilities                                                           |   |                 | 106,974,920 |   |   |   | 24,046,404 |   |   |   | 9,275,984 |   |   |   | — |   |   |   | 140,297,308 |   |
|                                                                                         |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest sensitivity gap                                                                     |   | $                    | 3,486,230   |   |   | $ | 5,939,139 |   |   | $ | 67,580,165 |   |   | $ | 4,841,979 |   |   | $ | 81,847,513 |   |
| Cumulative gap                                                                               |   | $                    | 3,486,230   |   |   | $ | 9,425,369 |   |   | $ | 77,005,534 |   |   | $ | 81,847,513 |   |   | $ | 81,847,513 |   |
| Cumulative gap as a percentage of total interest-earning assets                              |   |                 | 1.57        | % |   |   | 4.24 | % |   |   | 34.67 | % |   |   | 36.85 | % |   |   | 36.85 | % |
| Cumulative net interest-earning assets as a percentage of total interest-bearing liabilities |   |                 | 103.26      | % |   |   | 107.19 | % |   |   | 154.89 | % |   |   | 158.34 | % |   |   | 158.34 | % |

| (1) | For purposes of the gap analysis, mortgage and other loans are reduced by non-performing loans but are not reduced by the allowance for possible loan losses. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For purposes of the gap analysis, unearned discount and deferred fees are pro-rated. |
|-----|--------------------------------------------------------------------------------------|

----

|                                                             |   | Year Ended December 31, |        |    | Year Ended December 31, |   | Year Ended December 31, |   |
|------------------------------------------------------------------|--------|-------------------------|-------------|---------|-------------------------|--------|-------------------------|--------|
|                                                             |   | 2009                    |        |    | 2008                    |   |                    | 2007   |   |
|                                                             |   | Average                 |        |    |                    |   |                    | Yield/ |   |   | Average |   |   |   |   |   | Yield/ |   |   | Average |   |   |   |   |   | Yield/ |   |
|                                                             |   | Balance                 |        |    | Interest                |   |                    | Cost   |   |   | Balance |   |   | Interest |   |   | Cost |   |   | Balance |   |   | Interest |   |   | Cost |   |
|                                                             |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets:                                                          |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                         |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Loans receivable                                     |   | $                       | 71,655,679  |    |                    | $      | 5,465,368               |   |   |   | 7.63 | % |   | $ | 64,186,215 |   |   | $ | 5,078,576 |   |   |   | 7.91 | % |   | $ | 61,107,477 |   |   | $ | 5,980,133 |   |   |   | 9.79 |  % |
|   Other interest earning assets                        |   |                    | 27,440,096  |    |                    |   | 33,050                  |   |   |   | 0.12 |   |   |   | 14,864,864 |   |   |   | 237,490 |   |   |   | 1.60 |   |   |   | 20,652,598 |   |   |   | 994,334 |   |   |   | 4.81 |   |
|   Investment securities                                |   |                    | 118,475,481 |    |                    |   | 5,149,770               |   |   |   | 4.35 |   |   |   | 119,976,379 |   |   |   | 5,699,228 |   |   |   | 4.75 |   |   |   | 112,178,675 |   |   |   | 5,303,886 |   |   |   | 4.73 |   |
|   Total interest-earning assets                        |   |                    | 217,571,256 |    |                    |   | 10,648,188              |   |   |   | 4.89 |   |   |   | 199,027,458 |   |   |   | 11,015,294 |   |   |   | 5.53 |   |   |   | 193,938,750 |   |   |   | 12,278,353 |   |   |   | 6.33 |   |
|                                                             |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Non-interest earning assets                                |   |                    | 8,472,431   |    |                    |   |                    |   |   |   |   |   |   |   | 11,105,146 |   |   |   |   |   |   |   |   |   |   |   | 14,624,973 |   |   |   |   |   |   |   |   |   |
|   Total assets                                         |   | $                       | 226,043,687 |    |                    |   |                    |   |   |   |   |   |   | $ | 210,132,604 |   |   |   |   |   |   |   |   |   |   | $ | 208,563,723 |   |   |   |   |   |   |   |   |   |
|                                                             |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and equity:                                          |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Interest-bearing liabilities:                              |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Savings accounts                                     |   | $                       | 13,733,980  |    |                    |   | 50,145                  |   |   |   | 0.37 |   |   | $ | 12,046,954 |   |   |   | 76,011 |   |   |   | 0.63 |   |   | $ | 11,942,515 |   |   |   | 97,900 |   |   |   | 0.82 |   |
|   Time accounts                                        |   |                    | 66,249,743  |    |                    |   | 925,793                 |   |   |   | 1.40 |   |   |   | 69,562,982 |   |   |   | 1,615,142 |   |   |   | 2.32 |   |   |   | 66,237,498 |   |   |   | 2,436,688 |   |   |   | 3.68 |   |
|   Money market accounts                                |   |                    | 25,387,152  |    |                    |   | 246,866                 |   |   |   | 0.97 |   |   |   | 21,092,188 |   |   |   | 310,714 |   |   |   | 1.47 |   |   |   | 21,366,204 |   |   |   | 439,236 |   |   |   | 2.06 |   |
|   Now accounts                                         |   |                    | 29,304,494  |    |                    |   | 142,405                 |   |   |   | 0.49 |   |   |   | 17,607,727 |   |   |   | 127,066 |   |   |   | 0.72 |   |   |   | 19,258,479 |   |   |   | 131,634 |   |   |   | 0.68 |   |
|   Subordinated debt                                    |   |                    | —     |    |                    |   | —                 |   |   |   | — |   |   |   | 3,098,634 |   |   |   | 214,685 |   |   |   | 6.91 |   |   |   | 5,155,000 |   |   |   | 356,159 |   |   |   | 6.91 |   |
| Total interest-bearing liabilities                               |   |                    | 134,675,369 |    |                    |   | 1,365,209               |   |   |   | 1.01 |   |   |   | 123,408,485 |   |   |   | 2,343,618 |   |   |   | 1.90 |   |   |   | 123,959,696 |   |   |   | 3,461,617 |   |   |   | 2.79 |   |
|   Checking accounts                                    |   |                    | 65,241,462  |    |                    |   |                    |   |   |   |   |   |   |   | 63,545,525 |   |   |   |   |   |   |   |   |   |   |   | 63,596,060 |   |   |   |   |   |   |   |   |   |
| Total                                                            |   |                    | 199,916,831 |    |                    |   |                    |   |   |   |   |   |   |   | 186,954,010 |   |   |   |   |   |   |   |   |   |   |   | 187,555,756 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                |   |                    | 1,740,429   |    |                    |   |                    |   |   |   |   |   |   |   | 1,308,257 |   |   |   |   |   |   |   |   |   |   |   | 1,909,693 |   |   |   |   |   |   |   |   |   |
|   Total liabilities                                    |   |                    | 201,657,260 |    |                    |   |                    |   |   |   |   |   |   |   | 188,262,267 |   |   |   |   |   |   |   |   |   |   |   | 189,465,449 |   |   |   |   |   |   |   |   |   |
|  Equity                                                     |   |                    | 24,386,427  |    |                    |   |                    |   |   |   |   |   |   |   | 21,870,337 |   |   |   |   |   |   |   |   |   |   |   | 19,098,274 |   |   |   |   |   |   |   |   |   |
|   Total liabilities and equity                         |   | $                       | 226,043,687 |    |                    |   |                    |   |   |   |   |   |   | $ | 210,132,604 |   |   |   |   |   |   |   |   |   |   | $ | 208,563,723 |   |   |   |   |   |   |   |   |   |
| Net interest income/net interest                                 |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  rate spread                                                |   |                    |        |    |                    | $      | 9,282,979               |   |   |   | 3.88 |  % |   |   |   |   |   | $ | 8,671,676 |   |   |   | 3.63 |  % |   |   |   |   |   | $ | 8,816,736 |   |   |   | 3.54 |  % |
| Net interest earning assets/net                                  |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  interest margin                                            |   | $                       | 82,895,887  |    |                    |   |                    |   |   |   | 4.27 | % |   | $ | 75,618,973 |   |   |   |   |   |   |   | 4.36 | % |   | $ | 69,979,054 |   |   |   |   |   |   |   | 4.55 |  % |
| Ratio of interest-earning assets to interest-bearing liabilities |   |                    | 1.62        |  x |                    |   |                    |   |   |   |   |   |   |   | 1.61 |  x |   |   |   |   |   |   |   |   |   |   | 1.56 |  x |   |   |   |   |   |   |   |   |
|                                                             |   |                    |        |    |                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return On Average Assets:                                        |   |                    |        |    |                    |   |                    |   |   |   | 0.81 |  % |   |   |   |   |   |   |   |   |   |   | 0.92 |  % |   |   |   |   |   |   |   |   |   |   | 0.98 |  % |
| Return On Average Equity:                                        |   |                    |        |    |                    |   |                    |   |   |   | 7.47 |  % |   |   |   |   |   |   |   |   |   |   | 8.83 |  % |   |   |   |   |   |   |   |   |   |   | 10.72 |  % |
| Equity To Assets:                                                |   |                    |        |    |                    |   |                    |   |   |   | 10.33 |  % |   |   |   |   |   |   |   |   |   |   | 10.91 |  % |   |   |   |   |   |   |   |   |   |   | 10.25 |  % |

