----

----

|   | (Mark One)                                                                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                      |
| x      | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                      |
| o      | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                                TO |

| California                                                     | 46-1981399                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

| 701 W. Main StreetVisalia, California  93291 |
|--------------------------------------------------------|
| (Address of principal executive offices)               |

| (559) 622-9000(Issuer’s telephone number) |
|-------------------------------------------------|

| Large Accelerated Filer | o | Accelerated Filer         | o |
|-------------------------|---|---------------------------|---|
| Non-Accelerated Filer   | o | Smaller Reporting Company | x |

----

----

----

INDEX

| PART I - FINANCIAL INFORMATION                                                                      | 3      |
|-----------------------------------------------------------------------------------------------------|--------|
|                                                                                                |   |
| ITEM 1 - FINANCIAL STATEMENTS                                                                       | 4      |
|                                                                                                |   |
| ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATONS | 19     |
|                                                                                                |   |
| ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           | 36     |
|                                                                                                |   |
| ITEM 4 – CONTROLS AND PROCEDURES                                                              | 36     |
|                                                                                                |   |
| PART II - OTHER INFORMATION                                                                         | 37     |
|                                                                                                |   |
| ITEM 1 LEGAL PROCEEDINGS                                                                            | 37     |
|                                                                                                |   |
| ITEM 1A  RISK FACTORS                                                                     | 37     |
|                                                                                                |   |
| ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                  | 37     |
|                                                                                                |   |
| ITEM 3 DEFAULTS UPON SENIOR SECURITIES                                                              | 37     |
|                                                                                                |   |
| ITEM 4 RESERVED                                                                                     | 38     |
|                                                                                                |   |
| ITEM 5 OTHER INFORMATION                                                                            | 38     |
|                                                                                                |   |
| ITEM 6 EXHIBITS                                                                                     | 38     |
|                                                                                                |   |
| SIGNATURES                                                                                          | 39     |
|                                                                                                |   |
| EXHIBIT INDEX                                                                                       | 40     |

----

Index

PART I

----

Index

PART 1 – FINANCIAL INFORMATION

|                                                                                                                                                                                                   |   | September 30, 2010 |        |   | December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
|                                                                                                                                                                                                   |   |               |        |   |              |   |
| Assets                                                                                                                                                                                                 |   |               |        |   |              |   |
| Cash and due from banks                                                                                                                                                                                |   | $                  | 39,781,906  |   |              | $      | 39,077,786 |   |
| Available-for-sale investment securities, at fair value                                                                                                                                                |   |               | 43,826,000  |   |              |   | 42,566,000 |   |
| Loans, less allowance for loan losses of $6,447,951 at September 30, 2010 and $6,231,065 at December 31, 2009 (Note 4)                                                                                 |   |               | 235,611,293 |   |              |   | 234,822,963 |   |
| Bank premises and equipment, net                                                                                                                                                                       |   |               | 8,591,956   |   |              |   | 8,041,905 |   |
| Cash surrender value of bank-owned life insurance                                                                                                                                                      |   |               | 6,559,805   |   |              |   | 6,354,871 |   |
| Accrued interest receivable and other assets                                                                                                                                                           |   |               | 8,230,240   |   |              |   | 9,307,998 |   |
| Total assets                                                                                                                                                                                           |   | $                  | 342,601,200 |   |              | $      | 340,171,523 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Liabilities and Shareholders’ Equity                                                                                                                                                             |   |               |        |   |              |   |   |   |
| Deposits:                                                                                                                                                                                              |   |               |        |   |              |   |   |   |
| Noninterest-bearing                                                                                                                                                                                    |   | $                  | 80,874,563  |   |              | $      | 76,574,651 |   |
| Interest-bearing                                                                                                                                                                                       |   |               | 214,713,485 |   |              |   | 217,707,492 |   |
| Total deposits                                                                                                                                                                                         |   |               | 295,588,048 |   |              |   | 294,282,143 |   |
| Accrued interest payable and other liabilities                                                                                                                                                         |   |               | 2,786,917   |   |              |   | 2,265,842 |   |
| Long-term debt                                                                                                                                                                                         |   |               | 2,613,094   |   |              |   | 3,661,999 |   |
| Junior subordinated deferrable interest debentures                                                                                                                                                     |   |               | 3,093,000   |   |              |   | 3,093,000 |   |
| Total liabilities                                                                                                                                                                                      |   |               | 304,081,059 |   |              |   | 303,302,984 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Commitments and contingencies (Note 6)                                                                                                                                                                 |   |               |        |   |              |   |   |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Shareholders’ equity:                                                                                                                                                                            |   |               |        |   |              |   |   |   |
| Serial preferred stock - no par value; 10,000,000 shares authorized, issued and outstanding – 7,700 shares class B and 385 shares class C at September 30, 2010 and  December 31, 2009 |   |               | 7,802,550   |   |              |   | 7,744,800 |   |
| Common stock - no par value; 30,000,000 sharesauthorized; issued and outstanding – 2,608,317 shares at September 30, 2010 and December 31, 2009                                                  |   |               | 25,989,029  |   |              |   | 25,953,290 |   |
| Retained earnings                                                                                                                                                                                      |   |               | 4,192,139   |   |              |   | 3,166,732 |   |
| Accumulated other comprehensive income, net of taxes (Note 9)                                                                                                                                          |   |               | 536,423     |   |              |   | 3,717 |   |
| Total shareholders’ equity                                                                                                                                                                       |   |               | 38,520,141  |   |              |   | 36,868,539 |   |
| Total liabilities and shareholders’ equity                                                                                                                                                       |   | $                  | 342,601,200 |   |              | $      | 340,171,523 |   |

----

Index

|                                                           |   | For the Three Months Ended September 30, |      |   | For the Nine Months Ended September 30, |   |
|----------------------------------------------------------------|--------|------------------------------------------|-----------|--------|-----------------------------------------|--------|
|                                                           |   | 2010                                     |      |   | 2009                                    |   |   | 2010 |   |   | 2009 |   |
| Interest Income:                                               |   |                                     |      |   |                                    |   |   |   |   |   |   |   |
| Interest and fees on loans                                     |   | $                                        | 3,723,991 |   |                                    | $      | 3,839,994 |   |   | $ | 11,124,244 |   |   | $ | 11,215,081 |   |
| Interest on investment securities:                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                        |   |                                     | 177,765   |   |                                    |   | 332,501 |   |   |   | 550,671 |   |   |   | 955,986 |   |
| Exempt from Federal income taxes                               |   |                                     | 158,853   |   |                                    |   | 181,236 |   |   |   | 474,136 |   |   |   | 577,645 |   |
| Interest on Federal funds sold                                 |   |                                     | -         |   |                                    |   | 73 |   |   |   | - |   |   |   | 9,972 |   |
| Interest on deposits in banks                                  |   |                                     | 18,362    |   |                                    |   | 12,620 |   |   |   | 51,113 |   |   |   | 12,701 |   |
| Total interest income                                          |   |                                     | 4,078,971 |   |                                    |   | 4,366,424 |   |   |   | 12,200,164 |   |   |   | 12,771,385 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense:                                              |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                           |   |                                     | 569,452   |   |                                    |   | 909,716 |   |   |   | 1,882,724 |   |   |   | 2,847,745 |   |
| Interest on short-term debt                                    |   |                                     | -         |   |                                    |   | - |   |   |   | - |   |   |   | 27,934 |   |
| Interest on long-term debt                                     |   |                                     | 33,494    |   |                                    |   | 47,092 |   |   |   | 128,106 |   |   |   | 163,648 |   |
| Interest on junior subordinated deferrable interest debentures |   |                                     | 30,107    |   |                                    |   | 30,485 |   |   |   | 85,724 |   |   |   | 101,327 |   |
| Total interest expense                                         |   |                                     | 633,053   |   |                                    |   | 987,293 |   |   |   | 2,096,554 |   |   |   | 3,140,654 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income before provision for loan losses           |   |                                     | 3,445,918 |   |                                    |   | 3,379,131 |   |   |   | 10,103,610 |   |   |   | 9,630,731 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Provision for Loan Losses                                      |   |                                     | 550,000   |   |                                    |   | 600,000 |   |   |   | 1,800,000 |   |   |   | 2,000,000 |   |
| Net interest income after provision for loan losses            |   |                                     | 2,895,918 |   |                                    |   | 2,779,131 |   |   |   | 8,303,610 |   |   |   | 7,630,731 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Income:                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Service charges                                                |   |                                     | 197,486   |   |                                    |   | 198,587 |   |   |   | 584,884 |   |   |   | 567,459 |   |
| Gain on sale of available-for-sale investment securities, net  |   |                                     | 10,523    |   |                                    |   | 164,756 |   |   |   | 10,523 |   |   |   | 168,818 |   |
| Gain on sale of other real estate                              |   |                                     | -         |   |                                    |   | 16,055 |   |   |   | - |   |   |   | 16,055 |   |
| Mortgage loan brokerage fees                                   |   |                                     | 23,464    |   |                                    |   | 13,105 |   |   |   | 31,385 |   |   |   | 40,587 |   |
| Earnings on cash surrender value of life insurance policies    |   |                                     | 74,708    |   |                                    |   | 72,560 |   |   |   | 221,164 |   |   |   | 214,578 |   |
| Gain from bank owned life insurance                            |   |                                     | -         |   |                                    |   | - |   |   |   | - |   |   |   | 317,488 |   |
| Other                                                          |   |                                     | 52,183    |   |                                    |   | 43,095 |   |   |   | 135,759 |   |   |   | 147,412 |   |
| Total non-interest income                                      |   |                                     | 358,364   |   |                                    |   | 508,158 |   |   |   | 983,715 |   |   |   | 1,472,397 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Expense:                                          |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                 |   |                                     | 1,229,130 |   |                                    |   | 1,200,590 |   |   |   | 3,955,888 |   |   |   | 3,663,388 |   |
| Occupancy and equipment                                        |   |                                     | 333,410   |   |                                    |   | 387,371 |   |   |   | 995,604 |   |   |   | 1,169,813 |   |
| Other                                                          |   |                                     | 699,441   |   |                                    |   | 775,894 |   |   |   | 2,380,771 |   |   |   | 2,379,594 |   |
| Total non-interest expense                                     |   |                                     | 2,261,981 |   |                                    |   | 2,363,855 |   |   |   | 7,332,263 |   |   |   | 7,212,795 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Income before provision for income taxes                       |   |                                     | 992,301   |   |                                    |   | 923,434 |   |   |   | 1,955,062 |   |   |   | 1,890,333 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Provision for Income Taxes                                     |   |                                     | 317,000   |   |                                    |   | 303,000 |   |   |   | 556,000 |   |   |   | 391,000 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                     |   | $                                        | 675,301   |   |                                    | $      | 620,434 |   |   | $ | 1,399,062 |   |   | $ | 1,499,333 |   |
| Dividends accrued and discount accreted on preferred Shares    |   |                                     | (96,250   | )      |                                    |   | (96,251 | ) |   |   | (289,819 | ) |   |   | (257,736 | ) |
| Net income available to common shareholders                    |   | $                                        | 579,051   |   |                                    | $      | 524,183 |   |   | $ | 1,109,243 |   |   | $ | 1,241,597 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share (Note 8)                              |   | $                                        | 0.22      |   |                                    | $      | 0.20 |   |   | $ | 0.43 |   |   | $ | 0.48 |   |
|                                                           |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share (Note 8)                            |   | $                                        | 0.22      |   |                                    | $      | 0.20 |   |   | $ | 0.43 |   |   | $ | 0.48 |   |

----

Index

|                                                                                  |   | For the Nine Months Ended September 30, |       |
|---------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                                                  |   | 2010                                    |       |   | 2009 |   |
|                                                                                  |   |                                    |       |   |   |   |
| Cash Flows from Operating Activities:                                                 |   |                                    |       |   |   |   |
| Net income                                                                            |   | $                                       | 1,399,062  |   |   | $ | 1,499,333 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:     |   |                                    |       |   |   |   |   |   |
| Provision for loan losses                                                             |   |                                    | 1,800,000  |   |   |   | 2,000,000 |   |
| (Decrease) increase in deferred loan origination fees, net                            |   |                                    | (33,320    | ) |   |   | 112,843 |   |
| Depreciation                                                                          |   |                                    | 378,196    |   |   |   | 507,982 |   |
| Tax benefit from exercise of stock options                                            |   |                                    | -          |   |   |   | (7,718 | ) |
| Deferred tax benefit                                                                  |   |                                    | 6,285      |   |   |   | - |   |
| Gain on sale of available-for-sale investment securities, net                         |   |                                    | (10,523    | ) |   |   | (168,818 | ) |
| Amortization (accretion) of premiums (discounts) on investment securities, net        |   |                                    | 222,482    |   |   |   | (10,941 | ) |
| Increase in cash surrender value of bank-owned life insurance                         |   |                                    | (204,934   | ) |   |   | (209,856 | ) |
| Gain from bank owned life insurance                                                   |   |                                    | -          |   |   |   | (317,488 | ) |
| Stock-based compensation expense                                                      |   |                                    | 35,739     |   |   |   | 46,702 |   |
| Loss on disposition of premises and equipment                                         |   |                                    | 9,341      |   |   |   | 285 |   |
| Gain on sale of other real estate                                                     |   |                                    | -          |   |   |   | (16,055 | ) |
| Decrease (increase) in accrued interest receivable and other assets                   |   |                                    | 1,313,173  |   |   |   | (713,903 | ) |
| Increase (decrease) in accrued interest payable and other liabilities                 |   |                                    | 148,588    |   |   |   | (114,378 | ) |
| Net cash provided by operating activities                                             |   |                                    | 5,064,089  |   |   |   | 2,607,988 |   |
|                                                                                  |   |                                    |       |   |   |   |   |   |
| Cash Flows from Investing Activities:                                                 |   |                                    |       |   |   |   |   |   |
| Proceeds from matured and called available-for-sale investment securities             |   |                                    | 1,505,000  |   |   |   | 2,864,361 |   |
| Proceeds from sales of available-for-sale investment securities                       |   |                                    | 2,510,523  |   |   |   | 7,371,531 |   |
| Purchases of available-for-sale investment securities                                 |   |                                    | (9,515,957 | ) |   |   | (12,940,757 | ) |
| Proceeds from principal repayments from available-for-sale mortgage-backed securities |   |                                    | 4,933,667  |   |   |   | 4,656,784 |   |
| Purchase of Federal Home Loan Bank Stock, net                                         |   |                                    | (241,700   | ) |   |   | (14,800 | ) |
| Net increase in loans                                                                 |   |                                    | (2,555,010 | ) |   |   | (11,830,797 | ) |
| Purchase of premises and equipment                                                    |   |                                    | (937,588   | ) |   |   | (4,086,031 | ) |
| Proceeds from sale of equipment                                                       |   |                                    | -          |   |   |   | 50 |   |
| Proceeds from bank owned life insurance                                               |   |                                    | -          |   |   |   | 662,838 |   |
| Proceeds from sale of other real estate                                               |   |                                    | -          |   |   |   | 1,296,089 |   |
| Net cash used in investing activities                                                 |   |                                    | (4,301,065 | ) |   |   | (12,020,732 | ) |