----

|                                      |   | Year Ended December 31, 2009 |     |   | Year Ended December 31, 2008 |   |       | Year Ended December 31, 2007 |   |
|-------------------------------------------|--------|------------------------------|----------|--------|------------------------------|--------|------------|------------------------------|--------|
|                                      |   | Compared to                  |     |   | Compared to                  |   |       | Compared to                  |   |
|                                      |   | December 31, 2008            |     |   | December 31, 2007            |   |       | December 31, 2006            |   |
|                                      |   | Increase/(Decrease)          |     |   | Increase/(Decrease)          |   |       | Increase/(Decrease)          |   |
|                                      |   | In Net Interest Income       |     |   | In Net Interest Income       |   |       | In Net Interest Income       |   |
|                                      |   | Due to                       |     |   |                         |   |       | Due to                       |   |   |   |   |   | Due to |   |   |   |   |
|                                      |   | Volume                       |     |   | Rate                         |   |       | Net                          |   |   | Volume |   |   | Rate |   |   | Net |   |   | Volume |   |   | Rate |   |   | Net |   |
|                                      |   |                         |     |   |                         |   |       |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                  |   |                         |     |   |                         |   |       |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Loans receivable              |   | $                            | 590,835  |   |                         | $      | (204,043   | )                            |   | $ | 386,792 |   |   | $ | 301,408 |   |   | $ | (1,202,965 | ) |   | $ | (901,557 | ) |   | $ | (862,149 | ) |   | $ | (142,918 | ) |   | $ | (1,005,067 | ) |
|   Other interest-earning assets |   |                         | 201,204  |   |                         |   | (405,644   | )                            |   |   | (204,440 | ) |   |   | (278,390 | ) |   |   | (478,454 | ) |   |   | (756,844 | ) |   |   | 90,772 |   |   |   | 15,899 |   |   |   | 106,671 |   |
|   Investment securities, afs    |   |                         | (71,293  | )      |                         |   | (478,165   | )                            |   |   | (549,458 | ) |   |   | 368,831 |   |   |   | 26,511 |   |   |   | 395,342 |   |   |   | (91,276 | ) |   |   | 194,073 |   |   |   | 102,797 |   |
|      Total       |   |                         | 720,746  |   |                         |   | (1,087,852 | )                            |   |   | (367,106 | ) |   |   | 391,850 |   |   |   | (1,654,909 | ) |   |   | (1,263,059 | ) |   |   | (862,653 | ) |   |   | 67,054 |   |   |   | (795,599 | ) |
|                                      |   |                         |     |   |                         |   |       |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Interest-bearing liabilities:       |   |                         |     |   |                         |   |       |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Savings accounts              |   |                         | 10,628   |   |                         |   | (36,494    | )                            |   |   | (25,866 | ) |   |   | 856 |   |   |   | (22,745 | ) |   |   | (21,889 | ) |   |   | (9,467 | ) |   |   | 21,954 |   |   |   | 12,487 |   |
|   Time accounts                 |   |                         | (76,867  | )      |                         |   | (612,482   | )                            |   |   | (689,349 | ) |   |   | 122,378 |   |   |   | (943,924 | ) |   |   | (821,546 | ) |   |   | (130,662 | ) |   |   | 265,586 |   |   |   | 134,924 |   |
|   Money market accounts         |   |                         | 63,136   |   |                         |   | (126,984   | )                            |   |   | (63,848 | ) |   |   | (5,645 | ) |   |   | (122,877 | ) |   |   | (128,522 | ) |   |   | 36,566 |   |   |   | 49,714 |   |   |   | 86,280 |   |
|   Now accounts                  |   |                         | 84,217   |   |                         |   | (68,878    | )                            |   |   | 15,339 |   |   |   | (11,225 | ) |   |   | 6,657 |   |   |   | (4,568 | ) |   |   | (11,250 | ) |   |   | 34,911 |   |   |   | 23,661 |   |
|   Short term borrowings         |   |                         | —  |   |                         |   | —    |                         |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (1,112 | ) |   |   | — |   |   |   | (1,112 | ) |
|   Subordinated debt             |   |                         | (214,685 | )      |                         |   | —    |                         |   |   | (214,685 | ) |   |   | (141,474 | ) |   |   | — |   |   |   | (141,474 | ) |   |   | — |   |   |   | — |   |   |   | — |   |
|      Total       |   |                         | (133,571 | )      |                         |   | (844,838   | )                            |   |   | (978,409 | ) |   |   | (35,110 | ) |   |   | (1,082,889 | ) |   |   | (1,117,999 | ) |   |   | (115,925 | ) |   |   | 372,165 |   |   |   | 256,240 |   |
| Net change in net interest income    |   | $                            | 854,317  |   |                         | $      | (243,014   | )                            |   | $ | 611,303 |   |   | $ | 426,959 |   |   | $ | (572,019 | ) |   | $ | (145,060 | ) |   | $ | (746,728 | ) |   | $ | (305,110 | ) |   | $ | (1,051,839 | ) |

----

|   | ● | Interest income of $10,648,188                     |
|--------|---------|----------------------------------------------------|
|   | ● | Reduced by interest expense of $1,365,209          |
|   | ● | Reduced by a provision for loan losses of $560,000 |
|   | ● | Increased by non-interest income of $2,418,857     |
|   | ● | Reduced by non-interest expense of $7,829,796      |
|   | ● | Reduced by income tax expense of $1,489,763        |

----

| ·   |   |  The interest rate floors on most of our loans slowed the decline in our average asset yields. |
|--------------------|--------|-----------------------------------------------------------------------------------------------------|

| ·   |   | Our efforts to increase our loan portfolio were successful, thereby increasing our highest yielding asset category. |
|--------------------|--------|---------------------------------------------------------------------------------------------------------------------|

| ·   |   | Our repayment of the relatively high cost subordinated debt, which was our highest cost funding source, in the second half of 2008. |
|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   |   | Our purchases of fixed-rate investment securities during 2008 prior to the most recent series of market interest rate declines that began in the fourth quarter of 2008, which allowed us to avoid a precipitous decline in the yield on that portfolio. |
|--------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | ● | $195,000 increase in FDIC and NYSBD assessments due to an increase in the FDIC assessment rate and the imposition of a special assessment to help replenish the FDIC insurance fund which has been substantially depleted by many recent bank failures; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ● | $160,251 increase in salaries and benefits due to additional staff and higher related benefit costs;                                                                                                                                                    |
|   | ● | $51,600 increase in professional fees primarily due the costs of hiring key employees and preparing for the initial full compliance with Section 404 of the Sarbanes-Oxley Act;                                                                         |
|   | ● | $36,054 increase in legal expense primarily due to increased collection costs; and                                                                                                                                                                      |
|   | ● | $34,138 increase in computer expenses primarily due to increased depreciation associated with the purchase and upgrade of software and fees associated with our disaster recovery program.                                                              |

----

| ·   |   | An $18,476,696 net increase in cash and cash equivalents as we elected to invest excess cash in overnight investments to facilitate redeployment when appropriate opportunities arise, and |
|--------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   |   | A $12,511,926 net increase in net loans receivable as a result of our efforts to increase the size of its loan portfolio, partially offset by |
|--------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   |   | A $6,376,184 net decrease in investment securities available for sale as we reduced purchases of fixed rate debt securities at a time when the available yields on those securities were very low. |
|--------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Contractual Obligations                                                                    |   | Payment due by Period |       |
|--------------------------------------------------------------------------------------------|--------|-----------------------|------------|
|                                                                                       |   |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                       |   | Less than             |       |   | One to three |   |   | Four to five |   |   | After |   |   | Total Amounts |   |
|                                                                                       |   | One Year              |       |   | years |   |   | years |   |   | five years |   |   | committed |   |
|                                                                                       |   |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Minimum annual rental  payments under  non-cancelable operating leases |   | $                     | 404,951    |   |   | $ | 834,055 |   |   | $ | 810,167 |   |   | $ | 1,406,153 |   |   | $ | 3,455,326 |   |
| Remaining contractual maturities of time deposits                                     |   |                  | 55,393,143 |   |   |   | 7,145,000 |   |   |   | 2,130,985 |   |   |   | — |   |   |   | 64,669,128 |   |
| Total contractual cash obligations                                                         |   | $                     | 55,798,094 |   |   | $ | 7,979,055 |   |   | $ | 2,941,152 |   |   | $ | 1,406,153 |   |   | $ | 68,124,454 |   |

|                   |   |                                      |       |   |         |   |      |         |   |   |       |   |   |          |    |   |   |   |       |
|------------------------|--------|-------------------------------------------|------------|--------|--------------|--------|-----------|--------------|--------|--------|------------|--------|--------|---------------|---------|--------|--------|--------|------------|
| Other commitments      |   | Amount of commitment Expiration by Period |       |
|                   |   |                                      |       |   |         |   |      |         |   |   |       |   |   |          |    |   |   |   |       |   |
|                   |   | Less than                                 |       |   | One to three |   |      | Four to five |   |   | After      |   |   | Total Amounts |    |
|                   |   | One Year                                  |       |   | years        |   |      | years        |   |   | five years |   |   | committed     |    |
|                   |   |                                      |       |   |         |   |      |         |   |   |       |   |   |          |    |   |   |   |       |   |
|  Loan commitments |   | $                                         | 19,071,707 |   |         | $      | 4,890,972 |         |   | $      | —    |   |   | $             | — |   |   | $      | 23,962,679 |   |

| Report of Independent Registered Public Accounting Firm                                              |   |   | F-1    |   |
|------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                 |   |   |   |   |
| Consolidated Statements of Financial Condition as of December 31, 2009 and 2008                      |   |   | F-2    |   |
|                                                                                                 |   |   |   |   |
| Consolidated Statements of Earnings for the Years Ended December 31, 2009 and 2008                   |   |   | F-3    |   |
|                                                                                                 |   |   |   |   |
| Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2009 and 2008 |   |   | F-4    |   |
|                                                                                                 |   |   |   |   |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008                 |   |   | F-5    |   |
|                                                                                                 |   |   |   |   |
| Notes to Consolidated Financial Statements                                                           |   |   | F-6    |   |

----

 Report of Independent Registered Public Accounting Firm

|   |  /s/ Crowe Horwath LLP |   |
|--------|-----------------------------|--------|

----

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

| DECEMBER 31, 2009 AND 2008 |
|----------------------------|

|                                                                                                                                                                                      |   | 2009   |        |   | 2008   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                                                                                                                                                                      |   |   |        |   |   |   |
| ASSETS                                                                                                                                                                                    |   |   |        |   |   |   |
| Cash and cash equivalents                                                                                                                                                                 |   | $      | 39,716,919  |   |   | $      | 21,240,223 |   |
| Investment securities, available for sale                                                                                                                                                 |   |   | 113,912,404 |   |   |   | 120,288,588 |   |
| Loans receivable (net of allowance for loan losses of $1,063,454 and $987,876, respectively)                                                                                              |   |   | 77,770,702  |   |   |   | 65,258,776 |   |
| Accrued interest receivable                                                                                                                                                               |   |   | 722,228     |   |   |   | 723,473 |   |
| Premises and equipment, net                                                                                                                                                               |   |   | 3,204,063   |   |   |   | 3,695,822 |   |
| Prepaid and other assets                                                                                                                                                                  |   |   | 1,673,556   |   |   |   | 1,450,846 |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| Total assets                                                                                                                                                                              |   | $      | 236,999,872 |   |   | $      | 212,657,728 |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                |   |   |        |   |   |   |   |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| LIABILITIES:                                                                                                                                                                              |   |   |        |   |   |   |   |   |
| Deposits                                                                                                                                                                                  |   |   |        |   |   |   |   |   |
|     Non-interest bearing                                                                                                                                              |   | $      | 70,688,777  |   |   | $      | 58,907,451 |   |
|     Interest bearing                                                                                                                                                  |   |   | 140,297,309 |   |   |   | 129,201,998 |   |
| Total deposits                                                                                                                                                                            |   |   | 210,986,086 |   |   |   | 188,109,449 |   |
| Accounts payable, accrued expenses and other liabilities                                                                                                                                  |   |   | 1,529,837   |   |   |   | 1,344,512 |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| Total liabilities                                                                                                                                                                         |   |   | 212,515,923 |   |   |   | 189,453,961 |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| Commitments and contigent liabilities (Note 12)                                                                                                                                           |   |   | —     |   |   |   | — |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                |   |   |        |   |   |   |   |   |
| Common stock ($.0001 par value, 3,000,000 shares authorized, 1,945,134 issued, 1,762,191 outstanding at December 31, 2009; 1,923,884 issued, 1,882,461 outstanding at December 31, 2008,) |   |   | 195    |   |   |   | 192  |   |
| Additional paid-in capital                                                                                                                                                                |   |   | 9,317,719   |   |   |   | 9,200,010 |   |
| Retained earnings                                                                                                                                                                         |   |   | 16,112,741  |   |   |   | 14,714,143 |   |
| Treasury stock, at cost (182,943 shares at December 31, 2009 and 41,423 shares at December 31, 2008)                                                                                      |   |   | (1,840,249  | )      |   |   | (395,891 | ) |
| Unearned Employee Stock Ownership Plan shares                                                                                                                                             |   |   | (732,672    | )      |   |   | (901,750 | ) |
| Accumulated other comprehensive gains, net of taxes of $1,371,416 and $488,735, respectively                                                                                         |   |   | 1,626,215   |   |   |   | 587,063 |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| Total stockholders’ equity                                                                                                                                                          |   |   | 24,483,949  |   |   |   | 23,203,767 |   |
|                                                                                                                                                                                      |   |   |        |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                                                                                                                          |   | $      | 236,999,872 |   |   | $      | 212,657,728 |   |