----

Index

|                                                              |   | For the Nine Months Ended September 30, |       |
|-------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                              |   | 2010                                    |       |   | 2009 |   |
|                                                              |   |                                    |       |   |   |   |
| Cash Flows from Financing Activities:                             |   |                                    |       |   |   |   |
| Net increase in noninterest-bearing and interest-bearing deposits |   | $                                       | 2,462,888  |   |   | $ | 23,402,440 |   |
| Net (decrease) increase in time deposits                          |   |                                    | (1,156,982 | ) |   |   | 14,128,872 |   |
| Proceeds from exercised stock options                             |   |                                    | -          |   |   |   | 59,998 |   |
| Benefit from exercised stock options                              |   |                                    | -          |   |   |   | 7,718 |   |
| Proceeds from issuance of preferred stock                         |   |                                    | -          |   |   |   | 7,674,217 |   |
| Cash dividends paid on preferred stock                            |   |                                    | (315,905   | ) |   |   | (227,310 | ) |
| Decrease in short-term borrowings, net                            |   |                                    | -          |   |   |   | (8,000,000 | ) |
| Principal payments on long-term debt                              |   |                                    | (1,048,905 | ) |   |   | (1,465,732 | ) |
| Cash paid to repurchase fractional shares                         |   |                                    | -          |   |   |   | (2,577 | ) |
| Net cash (used in) provided by financing activities               |   |                                    | (58,904    | ) |   |   | 35,577,820 |   |
|                                                              |   |                                    |       |   |   |   |   |   |
| Increase in cash and cash equivalents                             |   |                                    | 704,120    |   |   |   | 26,165,076 |   |
| Cash and Cash Equivalents at Beginning of Year                    |   |                                    | 39,077,786 |   |   |   | 22,145,867 |   |
| Cash and Cash Equivalents at End of Period                        |   | $                                       | 39,781,906 |   |   | $ | 48,310,943 |   |
|                                                              |   |                                    |       |   |   |   |   |   |
| Supplemental Disclosure of Cash Flow Information:                 |   |                                    |       |   |   |   |   |   |
| Cash paid during the period for:                                  |   |                                    |       |   |   |   |   |   |
| Interest expense                                                  |   | $                                       | 2,133,102  |   |   | $ | 3,293,280 |   |
| Income taxes                                                      |   | $                                       | 230,000    |   |   | $ | 865,000 |   |
|                                                              |   |                                    |       |   |   |   |   |   |
| Non-Cash Investing Activities:                                    |   |                                    |       |   |   |   |   |   |
| Net change in unrealized loss on available-for-sale securities    |   | $                                       | 905,193    |   |   | $ | 526,160 |   |
| Non-Cash Financing Activities:                                    |   |                                    |       |   |   |   |   |   |
| Accrued dividends on preferred stock                              |   | $                                       | 315,905    |   |   | $ | 53,621 |   |
| Real estate owned acquired through foreclosure                    |   | $                                       | -          |   |   | $ | 1,280,034 |   |

----

Index

| 1. | GENERAL |
|----|---------|

| 2. | BASIS OF PRESENTATION |
|----|-----------------------|

----

Index

| 3. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES |
|----|------------------------------------------|

|                        |   | September 30, 2010 |       |
|-----------------------------|--------|--------------------|------------|
|                        |   | Amortized Cost     |       |   | Gross Unrealized Gains |   |   | Gross Unrealized Losses |   |   | Estimated Fair Value |   |
|                        |   |               |       |   |   |   |   |   |   |   |   |   |
| Debt securities:            |   |               |       |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies    |   |               | 3,429,097  |   |   | $ | 95,903 |   |   | $ | - |   |   | $ | 3,525,000 |   |
| Mortgage-backed securities: |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                  |   |               | 9,449,875  |   |   |   | 334,525 |   |   |   | (17,400 | ) |   |   | 9,767,000 |   |
| Agency SBA                  |   |               | 15,189,223 |   |   |   | 227,636 |   |   |   | (1,859 | ) |   |   | 15,415,000 |   |
| Municipal securities        |   |               | 14,846,295 |   |   |   | 372,820 |   |   |   | (100,115 | ) |   |   | 15,119,000 |   |
|                        |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        |   |               | 42,914,490 |   |   | $ | 1,030,884 |   |   | $ | (119,374 | ) |   | $ | 43,826,000 |   |

|                        |   | December 31, 2009 |       |
|-----------------------------|--------|-------------------|------------|
|                        |   | Amortized Cost    |       |   | Gross Unrealized Gains |   |   | Gross Unrealized Losses |   |   | Estimated Fair Value |   |
|                        |   |              |       |   |   |   |   |   |   |   |   |   |
| Debt securities:            |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies    |   | $                 | 2,909,941  |   |   | $ | 105,059 |   |   | $ | - |   |   |   | 3,015,000 |   |
| Mortgage-backed securities: |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                  |   |              | 8,985,716  |   |   |   | 295,386 |   |   |   | (102 | ) |   |   | 9,281,000 |   |
| Agency SBA                  |   |              | 15,326,055 |   |   |   | 27,173 |   |   |   | (46,228 | ) |   |   | 15,307,000 |   |
| Municipal securities        |   |              | 15,337,971 |   |   |   | 48,855 |   |   |   | (423,826 | ) |   |   | 14,963,000 |   |
|                        |   | $                 | 42,559,683 |   |   | $ | 476,473 |   |   | $ | (470,156 | ) |   | $ | 42,566,000 |   |

----

Index

| 3. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES (Continued) |
|----|------------------------------------------------------|

|                 |   | Less than 12 Months |            |   | 12 Months or More |   |    | Total      |   |
|----------------------|--------|---------------------|-----------------|--------|-------------------|--------|---------|------------|--------|
|                 |   | Fair Value          |            |   | Unrealized Losses |   |    | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|                 |   |                |            |   |              |   |    |       |   |   |   |   |   |   |   |   |   |   |
| Debt securities:     |   |                |            |   |              |   |    |       |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed      |   |                |            |   |              |   |    |       |   |   |   |   |   |   |   |   |   |   |
| securities:          |   |                |            |   |              |   |    |       |   |   |   |   |   |   |   |   |   |   |
| Agency MBS           |   | $                   |  2,099,000 |   |              | $      | (17,400 | )          |   | $ | - |   |   | $ | - |   |   | $ |  2,099,000 |   |   | $ | (17,400 | ) |
| Agency SBA           |   |                | -               |   |              |   | -       |       |   |   | 870,000 |   |   |   | (1,859 | ) |   |   | 870,000 |   |   |   | (1,859 | ) |
| Municipal securities |   |                | 486,000         |   |              |   | (3,104  | )          |   |   | 2,328,000 |   |   |   | ( 97,011 | ) |   |   | 2,814,000 |   |   |   | (100,115 | ) |
|                 |   | $                   | 2,585,000       |   |              | $      | (20,504 | )          |   | $ | 3,198,000 |   |   | $ |   (98,870 | ) |   | $ | 5,783,000 |   |   | $ |  (119,374 | ) |

|                 |   | Less than 12 Months |                |   | 12 Months or More |   |       | Total      |   |
|----------------------|--------|---------------------|---------------------|--------|-------------------|--------|------------|------------|--------|
|                 |   | Fair Value          |                |   | Unrealized Losses |   |       | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|                 |   |                |                |   |              |   |       |       |   |   |   |   |   |   |   |   |   |   |
| Debt securities:     |   |                |                |   |              |   |       |       |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed      |   |                |                |   |              |   |       |       |   |   |   |   |   |   |   |   |   |   |
| securities:          |   |                |                |   |              |   |       |       |   |   |   |   |   |   |   |   |   |   |
| Agency MBS           |   | $                   |   132,000 |   |              | $      |  (102 | )          |   | $ | - |   |   | $ | - |   |   | $ | 132,000 |   |   | $ |   (102 | ) |
| Agency SBA           |   |                | 9,567,000           |   |              |   | (46,228    | )          |   |   | - |   |   |   | - |   |   |   | 9,567,000 |   |   |   | (46,228 | ) |
| Municipal securities |   |                | 6,449,000           |   |              |   | (179,802   | )          |   |   | 2,789,000 |   |   |   | ( 244,024 | ) |   |   | 9,238,000 |   |   |   | (423,826 | ) |
|                 |   | $                   | 16,148,000          |   |              | $      | (226,132   | )          |   | $ | 2,789,000 |   |   | $ | (244,024 | ) |   | $ | 18,937,000 |   |   | $ | (470,156 | ) |

----

Index

| 3. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES (Continued) |
|----|------------------------------------------------------|

|                                      |   | Amortized Cost |       |   | Estimated Fair Value |   |
|-------------------------------------------|--------|----------------|------------|--------|----------------------|--------|
|                                      |   |           |       |   |                 |   |
| Within one year                           |   | $              | 19,749     |   |                 | $      | 20,000 |   |
| After one year through five years         |   |           | 2,046,239  |   |                 |   | 2,070,000 |   |
| After five years through ten years        |   |           | 3,319,157  |   |                 |   | 3,370,000 |   |
| After ten years                           |   |           | 12,890,247 |   |                 |   | 13,184,000 |   |
|                                      |   |           | 18,275,392 |   |                 |   | 18,644,000 |   |
| Investment securities not due at a single |   |           |       |   |                 |   |   |   |
| maturity date:                            |   |           |       |   |                 |   |   |   |
| Mortgage-backed securities                |   |           | 24,639,098 |   |                 |   | 25,182,000 |   |
|                                      |   |           |       |   |                 |   |   |   |
|                                      |   | $              | 42,914,490 |   |                 | $      | 43,826,000 |   |

| 4. | LOANS |
|----|-------|

|                               |   | September 30, 2010 |        |   | December 31, 2009 |   |
|------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
| Commercial                         |   | $                  | 51,856,222  |   |              | $      | 49,442,490 |   |
| Real estate – mortgage       |   |               | 167,436,355 |   |              |   | 162,772,435 |   |
| Real estate – construction   |   |               | 16,391,052  |   |              |   | 22,581,964 |   |
| Agricultural                       |   |               | 4,768,177   |   |              |   | 4,727,349 |   |
| Consumer                           |   |               | 1,980,916   |   |              |   | 1,936,588 |   |
|                               |   |               | 242,432,722 |   |              |   | 241,460,826 |   |
|                               |   |               |        |   |              |   |   |   |
| Deferred loan fees,  net |   |               | (373,478    | )      |              |   | (406,798 | ) |
| Allowance for loan losses          |   |               | (6,447,951  | )      |              |   | (6,231,065 | ) |
|                               |   | $                  | 235,611,293 |   |              | $      | 234,822,963 |   |

|                            |   | September 30, 2010 |       |   | December 31, 2009 |   |
|---------------------------------|--------|--------------------|------------|--------|-------------------|--------|
| Balance, beginning of year      |   | $                  | 6,231,065  |   |              | $      | 3,244,454 |   |
| Provision charged to operations |   |               | 1,800,000  |   |              |   | 7,000,000 |   |
| Losses charged to allowance     |   |               | (1,592,753 | )      |              |   | (4,013,611 | ) |
| Recoveries                      |   |               | 9,639      |   |              |   | 222 |   |
| Balance, ending                 |   | $                  | 6,447,951  |   |              | $      | 6,231,065 |   |

----

Index

| 5. | BANK PREMISES AND EQUIPMENT |
|----|-----------------------------|

|                                           |   | September 30, 2010 |       |   | December 31, 2009 |   |
|------------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
| Furniture and equipment                        |   | $                  | 2,962,544  |   |              | $      | 2,955,097 |   |
| Construction in progress, premises             |   |               | -          |   |              |   | 4,567,346 |   |
| Leasehold improvements                         |   |               | 207,342    |   |              |   | 550,548 |   |
| Premises                                       |   |               | 6,212,920  |   |              |   | 2,095,490 |   |
| Land                                           |   |               | 1,461,379  |   |              |   | 605,060 |   |
|                                           |   |               | 10,844,185 |   |              |   | 10,773,541 |   |
|                                           |   |               |       |   |              |   |   |   |
| Less accumulated depreciation and amortization |   |               | (2,252,229 | )      |              |   | (2,731,636 | ) |
|                                           |   | $                  | 8,591,956  |   |              | $      | 8,041,905 |   |

| 6. | COMMITMENTS AND CONTINGENCIES |
|----|-------------------------------|

----

Index

| 7. | STOCK BASED COMPENSATION |
|----|--------------------------|

|                                                        |   | For the Nine Months Ended September 30, 2010 |    |
|-------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                        |   | Shares                                       |    |   | Weighted Average Exercise Price |   |   | Weighted Average Remaining Contractual Term |   |   | Aggregate Intrinsic Value (in thousands) |   |
|                                                        |   |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Incentive:                                                  |   |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Options outstanding at January 1, 2010                      |   |                                         | 74,357  |   |   | $ | 10.34 |   |   |   |   |   |   |   |   |   |   |
| Options granted                                             |   |                                         | -       |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Options transferred to Nonstatutory                         |   |                                         | (12,803 | ) |   |   | 9.49 |   |   |   |   |   |   |   |   |   |   |
| Options exercised                                           |   |                                         | -       |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Options cancelled                                           |   |                                         | (2,207  | ) |   |   | 13.15 |   |   |   |   |   |   |   |   |   |   |
| Options outstanding at September 30, 2010                   |   |                                         | 59,347  |   |   |   | 10.42 |   |   | 4.64 years |   |   | $ | 5,186 |   |   |   | (1 | ) |
| Options vested or expected to vest after September 30, 2010 |   |                                         | 47,434  |   |   |   | 9.22 |   |   | 2.84 years |   |   | $ | 5,186 |   |   |   | (1 | ) |
| Options exercisable at September 30, 2010                   |   |                                         | 41,158  |   |   |   | 9.22 |   |   | 3.50 years |   |   | $ | 5,186 |   |   |   | (1 | ) |
|                                                        |   |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonstatutory:                                               |   |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options outstanding at January 1, 2010                      |   |                                         | 87,964  |   |   | $ | 9.10 |   |   |   |   |   |   |   |   |   |   |   |   |
| Options granted                                             |   |                                         | -       |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |
| Options transferred from Incentive                          |   |                                         | 12,803  |   |   |   | 9.49 |   |   |   |   |   |   |   |   |   |   |   |   |
| Options exercised                                           |   |                                         | -       |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |
| Options cancelled                                           |   |                                         | (12,103 | ) |   |   | 5.37 |   |   |   |   |   |   |   |   |   |   |   |   |
| Options outstanding at September 30, 2010                   |   |                                         | 88,664  |   |   |   | 9.66 |   |   | 2.92 years |   |   | $ | 21,204 |   |   |   | (1 | ) |
| Options vested or expected to vest after September 30, 2010 |   |                                         | 80,451  |   |   |   | 9.53 |   |   | 2.76 years |   |   |   | 21,204 |   |   |   | (1 | ) |
| Options exercisable at September 30, 2010                   |   |                                         | 85,357  |   |   |   | 9.53 |   |   | 2.75 years |   |   |   | 21,204 |   |   |   | (1 | ) |

----

Index

| 8. | EARNINGS PER SHARE COMPUTATION |
|----|--------------------------------|

|                                           |   | For the Three Months Ended September 30, |      |   | For the Nine Months Ended September 30, |   |
|------------------------------------------------|--------|------------------------------------------|-----------|--------|-----------------------------------------|--------|
|                                           |   | 2010                                     |      |   | 2009                                    |   |   | 2010 |   |   | 2009 |   |
| Net Income:                                    |   |                                     |      |   |                                    |   |   |   |   |   |   |   |
| Net income                                     |   | $                                        | 675,301   |   |                                    | $      | 620,434 |   |   | $ | 1,399,062 |   |   | $ | 1,499,333 |   |
| Dividends accrued and discounts                |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| accreted on preferred shares                   |   |                                     | (96,250   | )      |                                    |   | (96,251 | ) |   |   | (289,819 | ) |   |   | (257,736 | ) |
| Net income allocated to common                 |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| shareholders                                   |   | $                                        | 579,051   |   |                                    | $      | 524,183 |   |   | $ | 1,109,243 |   |   | $ | 1,241,597 |   |
| Earnings Per Share:                            |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share                       |   | $                                        | 0.22      |   |                                    | $      | 0.20 |   |   | $ | 0.43 |   |   | $ | 0.48 |   |
| Diluted earnings per share                     |   | $                                        | 0.22      |   |                                    | $      | 0.20 |   |   | $ | 0.43 |   |   | $ | 0.48 |   |
| Weighted Average Number of Shares Outstanding: |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic shares                                   |   |                                     | 2,608,317 |   |                                    |   | 2,605,646 |   |   |   | 2,608,317 |   |   |   | 2,600,176 |   |
| Diluted shares                                 |   |                                     | 2,612,143 |   |                                    |   | 2,619,492 |   |   |   | 2,612,205 |   |   |   | 2,610,051 |   |