----

|   | CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 |
|--------|-----------------------------------------------------------------------------------------|

|                                                                                                                              |   | 2009   |            |   | 2008   |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------|--------|--------|--------|
|                                                                                                                              |   |   |            |   |   |   |
| INTEREST INCOME:                                                                                                                  |   |   |            |   |   |   |
|      Loans receivable                                                                                    |   | $      | 5,465,368       |   |   | $      | 5,078,576 |   |
|      Investment securities                                                                               |   |   | 5,149,770       |   |   |   | 5,699,228 |   |
|      Other interest income                                                                               |   |   | 33,050          |   |   |   | 237,490 |   |
|              Total interest income                               |   |   | 10,648,188      |   |   |   | 11,015,294 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
| INTEREST EXPENSE:                                                                                                                 |   |   |            |   |   |   |   |   |
|      Deposits                                                                                            |   |   | 1,365,209       |   |   |   | 2,128,933 |   |
|      Subordinated Debt                                                                                   |   |   | —         |   |   |   | 214,685 |   |
|              Total interest expense                              |   |   | 1,365,209       |   |   |   | 2,343,618 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
|              Net interest income                                 |   |   | 9,282,979       |   |   |   | 8,671,676 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
| PROVISION FOR LOAN LOSSES                                                                                                         |   |   | 560,000         |   |   |   | 285,000 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
|              Net interest income after provision for loan losses |   |   | 8,722,979  |   |   |   | 8,386,676  |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
| NON-INTEREST INCOME:                                                                                                              |   |   |            |   |   |   |   |   |
|      Deposit service fees                                                                                |   |   | 2,137,676       |   |   |   | 2,120,769 |   |
|      Other income                                                                                        |   |   | 281,181         |   |   |   | 280,146 |   |
|              Total non-interest income                           |   |   | 2,418,857       |   |   |   | 2,400,915 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
| NON-INTEREST EXPENSES:                                                                                                            |   |   |            |   |   |   |   |   |
|      Salaries and employee benefits                                                                      |   |   | 3,675,149       |   |   |   | 3,514,898 |   |
|      Occupancy and equipment                                                                             |   |   | 1,482,300       |   |   |   | 1,469,898 |   |
|      Data processing service fees                                                                        |   |   | 279,152         |   |   |   | 245,014 |   |
|      Legal fees                                                                                          |   |   | 225,172         |   |   |   | 189,118 |   |
|      Professional fees                                                                                   |   |   | 308,100         |   |   |   | 256,500 |   |
|      Director fees                                                                                       |   |   | 218,225         |   |   |   | 217,450 |   |
|      FDIC and NYSBD assessments                                                                          |   |   | 392,000         |   |   |   | 197,000 |   |
|      Supplies and service                                                                                |   |   | 351,015         |   |   |   | 324,546 |   |
|      Checkbook charges                                                                                   |   |   | 147,048         |   |   |   | 124,196 |   |
|      Other                                                                                               |   |   | 751,635         |   |   |   | 800,974 |   |
|              Total non-interest expenses                         |   |   | 7,829,796       |   |   |   | 7,339,594 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES                                                                                                        |   |   | 3,312,040       |   |   |   | 3,447,997 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
| PROVISION/(BENEFIT) FOR  INCOME TAXES:                                                                                  |   |   |            |   |   |   |   |   |
|      Current                                                                                             |   |   | 1,373,021       |   |   |   | 1,870,198 |   |
|      Deferred                                                                                            |   |   | 116,742         |   |   |   | (353,945 | ) |
|                                                                                                                              |   |   |            |   |   |   |   |   |
|              Total income taxes                                  |   |   | 1,489,763       |   |   |   | 1,516,253 |   |
|                                                                                                                              |   |   |            |   |   |   |   |   |
| NET INCOME                                                                                                                        |   | $      | 1,822,277       |   |   | $      | 1,931,744 |   |
| Earnings per share:                                                                                                               |   |   |            |   |   |   |   |   |
| Basic                                                                                                                             |   | $      | 1.02            |   |   | $      | 1.04 |   |
| Diluted                                                                                                                           |   | $      | 1.01            |   |   | $      | 1.03 |   |
| Comprehensive income                                                                                                              |   | $      | 2,861,429       |   |   | $      | 2,897,879 |   |

----

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME FOR

| THE YEARS ENDED DECEMBER 31, 2009 AND 2008 |
|--------------------------------------------|

|                                                                                |   | Number of |      |   |   | Additional |   |     |      | Treasury |   | Unearned   |   |   | Other         |   |   | Total               |   |
|-------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|------------|--------|----------|-----------|----------|--------|------------|--------|--------|---------------|--------|--------|---------------------|--------|
|                                                                                |   | Common    |      | Common |   | Paid-in    |   | Retained |      | Stock,   |   | ESOP       |   |   | Comprehensive |   |   | Stockholders’ |   |
|                                                                                |   | Shares    |      | Stock  |   | Capital    |   | Earnings |      | at cost  |   | Shares     |   |   | Gain / (Loss) |   |   | Equity              |   |
|                                                                                |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |
|                                                                                |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |
| Balance at December 31, 2007                                                        |   |      | 1,900,509 |   | $      | 190        |   | $        | 9,107,119 |     | $      | 13,226,395 |   | $      | —       |   | $      | (1,070,827          | )      |   | $ | (379,072 | ) |   | $ | 20,883,805 |   |
| Exercise of stock options, including tax benefit                               |   |      | 23,375    |   |   | 2          |   |     | 164,857   |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | 164,859 |   |
| Stock-based compensation                                                            |   |      |      |   |   |       |   |     | 1,278     |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | 1,278 |   |
| Amortization of earned portion of ESOP common stock                                 |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   | 169,077             |   |   |   |   |   |   |   | 169,077 |   |
| Amortization of cost over  fair value  - ESOP                   |   |      |      |   |   |       |   |     | (73,244   | )        |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | (73,244 | ) |
|                                                                                |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
| Cash dividends declared ($0.24 per share)                                      |   |      |      |   |   |       |   |     |      |     |   | (443,996   | )      |   |          |   |   |                |   |   |   |   |   |   |   | (443,996 | ) |
| Purchase of treasury stock, at cost                                                 |   |      | (41,423   | )      |   |       |   |     |      |     |   |       |   |   | (395,891      | )      |   |                |   |   |   |   |   |   |   | (395,891 | ) |
| Comprehensive income:                                                               |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
|   Net income                                                              |   |      |      |   |   |       |   |     |      |     |   | 1,931,744  |   |   |          |   |   |                |   |   |   |   |   |   |   | 1,931,744 |   |
|   Other comprehensive income, net:                                        |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
| Change in unrealized loss on securities available for sale, net of tax effects |   |      | —   |   |   | —    |   |     | —   |     |   | —    |   |   | —       |   |   | —             |   |   |   | 966,135 |   |   |   | 966,135 |   |
| Total comprehensive income                                                          |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | 2,897,879 |   |
|                                                                                |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2008                                                        |   |      | 1,882,461 |   | $      | 192        |   | $        | 9,200,010 |     | $      | 14,714,143 |   | $      | (395,891      | )      | $      | (901,750            | )      |   | $ | 587,063 |   |   | $ | 23,203,767 |   |
|                                                                                |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
|                                                                                |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
| Exercise of stock options, including tax benefit                               |   |      | 21,250    |   |   | 3          |   |     | 118,624   |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | 118,627 |   |
| Stock-based compensation                                                            |   |      |      |   |   |       |   |     | 1,278     |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | 1,278 |   |
| Amortization of earned portion of ESOP common stock                                 |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   | 169,078             |   |   |   |   |   |   |   | 169,078 |   |
| Amortization of cost over fair value  - ESOP                         |   |      |      |   |   |       |   |     | (2,193    | )        |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | (2,193 | ) |
| Cash dividends declared  ($0.24 per share)                                |   |      |      |   |   |       |   |     |      |     |   | (423,679   | )      |   |          |   |   |                |   |   |   |   |   |   |   | (423,679 | ) |
| Purchase of treasury stock, at cost                                                 |   |      | (141,520  | )      |   |       |   |     |      |     |   |       |   |   | (1,444,358    | )      |   |                |   |   |   |   |   |   |   | (1,444,358 | ) |
| Comprehensive income:                                                               |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
|   Net income                                                              |   |      |      |   |   |       |   |     |      |     |   | 1,822,277  |   |   |          |   |   |                |   |   |   |   |   |   |   | 1,822,277 |   |
|   Other comprehensive income, net:                                        |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
| Change in unrealized gain on securities available for sale, net of tax effects |   |      | —   |   |   | —    |   |     | —   |     |   | —    |   |   | —       |   |   | —             |   |   |   | 1,039,152 |   |   |   | 1,039,152 |   |
| Total comprehensive income                                                          |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   | 2,861,429 |   |
|                                                                                |   |      |      |   |   |       |   |     |      |     |   |       |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2009                                                        |   |      | 1,762,191 |   | $      | 195        |   | $        | 9,317,719 |     | $      | 16,112,741 |   | $      | (1,840,249    | )      | $      | (732,672            | )      |   | $ | 1,626,215 |   |   | $ | 24,483,949 |   |