----

Index

| 9. | COMPREHENSIVE INCOME |
|----|----------------------|

|                                          |   | For the Three Months Ended |    |   | For the Nine Months Ended |   |
|-----------------------------------------------|--------|----------------------------|---------|--------|---------------------------|--------|
|                                          |   | September 30, 2010    |    |   | September 30, 2009   |   |   | September 30, 2010 |   |   | September 30, 2009 |   |
|                                          |   |                       |    |   |                      |   |   |   |   |   |   |   |
| Net income                                    |   | $                          | 675,301 |   |                      | $      | 620,434 |   |   | $ | 1,399,062 |   |   | $ | 1,499,333 |   |
| Other comprehensive income:                   |   |                       |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gain on available-for-sale |   |                       |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| investment securities, net of tax             |   |                       | 273,029 |   |                      |   | 323,367 |   |   |   | 532,707 |   |   |   | 309,645 |   |
| Total other comprehensive income              |   | $                          | 948,330 |   |                      | $      | 943,801 |   |   | $ | 1,931,769 |   |   | $ | 1,808,978 |   |

| 10. | INCOME TAXES |
|-----|--------------|

| 11. | STOCK REPURCHASE |
|-----|------------------|

----

Index

| 12. | PREFERRED STOCK |
|-----|-----------------|

----

Index

| 13. | FAIR VALUE MEASUREMENT |
|-----|------------------------|

|                                         |       |   | Fair Value Measurements, Using                     |   |
|----------------------------------------------|------------|--------|----------------------------------------------------|--------|
| (in thousands)                               |       |   | Quoted Prices inActive Markets forIdentical Assets |   | OtherObservableInputs |   | SignificantUnobservableInputs |   |
|                                         | Fair Value |   | (Level 1)                                          |   | (Level 2) |   | (Level 3) |   |
| Assets:                                      |       |   |                                               |   |   |   |   |   |   |   |   |   |
|                                         |       |   |                                               |   |   |   |   |   |   |   |   |   |
| Available-for-sale investment securities at: |       |   |                                               |   |   |   |   |   |   |   |   |   |
| September 30, 2010                           |       | $      | 43,826,000                                         |   |   | $ | — |   |   | $ | 43,826,000 |   |   | $ | — |   |
| December 31, 2009                            |       | $      | 42,566,000                                         |   |   | $ | — |   |   | $ | 42,566,000 |   |   | $ | — |   |

|               |   |       |      | Fair Value Measurements, Using                     |   |                  |    |
|--------------------|--------|------------|-----------|----------------------------------------------------|--------|-----------------------|---------|
| (in thousands)     |   |       |      | Quoted Prices inActive Markets forIdentical Assets |   | OtherObservableInputs |    | SignificantUnobservableInputs |   | TotalGain |   |
|               |   | Fair Value |      | (Level 1)                                          |   | (Level 2)             |    | (Level 3) |   | (Losses) |   |
| Assets:            |   |       |      |                                               |   |                  |    |   |   |   |   |
| Impaired loans at: |   |       |      |                                               |   |                  |    |   |   |   |   |   |   |   |   |
| September 30, 2010 |   | $          | 8,435,000 |                                               |   | $                     | — |   |   | $ | 599,000 |   |   | $ | 7,836,000 |   |   | $ | (562,000 | ) |
| December 31, 2009  |   | $          | 7,784,000 |                                               |   | $                     | — |   |   | $ | — |   |   | $ | 7,784,000 |   |   | $ | (2,227,000 | ) |

----

Index

|                           |   | September 30, 2010 |        |   | December 31, 2009 |   |
|--------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
|                           |   | Carrying Amount    |        |   | Fair Value        |   |   | Carrying Amount |   |   | Fair Value |   |
|                           |   |               |        |   |              |   |   |   |   |   |   |   |
| Financial assets:              |   |               |        |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents      |   | $                  | 39,781,906  |   |              | $      | 39,781,906 |   |   | $ | 33,077,786 |   |   | $ | 39,077,786 |   |
| Available-for-sale             |   |               |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| investment securities          |   |               | 43,826,000  |   |              |   | 43,826,000 |   |   |   | 42,566,000 |   |   |   | 42,566,000 |   |
| Loans, net                     |   |               | 235,611,293 |   |              |   | 234,201,799 |   |   |   | 234,822,963 |   |   |   | 232,495,909 |   |
| Cash surrender value of life   |   |               |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| insurance policies             |   |               | 6,559,805   |   |              |   | 6,559,805 |   |   |   | 6,354,871 |   |   |   | 6,354,871 |   |
| Accrued interest receivable    |   |               | 1,113,928   |   |              |   | 1,113,928 |   |   |   | 1,241,412 |   |   |   | 1,241,412 |   |
| FHLB stock                     |   |               | 1,360,700   |   |              |   | 1,360,700 |   |   |   | 1,119,000 |   |   |   | 1,119,000 |   |
|                           |   |               |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:         |   |               |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                       |   |               | 295,588,048 |   |              |   | 296,676,462 |   |   |   | 294,282,143 |   |   |   | 294,833,469 |   |
| Long-term debt                 |   |               | 2,613,094   |   |              |   | 3,002,269 |   |   |   | 3,661,999 |   |   |   | 2,974,335 |   |
| Junior subordinated deferrable |   |               |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| interest debentures            |   |               | 3,093,000   |   |              |   | 804,180 |   |   |   | 3,093,000 |   |   |   | 959,000 |   |
| Accrued interest payable       |   |               | 103,441     |   |              |   | 103,441 |   |   |   | 139,988 |   |   |   | 139,988 |   |

----

Index

ITEM 2

----

Index

----

Index

----

Index

|                                                         |   | Average balances and weighted average yields and costs |    |
|--------------------------------------------------------------|--------|--------------------------------------------------------|---------|
|                                                         |   | Nine Months ended September 30,                        |    |
|                                                         |   | 2010                                                   |    |   | 2009 |   |
| (dollars in thousands)                                       |   | Average Balance                                        |    |   | Interest income/ Expense |   |   | Average yield/ Cost |   |   | Average Balance |   |   | Interest income/ Expense |   |   | Average yield/ Cost |   |
| ASSETS                                                       |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due from banks                                               |   | $                                                      | 28,065  |   |   | $ | 51 |   |   |   | 0.24 | % |   | $ | 6,251 |   |   | $ | 13 |   |   |   | 0.28 | % |
| Federal funds sold                                           |   |                                                   | -       |   |   |   | - |   |   |   | - | % |   |   | 5,872 |   |   |   | 9 |   |   |   | 0.20 | % |
| Available-for-sale investment securities:                    |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                      |   |                                                   | 27,843  |   |   |   | 551 |   |   |   | 2.65 | % |   |   | 26,600 |   |   |   | 956 |   |   |   | 4.81 | % |
| Exempt from Federal income taxes (1)                         |   |                                                   | 15,288  |   |   |   | 474 |   |   |   | 6.28 | % |   |   | 18,517 |   |   |   | 578 |   |   |   | 6.32 | % |
| Total securities (1)                                         |   |                                                   | 43,131  |   |   |   | 1,025 |   |   |   | 3.93 | % |   |   | 45,117 |   |   |   | 1,534 |   |   |   | 5.43 | % |
| Loans (2) (3)                                                |   |                                                   | 243,792 |   |   |   | 11,124 |   |   |   | 6.10 | % |   |   | 238,571 |   |   |   | 11,215 |   |   |   | 6.29 | % |
| Total interest-earning assets (1)                            |   |                                                   | 314,988 |   |   |   | 12,200 |   |   |   | 5.28 | % |   |   | 295,811 |   |   |   | 12,771 |   |   |   | 6.03 | % |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning assets, net of allowance for loan losses |   |                                                   | 30,020  |   |   |   |   |   |   |   |   |   |   |   | 23,718 |   |   |   |   |   |   |   |   |   |
| Total assets                                                 |   | $                                                      | 345,008 |   |   |   |   |   |   |   |   |   |   | $ | 319,529 |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                   |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                    |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other interest bearing                                       |   | $                                                      | 122,754 |   |   | $ | 549 |   |   |   | 0.60 | % |   | $ | 108,342 |   |   | $ | 989 |   |   |   | 1.22 | % |
| Time deposits less than $100,000                             |   |                                                   | 24,964  |   |   |   | 276 |   |   |   | 1.48 | % |   |   | 24,792 |   |   |   | 451 |   |   |   | 2.43 | % |
| Time deposits $100,000 or more                               |   |                                                   | 72,448  |   |   |   | 1,057 |   |   |   | 1.95 | % |   |   | 68,826 |   |   |   | 1,407 |   |   |   | 2.73 | % |
| Total interest-bearing deposits                              |   |                                                   | 220,166 |   |   |   | 1,882 |   |   |   | 1.14 | % |   |   | 201,960 |   |   |   | 2,847 |   |   |   | 1.88 | % |
| Short-term debt                                              |   |                                                   | -       |   |   |   | - |   |   |   | - | % |   |   | 2,640 |   |   |   | 16 |   |   |   | 0.81 | % |
| Long-term debt                                               |   |                                                   | 3,245   |   |   |   | 128 |   |   |   | 5.27 | % |   |   | 4,371 |   |   |   | 176 |   |   |   | 5.38 | % |
| Junior subordinated deferrable interest debentures           |   |                                                   | 3,093   |   |   |   | 86 |   |   |   | 3.72 | % |   |   | 3,093 |   |   |   | 101 |   |   |   | 4.37 | % |
| Total interest-bearing liabilities                           |   |                                                   | 226,504 |   |   |   | 2,096 |   |   |   | 1.24 | % |   |   | 212,064 |   |   |   | 3,140 |   |   |   | 1.98 | % |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing deposits                                 |   |                                                   | 77,917  |   |   |   |   |   |   |   |   |   |   |   | 67,247 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                            |   |                                                   | 2,901   |   |   |   |   |   |   |   |   |   |   |   | 2,245 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                            |   |                                                   | 307,322 |   |   |   |   |   |   |   |   |   |   |   | 281,556 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                   |   |                                                   | 37,686  |   |   |   |   |   |   |   |   |   |   |   | 37,973 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity             |   | $                                                      | 345,008 |   |   |   |   |   |   |   |   |   |   | $ | 319,529 |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income and margin (1)                           |   |                                                   |    |   |   | $ | 10,104 |   |   |   | 4.39 | % |   |   |   |   |   | $ | 9,631 |   |   |   | 4.58 | % |

| (1) | Interest income is not presented on a taxable-equivalent basis, however, the average yield was calculated on a taxable equivalent basis by using a marginal tax rate of 34%. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Nonaccrual loans are included in total loans.  Interest income is included on nonaccrual loans only to the extent cash payments have been received. There was $88 interest received on nonaccrual loans for the period ended September 30, 2010 and $36 for September 30, 2009.  There was $22 and $103 interest income reversed on nonaccrual loans for 2010 and 2009, respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Interest income on loans includes amortized loan fees, net of costs, of $427 and $469 for 2010 and 2009, respectively. |
|-----|------------------------------------------------------------------------------------------------------------------------|

----

Index

| Changes in net interest income due to changes in volumes and rates |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |   |   |
|                                                               |   | Nine months ended September 30, 2010 vs. September 30, 2009 |   |
|                                                               |   | due to change in: |   |
|                                                               |   | Average Volume |   |   | Average Rate (1) |   |   | Total |   |
|                                                               |   |   |   |   |   |   |   |   |   |
| (In thousands)                                                     |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in interest income:                            |   |   |   |   |   |   |   |   |   |
| Due from banks                                                     |   | $ | 45 |   |   | $ | (7 | ) |   | $ | 38 |   |
| Federal funds sold                                                 |   |   | (9 | ) |   |   | - |   |   |   | (9 | ) |
| Investment securities                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                            |   |   | 45 |   |   |   | (450 | ) |   |   | (405 | ) |
| Exempt from Federal income taxes                                   |   |   | (153 | ) |   |   | 49 |   |   |   | (104 | ) |
| Total securities                                                   |   |   | (108 | ) |   |   | (401 | ) |   |   | (509 | ) |
| Loans                                                              |   |   | 245 |   |   |   | (336 | ) |   |   | (91 | ) |
| Total interest income                                              |   | $ | 173 |   |   | $ | (744 | ) |   | $ | (571 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in interest expense:                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Other interest bearing deposits                                    |   |   | 132 |   |   |   | (572 | ) |   |   | (440 | ) |
| Time deposits less than $100,000                                   |   |   | 3 |   |   |   | (178 | ) |   |   | (175 | ) |
| Time deposits $100,000 or more                                     |   |   | 74 |   |   |   | (424 | ) |   |   | (350 | ) |
| Total interest-bearing deposits                                    |   |   | 209 |   |   |   | (1,174 | ) |   |   | (965 | ) |
| Short-term debt                                                    |   |   | (16 | ) |   |   | - |   |   |   | (16 | ) |
| Long-term debt                                                     |   |   | (45 | ) |   |   | (3 | ) |   |   | (48 | ) |
| Junior subordinated deferrable interest debentures                 |   |   | - |   |   |   | (15 | ) |   |   | (15 | ) |
| Total interest expense                                             |   |   | 148 |   |   |   | (1,192 | ) |   |   | (1,044 | ) |
| Increase in net interest income                                    |   | $ | 25 |   |   | $ | 448 |   |   | $ | 473 |   |

----

Index

| Non-interest income                                         |   |
|-------------------------------------------------------------|--------|
|                                                        |   | Nine Months ended September 30, |   |   |   |   |
| (in thousands)                                              |   | 2010 |   |   | 2009 |   |   | Increase (Decrease) |   |
| Service charges                                             |   | $ | 585 |   |   | $ | 567 |   |   | $ | 18 |   |
| Gain on sale of available-for-sale investment securities    |   |   | 11 |   |   |   | 169 |   |   |   | (158 | ) |
| Gain on sale of other real estate                           |   |   | - |   |   |   | 16 |   |   |   | (16 | ) |
| Mortgage loan brokerage fees                                |   |   | 31 |   |   |   | 41 |   |   |   | (10 | ) |
| Earnings on cash surrender value of life insurance policies |   |   | 221 |   |   |   | 215 |   |   |   | 6 |   |
| Gain from bank owned life insurance                         |   |   | - |   |   |   | 317 |   |   |   | (317 | ) |
| Other                                                       |   |   | 136 |   |   |   | 147 |   |   |   | (11 | ) |
| Total non-interest income                                   |   | $ | 984 |   |   | $ | 1,472 |   |   | $ | (488 | ) |

----

Index

| Non-interest expense                 |   |
|--------------------------------------|--------|
|                                 |   | Nine Months ended September 30, |   |   |   |   |
| (in thousands)                       |   | 2010 |   |   | 2009 |   |   | Increase (Decrease) |   |
| Salaries and employee benefits       |   | $ | 3,955 |   |   | $ | 3,663 |   |   | $ | 292 |   |
| Occupancy and equipment              |   |   | 996 |   |   |   | 1,170 |   |   |   | (174 | ) |
| Other real estate owned              |   |   | - |   |   |   | 14 |   |   |   | (14 | ) |
| Data processing                      |   |   | 473 |   |   |   | 428 |   |   |   | 45 |   |
| Operations                           |   |   | 256 |   |   |   | 363 |   |   |   | (107 | ) |
| Professional and legal               |   |   | 314 |   |   |   | 372 |   |   |   | (58 | ) |
| Advertising and business development |   |   | 153 |   |   |   | 164 |   |   |   | (11 | ) |
| Telephone and postal                 |   |   | 166 |   |   |   | 160 |   |   |   | 6 |   |
| Supplies                             |   |   | 145 |   |   |   | 113 |   |   |   | 32 |   |
| Assessment and insurance             |   |   | 559 |   |   |   | 475 |   |   |   | 84 |   |
| Other expenses                       |   |   | 315 |   |   |   | 291 |   |   |   | 24 |   |
| Total non-interest expense           |   | $ | 7,332 |   |   | $ | 7,213 |   |   | $ | 119 |   |