----

| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 and 2008 |
|--------------------------------------------------------------------------------------|

|                                                                                                       |   | 2009   |        |   | 2008   |   |
|------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                                      |   |   |        |   |   |   |
|    Net income                                                                               |   | $      | 1,822,277   |   |   | $      | 1,931,744 |   |
|    Adjustments to reconcile net income to net cash provided by operating activities:             |   |   |        |   |   |   |   |   |
|        Depreciation and amortization                                    |   |   | 665,422     |   |   |   | 630,692 |   |
|        Accretion of discount, net amortization of premium               |   |   | (15,186     | )      |   |   | (222,974 | ) |
|        ESOP compensation expense                                        |   |   | 94,370      |   |   |   | 95,833 |   |
|        Stock-based compensation expense                                 |   |   | 1,278       |   |   |   | 1,278 |   |
|        Provision for loan losses                                        |   |   | 560,000     |   |   |   | 285,000 |   |
|    Changes in operating assets and liabilities:                                             |   |   |        |   |   |   |   |   |
|       (Increase)/decrease in prepaid and other assets                        |   |   | (748,549    | )      |   |   | 189,424 |   |
|       Decrease in accrued interest receivable                                |   |   | 1,245       |   |   |   | 75,776 |   |
|       Decrease/(increase) in deferred income taxes                           |   |   | 116,742     |   |   |   | (353,945 | ) |
|       Decrease in accrued expenses, income tax payable and other liabilities |   |   | (215,744    | )      |   |   | (75,809 | ) |
|           Net cash provided by operating activities      |   |   | 2,281,855   |   |   |   | 2,557,019 |   |
|                                                                                                       |   |   |        |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                                      |   |   |        |   |   |   |   |   |
|    Net increase in loans receivable                                                         |   |   | (12,953,701 | )      |   |   | (3,960,909 | ) |
|  Proceeds from repayments and calls of investment securities, available for sale                      |   |   | 37,675,927  |   |   |   | 25,554,513 |   |
|    Purchase of investment securities, available for sale                                    |   |   | (29,480,949 | )      |   |   | (26,157,422 | ) |
|    Purchases of premises and equipment, net                                                 |   |   | (173,663    | )      |   |   | (394,835 | ) |
|           Net used in investing activities               |   |   | (4,932,386  | )      |   |   | (4,958,653 | ) |
|                                                                                                       |   |   |        |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                                      |   |   |        |   |   |   |   |   |
|    Net increase in deposits                                                                 |   |   | 22,876,637  |   |   |   | 11,775,006 |   |
|    Payment of subordinated debt                                                             |   |   | —     |   |   |   | (5,155,000 | ) |
|    Cash dividends paid                                                                      |   |   | (423,679    | )      |   |   | (443,996 | ) |
|    Exercise of stock options                                                                |   |   | 118,627     |   |   |   | 164,859 |   |
|    Purchase of treasury stock, at cost                                                      |   |   | (1,444,358  | )      |   |   | (395,891 | ) |
|           Net cash provided by financing activities      |   |   | 21,127,227  |   |   |   | 5,944,978 |   |
|                                                                                                       |   |   |        |   |   |   |   |   |
| NET INCREASE IN CASH AND CASH EQUIVALENTS                                                                  |   |   | 18,476,696  |   |   |   | 3,543,344 |   |
|                                                                                                       |   |   |        |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                               |   |   | 21,240,223  |   |   |   | 17,696,879 |   |
|                                                                                                       |   |   |        |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, END OF YEAR                                                                     |   | $      | 39,716,919  |   |   | $      | 21,240,223 |   |
|                                                                                                       |   |   |        |   |   |   |   |   |
|                                                                                                       |   |   |        |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                          |   |   |        |   |   |   |   |   |
|    Cash paid during the period for:                                                         |   |   |        |   |   |   |   |   |
|      Interest                                                                     |   | $      | 1,486,955   |   |   | $      | 2,594,736 |   |
|      Income taxes                                                                 |   | $      | 1,303,405   |   |   | $      | 1,697,259 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009 and 2008 |
|-------------------------------------------------------------------------------------------|

----

----

----

| Reconciliation of EPS                       |   |   |      |   |     |   |      |      |   |   |   |   |   |     |      |   |      |   |
|---------------------------------------------|--------|--------|-----------|--------|----------|--------|-----------|-----------|--------|--------|--------|--------|--------|----------|-----------|--------|-----------|--------|
|                                        |   | 2009   |      |   | 2008     |   |
|                                        |   |   |      |   | Weighted |   |      |      |   |   |   |   |   | Weighted |      |   |      |   |
|                                        |   | Net    |      |   | Average  |   |      | Per Share |   |   | Net    |   |   | Average  |      |   | Per Share |   |
|                                        |   | Income |      |   | Shares   |   |      | Amount    |   |   | Income |   |   | Shares   |      |   | Amount    |   |
|                                        |   |   |      |   |     |   |      |      |   |   |   |   |   |     |      |   |      |   |
| Basic earnings per common share             |   |   |      |   |     |   |      |      |   |   |   |   |   |     |      |   |      |   |
| Net income available to common stockholders |   | $      | 1,822,277 |   |     |   | 1,791,756 |      |   | $      | 1.02   |   |   | $        | 1,931,744 |   |      |   | 1,854,339 |   |   | $ | 1.04 |   |
|                                        |   |   |      |   |     |   |      |      |   |   |   |   |   |     |      |   |      |   |   |   |   |   |   |   |
| Effect of dilutive shares                   |   |   |      |   |     |   |      |      |   |   |   |   |   |     |      |   |      |   |   |   |   |   |   |   |
| Weighted average shares, if converted       |   |   |      |   |     |   | 17,782    |      |   |   |   |   |   |     |      |   |      |   | 27,443 |   |   |   |   |   |
|                                        |   |   |      |   |     |   |      |      |   |   |   |   |   |     |      |   |      |   |   |   |   |   |   |   |
| Diluted earnings per common share           |   |   |      |   |     |   |      |      |   |   |   |   |   |     |      |   |      |   |   |   |   |   |   |   |
| Net income available to common stockholders |   | $      | 1,822,277 |   |     |   | 1,809,538 |      |   | $      | 1.01   |   |   | $        | 1,931,744 |   |      |   | 1,881,782 |   |   | $ | 1.03 |   |

----

----

----

|                                |   | December 31, 2009 |        |
|-------------------------------------|--------|-------------------|-------------|
|                                |   | Amortized         |        |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                |   | Cost              |        |   | Gains |   |   | Losses |   |   | Value |   |
|                                |   |              |        |   |   |   |   |   |   |   |   |   |
| FNMA MBS - Residential              |   | $                 | 4,855,213   |   |   | $ | 185,607 |   |   | $ | — |   |   | $ | 5,040,820 |   |
| FHLMC MBS - Residential             |   |              | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |
| GNMA MBS - Residential              |   |              | 1,265,428   |   |   |   | 55,812 |   |   |   | — |   |   |   | 1,321,240 |   |
| Whole Loan MBS - Residential        |   |              | 1,860,603   |   |   |   | 15,135 |   |   |   | (18,845 | ) |   |   | 1,856,893 |   |
| Collateralized mortgage obligations |   |              | 102,933,529 |   |   |   | 3,085,224 |   |   |   | (325,302 | ) |   |   | 105,693,451 |   |
|                                |   | $                 | 110,914,773 |   |   | $ | 3,341,778 |   |   | $ | (344,147 | ) |   | $ | 113,912,404 |   |

|                                |   | December 31, 2008 |        |
|-------------------------------------|--------|-------------------|-------------|
|                                |   | Amortized         |        |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                |   | Cost              |        |   | Gains |   |   | Losses |   |   | Value |   |
|                                |   |              |        |   |   |   |   |   |   |   |   |   |
| FNMA MBS - Residential              |   | $                 | 6,646,322   |   |   | $ | 82,351 |   |   | $ | (38,079 | ) |   | $ | 6,690,594 |   |
| FHLMC MBS - Residential             |   |              | 37,410      |   |   |   | 232 |   |   |   | — |   |   |   | 37,642 |   |
| GNMA MBS - Residential              |   |              | 1,576,764   |   |   |   | 56,026 |   |   |   | — |   |   |   | 1,632,790 |   |
| Whole Loan MBS - Residential        |   |              | 2,620,965   |   |   |   | — |   |   |   | (61,928 | ) |   |   | 2,559,037 |   |
| Collateralized mortgage obligations |   |              | 108,331,329 |   |   |   | 1,477,051 |   |   |   | (439,855 | ) |   |   | 109,368,525 |   |
|                                |   | $                 | 119,212,790 |   |   | $ | 1,615,660 |   |   | $ | (539,862 | ) |   | $ | 120,288,588 |   |

|                                            |   |              |        |   |      |   |
|-------------------------------------------------|--------|-------------------|-------------|--------|-----------|--------|
|                                            |   | December 31, 2009 |        |
| Securities, Available for SaleExpected Maturity |   | AmortizedCost     |        |   | FairValue |   |
|                                            |   |              |        |   |      |   |   |   |
| Less than one year                              |   | $                 | —     |   |      | $      | — |   |
| Due after one year through                      |   |              | 3,332,133   |   |      |   | 3,436,517 |   |
| five years                                      |   |              |        |   |      |   |   |   |
| Due after five years through                    |   |              | 42,339,497  |   |      |   | 43,961,503 |   |
| ten years                                       |   |              |        |   |      |   |   |   |
| Due after ten years                             |   |              | 65,243,143  |   |      |   | 66,514,384 |   |
|                                            |   | $                 | 110,914,773 |   |      | $      | 113,912,404 |   |

----

| December 31, 2009                   |   | Less than 12 months |       |   | More than 12 months |   |     | Total     |   |
|-------------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|-----------|--------|
|                                |   | FairValue           |       |   | UnrealizedLoss      |   |     | FairValue |   |   | UnrealizedLoss |   |   | FairValue |   |   | UnrealizedLoss |   |
| FHLMC MBS                           |   | $                   | —    |   |                | $      | —  |      |   | $ | — |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| FNMA MBS                            |   |                | —    |   |                |   | —  |      |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| GNMA MBS                            |   |                | —    |   |                |   | —  |      |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Whole Loan MBS                      |   |                | —    |   |                |   | —  |      |   |   | 433,666 |   |   |   | (18,845 | ) |   |   | 433,666 |   |   |   | (18,845 | ) |
| Collateralized mortgage obligations |   |                | 10,036,242 |   |                |   | (280,961 | )         |   |   | 1,750,950 |   |   |   | (44,341 | ) |   |   | 11,787,192 |   |   |   | (325,302 | ) |
|                                |   | $                   | 10,036,242 |   |                | $      | (280,961 | )         |   | $ | 2,184,616 |   |   | $ | (63,186 | ) |   | $ | 12,220,858 |   |   | $ | (344,147 | ) |

| December 31, 2008                   |   | Less than 12 months |       |   | More than 12 months |   |     | Total     |   |
|-------------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|-----------|--------|
|                                |   | FairValue           |       |   | UnrealizedLoss      |   |     | FairValue |   |   | UnrealizedLoss |   |   | FairValue |   |   | UnrealizedLoss |   |
| FHLMC MBS                           |   | $                   | —    |   |                | $      | —  |      |   | $ | — |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| FNMA MBS                            |   |                | 3,674,817  |   |                |   | (34,814  | )         |   |   | 251,470 |   |   |   | (3,265 | ) |   |   | 3,926,287 |   |   |   | (38,079 | ) |
| GNMA MBS                            |   |                | —    |   |                |   | —  |      |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Whole Loan MBS                      |   |                | 1,451,015  |   |                |   | (54,787  | )         |   |   | 1,108,022 |   |   |   | (7,141 | ) |   |   | 2,559,037 |   |   |   | (61,928 | ) |
| Collateralized mortgage obligations |   |                | 13,662,143 |   |                |   | (76,957  | )         |   |   | 8,808,164 |   |   |   | (362,898 | ) |   |   | 22,470,307 |   |   |   | (439,855 | ) |
|                                |   | $                   | 18,787,975 |   |                | $      | (166,558 | )         |   | $ | 10,167,656 |   |   | $ | (373,304 | ) |   | $ | 28,955,631 |   |   | $ | (539,862 | ) |