----

Index

|                                                         |   | Average balances and weighted average yields and costs |    |
|--------------------------------------------------------------|--------|--------------------------------------------------------|---------|
|                                                         |   | Three Months ended September 30,                       |    |
|                                                         |   | 2010                                                   |    |   | 2009 |   |
|                                                         |   |                                                   |    |   | Interest |   |   | Average |   |   |   |   |   | Interest |   |   | Average |   |
|                                                         |   | Average                                                |    |   | income/ |   |   | yield/ |   |   | Average |   |   | income/ |   |   | yield/ |   |
| (dollars in thousands)                                       |   | Balance                                                |    |   | Expense |   |   | Cost |   |   | Balance |   |   | Expense |   |   | Cost |   |
| ASSETS                                                       |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due from banks                                               |   | $                                                      | 29,966  |   |   | $ | 18 |   |   |   | 0.24 | % |   | $ | 18,550 |   |   | $ | 13 |   |   |   | 0.28 | % |
| Federal funds sold                                           |   |                                                   | -       |   |   |   | - |   |   |   | - | % |   |   | 1,563 |   |   |   | - |   |   |   | - | % |
| Available-for-sale investment securities:                    |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                      |   |                                                   | 28,214  |   |   |   | 178 |   |   |   | 2.50 | % |   |   | 28,612 |   |   |   | 332 |   |   |   | 4.60 | % |
| Exempt from Federal income taxes (1)                         |   |                                                   | 15,182  |   |   |   | 159 |   |   |   | 6.30 | % |   |   | 17,375 |   |   |   | 181 |   |   |   | 6.26 | % |
| Total securities (1)                                         |   |                                                   | 43,396  |   |   |   | 337 |   |   |   | 3.83 | % |   |   | 45,987 |   |   |   | 513 |   |   |   | 5.23 | % |
| Loans (2) (3)                                                |   |                                                   | 247,926 |   |   |   | 3,724 |   |   |   | 5.96 | % |   |   | 243,947 |   |   |   | 3,840 |   |   |   | 6.25 | % |
| Total interest-earning assets (1)                            |   |                                                   | 321,288 |   |   |   | 4,079 |   |   |   | 5.14 | % |   |   | 310,047 |   |   |   | 4,366 |   |   |   | 5.71 | % |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning assets, net of allowance for loan losses |   |                                                   | 27,155  |   |   |   |   |   |   |   |   |   |   |   | 25,497 |   |   |   |   |   |   |   |   |   |
| Total assets                                                 |   | $                                                      | 348,443 |   |   |   |   |   |   |   |   |   |   | $ | 335,544 |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                   |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                    |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other interest bearing                                       |   | $                                                      | 124,213 |   |   | $ | 171 |   |   |   | 0.55 | % |   | $ | 118,133 |   |   | $ | 305 |   |   |   | 1.02 | % |
| Time deposits less than $100,000                             |   |                                                   | 23,774  |   |   |   | 77 |   |   |   | 1.28 | % |   |   | 24,659 |   |   |   | 124 |   |   |   | 2.00 | % |
| Time deposits $100,000 or more                               |   |                                                   | 72,166  |   |   |   | 322 |   |   |   | 1.77 | % |   |   | 77,486 |   |   |   | 481 |   |   |   | 2.46 | % |
| Total interest-bearing deposits                              |   |                                                   | 220,153 |   |   |   | 570 |   |   |   | 1.03 | % |   |   | 220,278 |   |   |   | 910 |   |   |   | 1.64 | % |
| Long-term debt                                               |   |                                                   | 2,633   |   |   |   | 33 |   |   |   | 4.97 | % |   |   | 3,742 |   |   |   | 47 |   |   |   | 4.98 | % |
| Junior subordinated deferrable interest debentures           |   |                                                   | 3,093   |   |   |   | 30 |   |   |   | 3.85 | % |   |   | 3,093 |   |   |   | 30 |   |   |   | 3.85 | % |
| Total interest-bearing liabilities                           |   |                                                   | 225,879 |   |   |   | 633 |   |   |   | 1.11 | % |   |   | 227,113 |   |   |   | 987 |   |   |   | 1.72 | % |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest bearing deposits                                 |   |                                                   | 80,962  |   |   |   |   |   |   |   |   |   |   |   | 67,722 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                            |   |                                                   | 3,219   |   |   |   |   |   |   |   |   |   |   |   | 1,639 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                            |   |                                                   | 310,060 |   |   |   |   |   |   |   |   |   |   |   | 296,474 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                   |   |                                                   | 38,383  |   |   |   |   |   |   |   |   |   |   |   | 39,070 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity             |   | $                                                      | 348,443 |   |   |   |   |   |   |   |   |   |   | $ | 335,544 |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income and margin (1)                           |   |                                                   |    |   |   | $ | 3,446 |   |   |   | 4.36 | % |   |   |   |   |   | $ | 3,379 |   |   |   | 4.44 | % |

| (1) | Interest income is not presented on a taxable-equivalent basis, however, the average yield was calculated on a taxable-equivalent basis by using a marginal tax rate of 34%. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Nonaccrual loans are included in total loans. Interest income is included on nonaccrual loans only to the extent cash payments have been received. There was no interest received on nonaccrual loans for the period ended September 30, 2010 or September 30, 2009. There was $22 and $20 interest reversed on nonaccrual loans for the periods ended September 30, 2010 and 2009, respectively. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Interest income on loans includes amortized loan fees, net of costs, of $143 and $162 for 2010 and 2009, respectively. |
|-----|------------------------------------------------------------------------------------------------------------------------|

----

Index

| Changes in net interest income due to changes in volumes and rates |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
|                                                               |   | Three months ended September 30, 2010 vs. September 30, 2009 due to change in: |   |
|                                                               |   | Average Volume |   |   | Average Rate (1) |   |   | Total |   |
|                                                               |   |   |   |   |   |   |   |   |   |
| (In thousands)                                                     |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in interest income:                            |   |   |   |   |   |   |   |   |   |
| Due from banks                                                     |   | $ | 9 |   |   | $ | (4 | ) |   | $ | 5 |   |
| Investment securities                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                            |   |   | (5 | ) |   |   | (149 | ) |   |   | (154 | ) |
| Exempt from Federal income taxes                                   |   |   | (35 | ) |   |   | 13 |   |   |   | (22 | ) |
| Total securities                                                   |   |   | (40 | ) |   |   | (136 | ) |   |   | (176 | ) |
| Loans                                                              |   |   | 63 |   |   |   | (179 | ) |   |   | (116 | ) |
| Total interest income                                              |   |   | 32 |   |   |   | (319 | ) |   |   | (287 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in interest expense:                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Other interest-bearing deposits                                    |   |   | 16 |   |   |   | (150 | ) |   |   | (134 | ) |
| Time deposits less than $100,000                                   |   |   | (4 | ) |   |   | (43 | ) |   |   | (47 | ) |
| Time deposits $100,000 or more                                     |   |   | (33 | ) |   |   | (126 | ) |   |   | (159 | ) |
| Total interest-bearing deposits                                    |   |   | (21 | ) |   |   | (319 | ) |   |   | (340 | ) |
| Long-term debt                                                     |   |   | (14 | ) |   |   | - |   |   |   | (14 | ) |
| Junior subordinated deferrable interest debentures                 |   |   | - |   |   |   | - |   |   |   | - |   |
| Total interest expense                                             |   |   | (35 | ) |   |   | (319 | ) |   |   | (354 | ) |
| Increase in net interest income                                    |   | $ | 67 |   |   | $ | - |   |   | $ | 67 |   |

|   | (1) | Factors contributing to both changes in rate and volume have been attributed to changes in rates. |
|--------|-----|---------------------------------------------------------------------------------------------------|