----

|                                                                                     |   | 2009   |       |   | 2008   |   |
|------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                                                     |   |   |       |   |   |   |
| Commercial loans (principally variable rate):                                            |   |   |       |   |   |   |
|   Secured                                                                      |   | $      | 1,138,308  |   |   | $      | 1,177,796 |   |
|   Unsecured                                                                    |   |   | 10,966,874 |   |   |   | 9,558,296 |   |
|     Total commercial loans                                           |   |   | 12,105,182 |   |   |   | 10,736,092 |   |
|                                                                                     |   |   |       |   |   |   |   |   |
|                                                                                     |   |   |       |   |   |   |   |   |
| Real estate loans:                                                                       |   |   |       |   |   |   |   |   |
|   Commercial                                                                   |   |   | 48,767,729 |   |   |   | 39,918,879 |   |
|   One-to-four family                                                           |   |   | 2,914,956  |   |   |   | 2,548,159 |   |
|     Total real estate loans                                          |   |   | 51,682,685 |   |   |   | 42,467,038 |   |
|                                                                                     |   |   |       |   |   |   |   |   |
|                                                                                     |   |   |       |   |   |   |   |   |
| Construction loans (net of undisbursed funds of $3,168,000 and $5,270,500, respectively) |   |   | 13,258,000 |   |   |   | 11,896,432 |   |
|                                                                                     |   |   |       |   |   |   |   |   |
|                                                                                     |   |   |       |   |   |   |   |   |
| Consumer loans                                                                           |   |   | 532,498    |   |   |   | 599,293 |   |
| Other loans                                                                              |   |   | 1,455,224  |   |   |   | 757,481 |   |
|                                                                                     |   |   | 1,987,722  |   |   |   | 1,356,774 |   |
|                                                                                     |   |   |       |   |   |   |   |   |
| Total loans receivable                                                                   |   |   | 79,033,589 |   |   |   | 66,456,336 |   |
|                                                                                     |   |   |       |   |   |   |   |   |
|                                                                                     |   |   |       |   |   |   |   |   |
| Less:                                                                                    |   |   |       |   |   |   |   |   |
| Unearned loans fees, net                                                                 |   |   | (199,433   | )      |   |   | (209,684 | ) |
| Allowance for loan losses                                                                |   |   | (1,063,454 | )      |   |   | (987,876 | ) |
|                                                                                     |   |   |       |   |   |   |   |   |
| Total                                                                                    |   | $      | 77,770,702 |   |   | $      | 65,258,776 |   |

|              |   | 2009   |      |   | 2008   |   |
|-------------------|--------|--------|-----------|--------|--------|--------|
|              |   |   |      |   |   |   |
| Beginning balance |   | $      | 987,876   |   |   | $      | 927,161 |   |
| Charge-offs       |   |   | (556,639  | )      |   |   | (494,788 | ) |
| Recoveries        |   |   | 72,217    |   |   |   | 270,503 |   |
| Provision         |   |   | 560,000   |   |   |   | 285,000 |   |
|              |   |   |      |   |   |   |   |   |
| Ending balance    |   | $      | 1,063,454 |   |   | $      | 987,876 |   |

|                                   |   | 2009   |      |   | 2008   |   |
|----------------------------------------|--------|--------|-----------|--------|--------|--------|
| Nonaccrual loans:                      |   |   |      |   |   |   |
|   Unsecured commercial loans |   | $      | 41,037    |   |   | $      | 345,221 |   |
|   Commercial real estate     |   |   | 1,176,114 |   |   |   | 1,453,846 |   |
|   Construction               |   |   | 480,000   |   |   |   | 480,000 |   |
|                                   |   |   |      |   |   |   |   |   |
|  Total nonaccrual loans           |   | $      | 1,697,151 |   |   | $      | 2,279,067 |   |

|                                                                                                                                        |   |   |    |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                                                                                        |   | 2009   |    |   | 2008   |   |
|                                                                                                                                   |   |   |    |   |   |   |
| Interest income that would have been recorded during the year on nonaccrual loans outstanding at year-end in accordance with original terms |   | $      | 108,719 |   |   | $      | 114,464 |   |

----

|                                                               |   | 2009   |      |   | 2008   |   |
|--------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                               |   |   |      |   |   |   |
| Year-end loans with no allocated allowance for loan losses:        |   |   |      |   |   |   |
|        Construction             |   | $      | 480,000   |   |   | $      | — |   |
|        Commercial real estate   |   |   | 820,469   |   |   |   | — |   |
| Year-end loans with allocated allowance for loan losses:           |   |   |      |   |   |   |   |   |
|        Commercial and financial |   |   | 41,037    |   |   |   | 316,775 |   |
|        Commercial real estate   |   |   | —   |   |   |   | 145,241 |   |
|                                                               |   | $      | 1,341,506 |   |   | $      | 462,016 |   |
|                                                               |   |   |      |   |   |   |   |   |
| Amount of the allowance for loan losses allocated:                 |   |   |      |   |   |   |   |   |
|        Commercial and financial |   | $      | 8,207     |   |   | $      | 63,355 |   |
|        Commercial real estate   |   |   | —   |   |   |   | 60,241 |   |
|                                                               |   | $      | 8,207     |   |   | $      | 123,596 |   |

|                                                                                                               |   | 2009   |      |   | 2008   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                                                                               |   |   |      |   |   |   |
| Average of individually impaired loans during year                                                                 |   | $      | 1,371,850 |   |   | $      | 462,016 |   |
|                                                                                                               |   |   |      |   |   |   |   |   |
| Interest income recognized during time period that loans were impaired, using cash-basis method of accounting |   | $      | —   |   |   | $      | — |   |

|                                      |   | 2009   |    |   | 2008   |   |
|-------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                      |   |   |    |   |   |   |
| Loans receivable                          |   | $      | 313,203 |   |   | $      | 253,535 |   |
| Investment securities, available for sale |   |   | 409,025 |   |   |   | 469,938 |   |
|                                      |   |   |    |   |   |   |   |   |
| Total                                     |   | $      | 722,228 |   |   | $      | 723,473 |   |

----

|                                           |   | 2009   |       |   | 2008   |   |
|------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                           |   |   |       |   |   |   |
| Leasehold improvements                         |   | $      | 3,823,772  |   |   | $      | 4,238,498 |   |
| Computer equipment and software                |   |   | 376,178    |   |   |   | 342,290 |   |
| Furniture, fixtures and equipment              |   |   | 1,092,349  |   |   |   | 1,308,825 |   |
| Other                                          |   |   | 52,697     |   |   |   | 52,697 |   |
|                                           |   |   | 5,344,996  |   |   |   | 5,942,310 |   |
|                                           |   |   |       |   |   |   |   |   |
| Less accumulated depreciation and amortization |   |   | (2,140,933 | )      |   |   | (2,246,488 | ) |
|                                           |   |   |       |   |   |   |   |   |
| Total                                          |   | $      | 3,204,063  |   |   | $      | 3,695,822 |   |

| Year Ending  |   |   |      |
|--------------|--------|--------|-----------|
| December 31, |   | Amount |      |
|         |   |   |      |
| 2010         |   | $      | 404,951   |   |
| 2011         |   |   | 413,067   |   |
| 2012         |   |   | 420,988   |   |
| 2013         |   |   | 425,980   |   |
| 2014         |   |   | 384,187   |   |
| Thereafter   |   |   | 1,406,153 |   |
|         |   |   |      |   |
| Total        |   | $      | 3,455,326 |   |

|                                    |   | 2009   |      |   | 2008   |   |
|-----------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                    |   |   |      |   |   |   |
| Accounts receivable and other assets    |   | $      | 61,286    |   |   | $      | 646,276 |   |
| Security deposit receivable             |   |   | 11,200    |   |   |   | 11,200 |   |
| Prepaid assets                          |   |   | 1,189,203 |   |   |   | 278,875 |   |
| Equity securities, primarily FHLB stock |   |   | 345,400   |   |   |   | 320,400 |   |
| Income tax receivable                   |   |   | 9,422     |   |   |   | 157,978 |   |
| Late charges receivable                 |   |   | 57,045    |   |   |   | 36,117 |   |
|                                    |   |   |      |   |   |   |   |   |
|                                    |   | $      | 1,673,556 |   |   | $      | 1,450,846 |   |

----

|                       |   | 2009   |        |   | 2008    |   |
|----------------------------|--------|--------|-------------|--------|---------|--------|
|                       |   |   |        |   |    |   |   | Weighted |   |   |   |   |   |   |   |   | Weighted |   |
|                       |   |   |        |   |    |   |   | Average |   |   |   |   |   |   |   |   | Average |   |
|                       |   | Amount |        |   | Percent |   |   | Stated Rate |   |   | Amount |   |   | Percent |   |   | Stated Rate |   |
|                       |   |   |        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking                   |   | $      | 70,372,448  |   |    |   | 33.36 | % |   |   | — | % |   | $ | 58,598,579 |   |   |   | 31.15 | % |   |   | — | % |
| Variable-rate money market |   |   | 28,124,315  |   |    |   | 13.33 |   |   |   | 0.68 |   |   |   | 22,829,789 |   |   |   | 12.14 |   |   |   | 0.71 |   |
| Statement savings          |   |   | 15,001,936  |   |    |   | 7.11 |   |   |   | 0.34 |   |   |   | 12,412,561 |   |   |   | 6.60 |   |   |   | 0.55 |   |
| Interest-bearing checking  |   |   | 32,501,930  |   |    |   | 15.40 |   |   |   | 0.23 |   |   |   | 17,636,154 |   |   |   | 9.38 |   |   |   | 0.30 |   |
|                       |   |   |        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   |   | 146,000,629 |   |    |   | 69.20 |   |   |   | 0.22 |   |   |   | 111,477,083 |   |   |   | 59.27 |   |   |   | 0.25 |   |
|                       |   |   |        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Time deposits:             |   |   |        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less than six months       |   |   | 17,999,752  |   |    |   | 8.53 |   |   |   | 0.91 |   |   |   | 32,788,378 |   |   |   | 17.43 |   |   |   | 1.69 |   |
| Six months to one year     |   |   | 41,590,066  |   |    |   | 19.71 |   |   |   | 1.49 |   |   |   | 39,017,479 |   |   |   | 20.74 |   |   |   | 2.50 |   |
| More than one year         |   |   | 5,079,310   |   |    |   | 2.41 |   |   |   | 1.84 |   |   |   | 4,517,637 |   |   |   | 2.40 |   |   |   | 3.45 |   |
|                       |   |   |        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   |   | 64,669,128  |   |    |   | 30.65 |   |   |   | 1.36 |   |   |   | 76,323,494 |   |   |   | 40.57 |   |   |   | 2.21 |   |
|                       |   |   |        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other deposits             |   |   | 316,329     |   |    |   | 0.15 |   |   |   | — |   |   |   | 308,872 |   |   |   | 0.16 |   |   |   | — |   |
|                       |   |   |        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                      |   | $      | 210,986,086 |   |    |   | 100.00 | % |   |   | 0.57 | % |   | $ | 188,109,449 |   |   |   | 100.00 | % |   |   | 0.54 | % |

|                           |   | Amount |       |   | Percent |   |
|--------------------------------|--------|--------|------------|--------|---------|--------|
|                           |   |   |       |   |    |   |
| Within six months              |   | $      | 51,945,231 |   |    |   | 80.32 | % |
| Six months to one year         |   |   | 3,447,912  |   |    |   | 5.33 |   |
| Over one year to two years     |   |   | 6,397,000  |   |    |   | 9.89 |   |
| Over two years to three years  |   |   | 748,000    |   |    |   | 1.16 |   |
| Over three years to four years |   |   | 607,000    |   |    |   | 0.94 |   |
| Over four years to five years  |   |   | 1,523,985  |   |    |   | 2.36 |   |
|                           |   |   |       |   |    |   |   |   |
| Total                          |   | $      | 64,669,128 |   |    |   | 100.00 | % |

----

|                                    |   | 2009   |         |   | 2008   |   |
|-----------------------------------------|--------|--------|--------------|--------|--------|--------|
|                                    |   |   |         |   |   |   |
| Current:                                |   |   |         |   |   |   |
| Federal                                 |   | $      | 877,307      |   |   | $      | 1,168,969 |   |
| State and local                         |   |   | 495,714      |   |   |   | 701,229 |   |
|                                    |   |   | 1,373,021    |   |   |   | 1,870,198 |   |
|                                    |   |   |         |   |   |   |   |   |
| Deferred:                               |   |   |         |   |   |   |   |   |
|     Federal         |   |   | 72,698  |   |   |   | (220,421  | )  |
|     State and local |   |   | 44,044       |   |   |   | (133,524 | ) |
|                                    |   |   | 116,742      |   |   |   | (353,945 | ) |
|                                    |   | $      | 1,489,763    |   |   | $      | 1,516,253 |   |

|   |
|--------|

|                                            |   | 2009   |       |   | 2008   |   |
|-------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                            |   |   |       |   |   |   |
| Deferred tax assets:                            |   |   |       |   |   |   |
| Deferred loan fees                              |   | $      | 89,991     |   |   | $      | 123,680 |   |
| Excess book allowance for loan losses           |   |   | 328,927    |   |   |   | 323,000 |   |
| Other                                           |   |   | 478,914    |   |   |   | 567,894 |   |
|                                            |   |   |       |   |   |   |   |   |
|                                            |   |   | 897,832    |   |   |   | 1,014,574 |   |
| Deferred tax liabilities:                       |   |   |       |   |   |   |   |   |
| Unrealized (gain)/loss on investment securities |   |   | (1,371,416 | )      |   |   | (488,735 | ) |
|                                            |   |   |       |   |   |   |   |   |
| Net deferred tax asset (liability):             |   | $      | (473,584   | )      |   | $      | 525,839 |   |

----

|                                                          |   | 2009   |      |   | 2008   |   |
|---------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                          |   |   |      |   |   |   |   |   |   |   |   |   |
| Federal income tax provision at statutory rates          |   | $      | 1,126,094 |   |   |   | 34.0 | % |   | $ | 1,172,319 |   |   |   | 34.0 | % |
| State and local taxes, net of Federal income tax benefit |   |   | 356,240   |   |   |   | 11.0 |   |   |   | 383,527 |   |   |   | 11.1 |   |
| Other                                                         |   |   | 7,429     |   |   |   | 0.0 |   |   |   | (39,593 | ) |   |   | (1.1 | ) |
|                                                          |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   | $      | 1,489,763 |   |   |   | 45.0 | % |   | $ | 1,516,253 |   |   |   | 44.0 | % |

----

|                                     |   |   |       |              |   |              |   |        |   |                    |   |   |   | To be well-capitalized |
|------------------------------------------|--------|--------|------------|-------------------|--------|-------------------|--------|-------------|--------|-------------------------|--------|--------|--------|------------------------|
|                                     |   |   |       |              |   |              |   | For capital |   | under prompt corrective |
|                                     |   | Actual |       | adequacy purposes |   | action provisions |
|                                     |   | Amount |       |              | Ratio  |              | Amount |        |   | Ratio                   |   | Amount |   |                   | Ratio |
| As of December 31, 2009:                 |   |   |       |              |   |              |   |        |   |                    |   |   |   |                   |   |   |   |   |
| Tier 1 Capital (to Average Assets)       |   | $      | 22,468,000 |              |   | 9.51              | %      |        | $      | 9,454,548               |   |   | 4.00   | %                      |   | $ | 11,818,185 |   |   |   | 5.00 | % |
| Tier 1 Capital (to Risk Weighted Assets) |   |   | 22,468,000 |              |   | 21.94             |   |        |   | 4,095,720               |   |   | 4.00   |                   |   |   | 6,143,580 |   |   |   | 6.00 |   |
| Total Capital (to Risk Weighted Assets)  |   |   | 23,531,000 |              |   | 22.98             |   |        |   | 8,191,440               |   |   | 8.00   |                   |   |   | 10,239,300 |   |   |   | 10.00 |   |

|                                     |   |   |       |              |   |              |   |        |   |                    |   |   |   |                   |   |
|------------------------------------------|--------|--------|------------|-------------------|--------|-------------------|--------|-------------|--------|-------------------------|--------|--------|--------|------------------------|--------|
|                                     |   |   |       |              |   |              |   |        |   |                    |   |   |   | To be well-capitalized |
|                                     |   |   |       |              |   |              |   | For capital |   | under prompt corrective |
|                                     |   | Actual |       | adequacy purposes |   | action provisions |
|                                     |   | Amount |       |              | Ratio  |              | Amount |        |   | Ratio                   |   | Amount |   |                   | Ratio  |
| As of December 31, 2008:                 |   |   |       |              |   |              |   |        |   |                    |   |   |   |                   |   |   |   |   |
| Tier 1 Capital (to Average Assets)       |   | $      | 22,087,000 |              |   | 10.45             | %      |        | $      | 8,516,543               |   |   | 4.00   | %                      |   | $ | 10,645,678 |   |   | 5.00 | % |
| Tier 1 Capital (to Risk Weighted Assets) |   |   | 22,087,000 |              |   | 24.34             |   |        |   | 3,681,128               |   |   | 4.00   |                   |   |   | 5,521,692 |   |   | 6.00 |   |
| Total Capital (to Risk Weighted Assets)  |   |   | 23,075,000 |              |   | 25.43             |   |        |   | 7,362,255               |   |   | 8.00   |                   |   |   | 9,202,819 |   |   | 10.00 |   |

----

|                                                                                     |   | 2009   |    |
|------------------------------------------------------------------------------------------|--------|--------|---------|
|                                                                                     |   |   |    |   | Weighted |   |   |   |   |
|                                                                                     |   |   |    |   | Average |   |   | Aggregate |   |
|                                                                                     |   |   |    |   | Exercise |   |   | Intrinsic |   |
|                                                                                     |   | Shares |    |   | Price |   |   | Value |   |
|                                                                                     |   |   |    |   |   |   |   |   |   |
| Options outstanding at the beginning of the year                                         |   |   | 144,914 |   |   | $ | 11.35 |   |   |   |   |
|                                                                                     |   |   |    |   |   |   |   |   |   |   |   |
|      Granted                                                    |   |   | — |   |   |   | — |   |   |   |   |
|      Canceled                                                   |   |   | (6,916  | ) |   |   | 17.41 |   |   |   |   |
|      Exercised                                                  |   |   | (21,250 | ) |   |   | 5.02 |   |   |   |   |
|                                                                                     |   |   |    |   |   |   |   |   |   |   |   |
| Options outstanding at the end of the year                                               |   |   | 116,748 |   |   | $ | 12.16 |   |   | $ | (35,024 | ) |
|                                                                                     |   |   |    |   |   |   |   |   |   |   |   |   |
| Options exercisable at the end of the year                                               |   |   | 114,798 |   |   | $ | 12.09 |   |   | $ | (26,404 | ) |
|                                                                                     |   |   |    |   |   |   |   |   |   |   |   |   |
| Weighted average remaining contractual life of options outstandingat the end of the year |   |   |    |   | 3.0 Years |   |   |   |   |   |

|                           |   |   |    |   | Weighted Average      |   |
|--------------------------------|--------|--------|---------|--------|-----------------------|--------|
| Nonvested Shares               |   | Shares |    |   | Grant Date Fair Value |   |
|                           |   |   |    |   |                  |   |
| Nonvested at January 1, 2009   |   |   | 2,600   |   |                  | $      | 1.18 |   |
| Granted                        |   |   | — |   |                  |   |   |   |
| Vested                         |   |   | 650     |   |                  |   | 1.18 |   |
| Forfeited                      |   |   | — |   |                  |   |   |   |
|                           |   |   |    |   |                  |   |   |   |
| Nonvested at December 31, 2009 |   |   | 1,950   |   |                  | $      | 1.18 |   |

----

|                                             |   | 2009   |    |   | 2008   |   |
|--------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                             |   |   |    |   |   |   |
| Intrinsic value of options exercised             |   | $      | 145,350 |   |   | $      | 54,230 |   |
| Cash received from option exercise               |   | $      | 106,625 |   |   | $      | 149,600 |   |
| Tax benefit realized from option exercise        |   | $      | 12,002  |   |   | $      | 15,259 |   |
| Weighted average fair value of options exercised |   | $      | 6.84    |   |   | $      | 2.32 |   |

|                             |   | Number of          |    |   | Weighted Average |   |   | Weighted Average |   |
|----------------------------------|--------|--------------------|---------|--------|------------------|--------|--------|------------------|--------|
| Plan Description                 |   | Exercisable Shares |    |   | Exercise Price   |   |   | Contractual Life |   |
| 1998 Director Stock Option Plan  |   |               | 5,000   |   |             | $      | 4.90   |             |   |   | 1.60 |   |
| 1998 Incentive Stock Option Plan |   |               | 5,625   |   |             |   | 8.94   |             |   |   | 4.66 |   |
| 2000 Director Stock Option Plan  |   |               | 20,000  |   |             |   | 4.75   |             |   |   | 0.40 |   |
| 2000 Incentive Stock Option Plan |   |               | 37,373  |   |             |   | 10.66  |             |   |   | 2.33 |   |
| 2004 Director Stock Option Plan  |   |               | 48,750  |   |             |   | 17.60  |             |   |   | 4.50 |   |
| All Plans                        |   |               | 116,748 |   |             | $      | 12.16  |             |   |   | 2.99 |   |

|                                           |   | 2009   |       |   | 2008   |   |
|------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                           |   | Amount |       |   | Amount |   |
|                                           |   |   |       |   |   |   |
| Commitments to fund secured construction loans |   | $      | 3,168,000  |   |   | $      | 3,500,000 |   |
| Commitments to fund all other commercial loans |   |   | 20,794,679 |   |   |   | 22,219,911 |   |
|                                           |   | $      | 23,962,679 |   |   | $      | 25,719,911 |   |

----

|      | Interest-bearing Bank Balances – Interest-bearing bank balances mature within one year and are carried at cost which are estimated to be reasonably close to fair value. |
|--------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     | Money Market Investments – The fair value of these securities approximates their carrying value due to the relatively short time to maturity |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Investment Securities, Available For Sale – The estimated fair value of these securities is determined by using available market information and appropriate valuation methodologies.  The estimates presented herein are  not necessarily indicative of the amounts that the Company could realize in a current market exchange. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loans Receivable - The fair value of commercial and construction loans are approximated by the carrying value as the loans are tied directly to the Prime Rate and are subject to change on a daily basis.  The fair value of the remainder of the portfolio is determined by discounting the future cash flows of the loans using the appropriate discount rate. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Other Financial Assets - The fair value of these assets, principally accrued interest receivable, approximates their carrying value due to their short maturity. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|      | Non-Interest Bearing and Interest Bearing Deposits - The fair value disclosed for non-interest bearing deposits is equal to the amount payable on demand at the reporting date.  The fair value of interest bearing deposits is based upon the current rates for instruments of the same remaining maturity.  Interest bearing deposits with a maturity of greater than one year are estimated using a discounted cash flow approach that applies interest rates currently being offered. |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|      | Other Liabilities - The estimated fair value of other liabilities, which primarily include accrued interest payable, approximates their carrying amount. |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|      | In accordance with FASB ASC 825, the carrying amounts and estimated fair values of financial instruments, at December 31, 2009 and December 31, 2008 are as follows: |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | December 31, 2009 |        |   | December 31, 2008 |   |
|-------------------------------------------|--------|-------------------|-------------|--------|-------------------|--------|
|                                      |   | Carrying          |        |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                                      |   | Amount            |        |   | Value             |   |   | Amount |   |   | Value |   |
|                                      |   |              |        |   |              |   |   |   |   |   |   |   |
| Financial Assets:                         |   |              |        |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                 |   | $                 | 39,716,919  |   |              | $      | 39,716,919 |   |   | $ | 21,240,223 |   |   | $ | 21,240,223 |   |
| Investment securities, available for sale |   |              | 113,912,404 |   |              |   | 113,912,404 |   |   |   | 120,288,588 |   |   |   | 120,288,588 |   |
| Loans receivable                          |   |              | 77,770,702  |   |              |   | 78,515,058 |   |   |   | 65,258,776 |   |   |   | 63,767,118 |   |
| Other financial assets                    |   |              | 722,228     |   |              |   | 722,228 |   |   |   | 723,473 |   |   |   | 723,473 |   |
|                                      |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total Financial Assets                    |   | $                 | 232,122,253 |   |              | $      | 232,866,609 |   |   | $ | 207,511,060 |   |   | $ | 206,019,402 |   |
|                                      |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:                    |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing deposits             |   | $                 | 70,688,777  |   |              | $      | 70,688,777 |   |   | $ | 58,907,451 |   |   | $ | 58,907,451 |   |
| Interest bearing deposits                 |   |              | 140,297,309 |   |              |   | 140,258,492 |   |   |   | 129,201,998 |   |   |   | 129,096,378 |   |
| Other liabilities                         |   |              | 45,695      |   |              |   | 45,695 |   |   |   | 162,731 |   |   |   | 162,731 |   |
|                                      |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total Financial Liabilities               |   | $                 | 211,031,781 |   |              | $      | 210,992,964 |   |   | $ | 188,272,180 |   |   | $ | 188,166,560 |   |

|   | Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    | Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing and asset or liability. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | Fair Value Measurements at December 31, 2009 Using |        |
|------------------------------------------|--------|----------------------------------------------------|-------------|
|                                     |   |                                               |        |   |   |   |   | Significant |   |   |   |   |
|                                     |   |                                               |        |   | Quoted Prices in |   |   | Other |   |   | Significant |   |
|                                     |   |                                               |        |   | Active Markets for |   |   | Observable |   |   | Unobservable |   |
|                                     |   | December 31,                                       |        |   | Identical Assets |   |   | Inputs |   |   | Inputs |   |
|                                     |   | 2009                                               |        |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Assets:                                  |   |                                               |        |   |   |   |   |   |   |   |   |   |
| FNMA MBS - Residential                   |   | $                                                  | 5,040,820   |   |   | $ | — |   |   | $ | 5,040,820 |   |   | $ | — |   |
|                                     |   |                                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GNMA MBS - Residential                   |   |                                               | 1,321,240   |   |   |   | — |   |   |   | 1,321,240 |   |   |   | — |   |
| Whole Loan MBS-                          |   |                                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                              |   |                                               | 1,856,893   |   |   |   | — |   |   |   | 1,856,893 |   |   |   | — |   |
| Collateralized mortgage obligations |   |                                               | 105,693,451 |   |   |   | — |   |   |   | 105,693,451 |   |   |   | — |   |
| Total Available for sale Securities |   | $                                                  | 113,912,404 |   |   | $ | — |   |   | $ | 113,912,404 |   |   | $ | — |   |

----

|                                |   | Fair Value Measurements at December 31, 2008 Using |        |
|-------------------------------------|--------|----------------------------------------------------|-------------|
|                                |   |                                               |        |   |   |   |   | Significant |   |   |   |   |
|                                |   |                                               |        |   | Quoted Prices in |   |   | Other |   |   | Significant |   |
|                                |   |                                               |        |   | Active Markets for |   |   | Observable |   |   | Unobservable |   |
|                                |   | December 31,                                       |        |   | Identical Assets |   |   | Inputs |   |   | Inputs |   |
|                                |   | 2008                                               |        |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Assets:                             |   |                                               |        |   |   |   |   |   |   |   |   |   |
| FNMA MBS - Residential              |   | $                                                  | 6,690,594   |   |   | $ | — |   |   | $ | 6,690,594 |   |   | $ | — |   |
| FHLMC MBS - Residential             |   |                                               | 37,642      |   |   |   | — |   |   |   | 37,642 |   |   |   | — |   |
| GNMA MBS - Residential              |   |                                               | 1,632,790   |   |   |   | — |   |   |   | 1,632,790 |   |   |   | — |   |
| Whole Loan MBS- Residential         |   |                                               | 2,559,037   |   |   |   | — |   |   |   | 2,559,037 |   |   |   | — |   |
| Collateralized mortgage obligations |   |                                               | 109,368,525 |   |   |   | — |   |   |   | 109,368,525 |   |   |   | — |   |
| Total Available for sale Securities |   | $                                                  | 120,288,588 |   |   | $ | — |   |   | $ | 120,288,588 |   |   | $ | — |   |

|           |   | Fair Value Measurements at December 31, 2009 Using |   |
|----------------|--------|----------------------------------------------------|--------|
|           |   |                                               |   |   |   |   |   | Significant |   |   |   |   |
|           |   |                                               |   |   | Quoted Prices in |   |   | Other |   |   | Significant |   |
|           |   |                                               |   |   | Active Markets for |   |   | Observable |   |   | Unobservable |   |
|           |   | December 31,                                       |   |   | Identical Assets |   |   | Inputs |   |   | Inputs |   |
|           |   | 2009                                               |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Assets:        |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Impaired loans |   | $                                                  | 43,505 |   |   |   | — |   |   |   | — |   |   | $ | 43,505 |   |

|           |   | Fair Value Measurements at December 31, 2008 Using |   |
|----------------|--------|----------------------------------------------------|--------|
|           |   |                                               |   |   |   |   |   |   |   | Significant |   |   |   |   |   |
|           |   |                                               |   |   |   | Quoted Prices in |   |   | Other |   |   | Significant |   |
|           |   |                                               |   |   |   | Active Markets for |   |   | Observable |   |   | Unobservable |   |
|           |   | December 31,                                       |   |   | Identical Assets |   |   | Inputs |   |   | Inputs |   |
|           |   |                                               | 2008   |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Assets:        |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans |   | $                                                  | 85,000 |   |   |   | — |   |   |   | — |   |   | $ | 85,000 |   |

----

|              |   | 2009   |     |   | 2008   |   |
|-------------------|--------|--------|----------|--------|--------|--------|
|              |   |   |     |   |   |   |
| Beginning balance |   | $      | 159,664  |   |   | $      | 192,219 |   |
| Originations      |   |   | 81,187   |   |   |   | 84,514 |   |
| Payments          |   |   | (149,841 | )      |   |   | (117,069 | ) |
|              |   |   |     |   |   |   |   |   |
| Ending balance    |   | $      | 91,010   |   |   | $      | 159,664 |   |

----

| VSB BANCORP, INC.                 |
|-----------------------------------|
|                              |
| STATEMENTS OF FINANCIAL CONDITION |
| DECEMBER 31, 2009 and 2008        |

|                                                                                                                                                                                                     |   | 2009   |       |   | 2008   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| ASSETS                                                                                                                                                                                                   |   |   |       |   |   |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                |   | $      | —    |   |   | $      | 542 |   |
| Money market                                                                                                                                                                                             |   |   | 297,496    |   |   |   | 496,371 |   |
| Investment in subsidiaries                                                                                                                                                                               |   |   | 24,093,862 |   |   |   | 22,673,688 |   |
| Deferred taxes                                                                                                                                                                                           |   |   | 30,922     |   |   |   | 31,293 |   |
| Other assets                                                                                                                                                                                             |   |   | 78,007     |   |   |   | 20,332 |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| Total assets                                                                                                                                                                                             |   | $      | 24,500,287 |   |   | $      | 23,222,226 |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                               |   |   |       |   |   |   |   |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| LIABILITIES:                                                                                                                                                                                             |   |   |       |   |   |   |   |   |
| Accounts payable, accrued expenses and other liabilities                                                                                                                                                 |   | $      | 16,338     |   |   | $      | 18,459 |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| Total liabilities                                                                                                                                                                                        |   |   | 16,338     |   |   |   | 18,459 |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| COMMITMENTS AND CONTINGENT LIABILITIES                                                                                                                                                                   |   |   |       |   |   |   |   |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                               |   |   |       |   |   |   |   |   |
| Common stock ($.0001 par value, 3,000,000 shares authorized, 1,945,134 issued and 1,762,191 outstanding at December 31, 2009; 1,923,884 issued and 1,882,461 outstanding at December 31, 2008) |   |   | 195        |   |   |   | 192 |   |
| Additional paid-in capital                                                                                                                                                                               |   |   | 9,317,719  |   |   |   | 9,200,010 |   |
| Retained earnings                                                                                                                                                                                        |   |   | 16,112,741 |   |   |   | 14,714,143 |   |
| Treasury stock, at cost (182,943 shares at December 31, 2009 and 41,423 shares at December 31, 2008)                                                                                                     |   |   | (1,840,249 | )      |   |   | (395,891 | ) |
| Unearned Employee Stock Ownership Plan shares                                                                                                                                                            |   |   | (732,672   | )      |   |   | (901,750 | ) |
| Accumulated other comprehensive gain, net of taxes of $1,371,416 and $488,735), respectively                                                                                                        |   |   | 1,626,215  |   |   |   | 587,063 |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| Total stockholders’ equity                                                                                                                                                                         |   |   | 24,483,949 |   |   |   | 23,203,767 |   |
|                                                                                                                                                                                                     |   |   |       |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                                                                                                                                         |   | $      | 24,500,287 |   |   | $      | 23,222,226 |   |

----

| VSB BANCORP, INC.                              |   |   |   |   |
|------------------------------------------------|--------|--------|--------|--------|
|                                           |   |   |   |   |
| STATEMENTS OF OPERATIONS                       |   |   |   |   |
| FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 |   |   |

|                                                                                                      |   | 2009   |      |   | 2008   |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| INTEREST INCOME:                                                                                          |   |   |      |   |   |   |
|      Loans receivable                                                            |   | $      | 36,051    |   |   | $      | 42,815 |   |
|      Other interest income                                                       |   |   | 4,710     |   |   |   | 70,656 |   |
|              Total interest income       |   |   | 40,761    |   |   |   | 113,471 |   |
|                                                                                                      |   |   |      |   |   |   |   |   |
| INTEREST EXPENSE:                                                                                         |   |   |      |   |   |   |   |   |
|      Subordinated debt                                                           |   |   | —   |   |   |   | 214,685 |   |
|              Total interest expense      |   |   | —   |   |   |   | 214,685 |   |
|                                                                                                      |   |   |      |   |   |   |   |   |
|              Net interest income (loss)  |   |   | 40,761    |   |   |   | (101,214 | ) |
|                                                                                                      |   |   |      |   |   |   |   |   |
| NON-INTEREST INCOME:                                                                                      |   |   |      |   |   |   |   |   |
|      Dividend income                                                             |   |   | 1,500,000 |   |   |   | 2,768,723 |   |
|      Other                                                                       |   |   | —   |   |   |   | 6,455 |   |
|                                                                                                      |   |   | 1,500,000 |   |   |   | 2,775,178 |   |
|                                                                                                      |   |   |      |   |   |   |   |   |
| NON-INTEREST EXPENSES:                                                                                    |   |   |      |   |   |   |   |   |
|      Legal fees                                                                  |   |   | 38,000    |   |   |   | 56,000 |   |
|      Other                                                                       |   |   | 74,763    |   |   |   | 86,722 |   |
|              Total non-interest expenses |   |   | 112,763   |   |   |   | 142,722 |   |
|                                                                                                      |   |   |      |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES                                                                                |   |   | 1,427,998 |   |   |   | 2,531,242 |   |
|                                                                                                      |   |   |      |   |   |   |   |   |
| PROVISION/(BENEFIT) FROM  INCOME TAXES:                                                         |   |   |      |   |   |   |   |   |
|      Current                                                                     |   |   | (49,678   | )      |   |   | (104,725 | ) |
|      Deferred                                                                    |   |   | 371       |   |   |   | (72,768 | ) |
|                                                                                                      |   |   |      |   |   |   |   |   |
|              Total income taxes          |   |   | (49,307   | )      |   |   | (177,493 | ) |
|                                                                                                      |   |   |      |   |   |   |   |   |
| EQUITY IN UNDISTRIBUTED EARNINGS (LOSS), NET OF TAXES                                                     |   |   | 344,972   |   |   |   | (776,991 | ) |
|                                                                                                      |   |   |      |   |   |   |   |   |
| NET INCOME                                                                                                |   | $      | 1,822,277 |   |   | $      | 1,931,744 |   |

----

| VSB BANCORP, INC.                                                       |   |   |   |   |
|-------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                    |   |   |   |   |
| STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 |

|                                                                                                                            |   | 2009   |       |   | 2008   |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                           |   |   |       |   |   |   |
|    Net income                                                                                                    |   | $      | 1,822,277  |   |   | $      | 1,931,744 |   |
|    Adjustments to reconcile net income to net cash used in operating activities:                                 |   |   |       |   |   |   |   |   |
|    Changes in operating assets and liabilities:                                                                  |   |   |       |   |   |   |   |   |
|       ESOP compensation expense                                                                   |   |   | (73,431    | )      |   |   | (71,966 | ) |
|       Undistributed (loss) income of subsidiaries                                                 |   |   | (344,972   | )      |   |   | 776,991 |   |
|       (Increase) decrease in other assets                                                         |   |   | (57,675    | )      |   |   | 23,238 |   |
|       Decrease/(increase) in deferred income taxes                                                |   |   | 371        |   |   |   | (31,293 | ) |
|       Increase/(decrease) in accounts payable, accrued expenses,  and other liabilities |   |   | 34,345     |   |   |   | (131,260 | ) |
|           Net cash provided by operating activities                           |   |   | 1,380,915  |   |   |   | 2,497,454 |   |
|                                                                                                                            |   |   |       |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                           |   |   |       |   |   |   |   |   |
|    Net decrease in loan receivable                                                                               |   |   | 169,078    |   |   |   | 169,077 |   |
|    Net decrease/(increase) in money market deposit                                                               |   |   | 198,875    |   |   |   | 3,009,039 |   |
|           Net cash provided by investing activities                           |   |   | 367,953    |   |   |   | 3,178,116 |   |
|                                                                                                                            |   |   |       |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                           |   |   |       |   |   |   |   |   |
|    Exercise stock option                                                                                         |   |   | 118,627    |   |   |   | 164,859 |   |
|    Payment of subordinated debt                                                                                  |   |   | —    |   |   |   | (5,155,000 | ) |
|    Return of VSB Capital Trust - common stock                                                                    |   |   | —    |   |   |   | 155,000 |   |
|    Purchase of treasury stock, at cost                                                                           |   |   | (1,444,358 | )      |   |   | (395,891 | ) |
|    Payment of dividends                                                                                          |   |   | (423,679   | )      |   |   | (443,996 | ) |
|           Net cash used in financing activities                               |   |   | (1,749,410 | )      |   |   | (5,675,028 | ) |
|                                                                                                                            |   |   |       |   |   |   |   |   |
| NET INCREASE IN CASH AND CASH EQUIVALENTS                                                                                       |   |   | (542       | )      |   |   | 542 |   |
|                                                                                                                            |   |   |       |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                                                    |   |   | 542        |   |   |   | — |   |
|                                                                                                                            |   |   |       |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, END OF YEAR                                                                                          |   | $      | —    |   |   | $      | 542 |   |
|                                                                                                                            |   |   |       |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH                                                                                                 |   |   |       |   |   |   |   |   |
|    FLOW INFORMATION:                                                                                             |   |   |       |   |   |   |   |   |
|    Cash paid during the period for:                                                                              |   |   |       |   |   |   |   |   |
|      Interest                                                                                          |   | $      | —    |   |   | $      | 259,088 |   |
|      Income taxes                                                                                      |   | $      | —    |   |   | $      | — |   |

----

|                                                        |   | 2009   |    |   | 2008   |   |
|-------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                        |   |   |    |   |   |   |
| Shares allocated to participants                            |   |   | 56,396  |   |   |   | 47,151 |   |
| Shares released to participants                             |   |   | (5,070  | )      |   |   | (3,885 | ) |
| Unearned shares                                             |   |   | 36,504  |   |   |   | 45,749 |   |
|                                                        |   |   |    |   |   |   |   |   |
|      Total ESOP Shares             |   |   | 87,830  |   |   |   | 89,015 |   |
|      Fair value of unearned shares |   | $      | 432,937 |   |   | $      | 398,931 |   |

----

----

| Report of Independent Registered Public Accounting Firm                                              | F-1 |
|------------------------------------------------------------------------------------------------------|-----|
| Consolidated Statements of Financial Condition as of December 31, 2009 and 2008                      | F-2 |
| Consolidated Statements of Earnings for the Years Ended December 31, 2009 and 2008                   | F-3 |
| Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2009 and 2008 | F-4 |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008                 | F-5 |
| Notes to Consolidated Financial Statements                                                           | F-6 |

----

| Exhibit No. |   | Title of Exhibit                                                                           |
|-------------|--------|--------------------------------------------------------------------------------------------|
|        |   |                                                                                       |
| 3.1         |   | Restated Certificate of Incorporation of VSB Bancorp, Inc.*                                |
| 3.2         |   | Bylaws of VSB Bancorp, Inc.*                                                               |
| 10.1        |   | VSB Bancorp, Inc. Restated 2000 Incentive Stock Option Plan*                               |
| 10.2        |   | VSB Bancorp, Inc. Restated 2000 Directors Stock Option Plan*                               |
| 10.3        |   | VSB Bancorp, Inc. Restated 1998 Incentive Stock Option Plan*                               |
| 10.4        |   | VSB Bancorp, Inc. Restated 1998 Directors Stock Option Plan*                               |
| 10.5        |   | VSB Bancorp, Inc. 2004 Directors Stock Option Plan**                                       |
| 10.6        |   | Employment Agreement among Raffaele M. Branca, VSB Bancorp, Inc. and Victory State Bank*** |
| 21.         |   | Subsidiaries of the Registrant                                                             |
| 23.         |   | Consent of Independent Registered Public Accounting Firm                                   |
| 31.1        |   | Rule 13A-14(a)/15D-14(a) Certification of Chief Executive Officer                          |
| 31.2        |   | Rule 13A-14(a)/15D-14(a) Certification of Principal Accounting Officer                     |
| 32.1        |   | Certification by CEO pursuant to 18 U.S.C. 1350                                            |
| 32.2        |   | Certification by Principal Accounting Officer pursuant to 18 U.S.C. 1350                   |

----

|                 | VSB Bancorp, Inc. |
|----------------------|-------------------|
|                 | (Registrant)      |
| Date: March 18, 2010 |              |   |
|                 | By:               | /s/ Raffaele M. Branca |
|                 |              | Raffaele M. Branca, President & CEO, |
|                 |              | Principal Executive Officer and |
|                 |              | Principal Financial Officer |
|                 |              |   |
| Date: March 18, 2010 |              | /s/ Jonathan B. Lipschitz |
|                 |              | Jonathan B. Lipschitz |
|                 |              | Vice President, Controller and Principal Accounting Officer |

| /s/ Raffaele M. Branca                            |   | March 18, 2010 |
|---------------------------------------------------|--------|----------------|
| Raffaele M. Branca, President and Chief Executive |   | Date           |
| Officer and Director                              |   |           |
|                                              |   |           |
| /s/ Joseph J. LiBassi                             |   | March 18, 2010 |
| Joseph J, LiBassi, Chairman of the Board          |   | Date           |
|                                              |   |           |
| /s/ Joan Nerlino Caddell                          |   | March 18, 2010 |
| Joan Nerlino Caddell, Director                    |   | Date           |
|                                              |   |           |
| /s/ Robert S. Cutrona, Sr.                        |   | March 18, 2010 |
| Robert S. Cutrona, Sr., Director                  |   | Date           |
|                                              |   |           |
| /s/ Chaim Farkas                                  |   | March 18, 2010 |
| Chaim Farkas, Director                            |   | Date           |
|                                              |   |           |
| /s/ Alfred C. Johnsen                             |   | March 18, 2010 |
| Alfred C. Johnsen, Director                       |   | Date           |
|                                              |   |           |
| /s/ Robert P. Moore                               |   | March 18, 2010 |
| Robert P. Moore, Director                         |   | Date           |
|                                              |   |           |
| /s/ Carlos Perez                                  |   | March 18, 2010 |
| Carlos Perez, Director                            |   | Date           |
|                                              |   |           |
| /s/ Bruno Savo                                    |   | March 18, 2010 |
| Bruno Savo, Director                              |   | Date           |

----