----

Index

| Non-interest income                                                                              |   |
|--------------------------------------------------------------------------------------------------|--------|
|                                                                                             |   | Three Months ended September 30, |   |   |   |   |
| (in thousands)                                                                                   |   | 2010 |   |   | 2009 |   |   | Increase (Decrease) |   |
| Service charges                                                                                  |   | $ | 197 |   |   | $ | 198 |   |   | $ | (1 | ) |
| Gain on sale of available-for-sale investment securities,      net |   |   | 11 |   |   |   | 165 |   |   |   | (154 | ) |
| Gain on sale of other real estate                                                                |   |   | - |   |   |   | 16 |   |   |   | (16 | ) |
| Mortgage loan brokerage fees                                                                     |   |   | 23 |   |   |   | 13 |   |   |   | 10 |   |
| Earnings on cash surrender value of life insurance policies                                      |   |   | 75 |   |   |   | 73 |   |   |   | 2 |   |
| Other                                                                                            |   |   | 52 |   |   |   | 43 |   |   |   | 9 |   |
| Total non-interest income                                                                        |   | $ | 358 |   |   | $ | 508 |   |   | $ | (150 | ) |

----

Index

| Non-interest expense                 |   |
|--------------------------------------|--------|
|                                 |   | Three Months ended September 30, |   |   |   |   |
| (in thousands)                       |   | 2010 |   |   | 2009 |   |   | Increase (Decrease) |   |
| Salaries and employee benefits       |   | $ | 1,228 |   |   | $ | 1,200 |   |   | $ | 28 |   |
| Occupancy and equipment              |   |   | 333 |   |   |   | 388 |   |   |   | (55 | ) |
| Other real estate owned              |   |   | - |   |   |   | 3 |   |   |   | (3 | ) |
| Data processing                      |   |   | 159 |   |   |   | 153 |   |   |   | 6 |   |
| Operations                           |   |   | 78 |   |   |   | 121 |   |   |   | (43 | ) |
| Professional and legal               |   |   | 56 |   |   |   | 138 |   |   |   | (82 | ) |
| Advertising and business development |   |   | 40 |   |   |   | 43 |   |   |   | (3 | ) |
| Telephone and postal                 |   |   | 58 |   |   |   | 54 |   |   |   | 4 |   |
| Supplies                             |   |   | 48 |   |   |   | 38 |   |   |   | 10 |   |
| Assessment and insurance             |   |   | 152 |   |   |   | 142 |   |   |   | 10 |   |
| Other expenses                       |   |   | 110 |   |   |   | 84 |   |   |   | 26 |   |
| Total non-interest expense           |   | $ | 2,262 |   |   | $ | 2,364 |   |   | $ | (102 | ) |

----

Index

| Market value of securities available for sale |   |
|-----------------------------------------------|--------|
|                                          |   |
|                                          |   | September 30, 2010 |   |
| (in thousands)                                |   | AmortizedCost |   |   | Unrealized Gain |   |   | Unrealized Loss |   |   | Fair  Value |   |
| U.S. government agencies                      |   | $ | 3,429 |   |   | $ | 96 |   |   | $ | - |   |   | $ | 3,525 |   |
| Mortgage-backed securities:                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                                    |   |   | 9,450 |   |   |   | 335 |   |   |   | (17 | ) |   |   | 9,768 |   |
| SBA MBS                                       |   |   | 15,189 |   |   |   | 228 |   |   |   | (2 | ) |   |   | 15,415 |   |
| Municipal securities                          |   |   | 14,846 |   |   |   | 372 |   |   |   | (100 | ) |   |   | 15,118 |   |
| Total                                         |   | $ | 42,914 |   |   | $ | 1,031 |   |   | $ | (119 | ) |   | $ | 43,826 |   |

|                        |   | December 31, 2009 |   |
|-----------------------------|--------|-------------------|--------|
| (in thousands)              |   | AmortizedCost     |   |   | UnrealizedGain |   |   | Unrealized Loss |   |   | Fair Value |   |
| U.S. government agencies    |   | $                 | 2,910  |   |   | $ | 105 |   |   | $ | - |   |   | $ | 3,015 |   |
| Mortgage-backed securities: |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency MBS                  |   |              | 8,986  |   |   |   | 295 |   |   |   | - |   |   |   | 9,281 |   |
| SBA MBS                     |   |              | 15,326 |   |   |   | 27 |   |   |   | (46 | ) |   |   | 15,307 |   |
| Municipal securities        |   |              | 15,338 |   |   |   | 49 |   |   |   | (424 | ) |   |   | 14,963 |   |
| Total                       |   | $                 | 42,560 |   |   | $ | 476 |   |   | $ | (470 | ) |   | $ | 42,566 |   |

----

Index

| (dollars in  thousands)                    |   | September 30, 2010 |    |   | December 31, 2009 |   |
|------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
| Commercial                                           |   | $                  | 51,856  |   |              |   | 21 | % |   | $ | 49,443 |   |   |   | 21 | % |
| Real estate – mortgage (1)                     |   |               | 167,436 |   |              |   | 69 |   |   |   | 162,772 |   |   |   | 67 |   |
| Real estate – construction                     |   |               | 16,391  |   |              |   | 7 |   |   |   | 22,582 |   |   |   | 9 |   |
| Agricultural                                         |   |               | 4,768   |   |              |   | 2 |   |   |   | 4,727 |   |   |   | 2 |   |
| Consumer and other                                   |   |               | 1,981   |   |              |   | 1 |   |   |   | 1,937 |   |   |   | 1 |   |
| Subtotal                                             |   |               | 242,432 |   |              |   | 100 | % |   |   | 241,461 |   |   |   | 100 | % |
| Deferred loan fees, net                              |   |               | (373    | )      |              |   |   |   |   |   | (407 | ) |   |   |   |   |
| Allowance for loan losses                            |   |               | (6,448  | )      |              |   |   |   |   |   | (6,231 | ) |   |   |   |   |
| Total loans, net                                     |   | $                  | 235,611 |   |              |   |   |   |   | $ | 234,823 |   |   |   |   |   |
|                                                 |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| (1) Consists primarily of commercial mortgage loans. |   |

----

Index

| Changes in allowance for loan losses         |   |
|----------------------------------------------|--------|
|                                         |   |   |   |   |   |   |   |   |   |
|                                         |   | Nine Months ended |   |   | Nine Months ended |   |   | Year ended |   |
|                                         |   | September 30, 2010 |   |   | September 30, 2009 |   |   | December 31, 2009 |   |
| (dollars in thousands)                       |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |
| Balance, beginning                           |   | $ | 6,231 |   |   | $ | 3,244 |   |   | $ | 3,244 |   |
| Provision for  loan losses         |   |   | 1,800 |   |   |   | 2,000 |   |   |   | 7,000 |   |
| Charge-offs-real estate                      |   |   | (1,530 | ) |   |   | (173 | ) |   |   | - |   |
| Charge-offs-commercial                       |   |   | (34 | ) |   |   | - |   |   |   | (4,013 | ) |
| Charge-offs-other                            |   |   | (29 | ) |   |   | - |   |   |   | - |   |
| Recoveries                                   |   |   | 10 |   |   |   | - |   |   |   | - |   |
| Balance, ending                              |   | $ | 6,448 |   |   | $ | 5,071 |   |   | $ | 6,231 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net charge-offs to average loans outstanding |   |   | 0.65 | % |   |   | 0.10 | % |   |   | 1.67 | % |
| Average loans outstanding                    |   | $ | 243,792 |   |   | $ | 238,571 |   |   | $ | 239,428 |   |
| Ending allowance to total loans outstanding  |   |   | 2.66 | % |   |   | 2.11 | % |   |   | 2.58 | % |

| (dollars in thousands)                         |   | September 30, 2010 |   |   | December 31,2009 |   |
|------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                           |   |               |   |   |             |   |
| Furniture and equipment                        |   | $                  | 2,963  |   |             | $      | 2,955 |   |
| Construction in progress                       |   |               | -      |   |             |   | 4,567 |   |
| Premises                                       |   |               | 6,213  |   |             |   | 2,095 |   |
| Leasehold improvements                         |   |               | 207    |   |             |   | 551 |   |
| Land                                           |   |               | 1,461  |   |             |   | 606 |   |
|                                           |   |               | 10,844 |   |             |   | 10,774 |   |
|                                           |   |               |   |   |             |   |   |   |
| Less accumulated depreciation and amortization |   |               | (2,252 | )      |             |   | (2,732 | ) |
| Total                                          |   | $                  | 8,592  |   |             | $      | 8,042 |   |

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Index

| Deposit Portfolio      |   |
|------------------------|--------|
| (dollars in thousands) |   | September 30, 2010 |   |   | December 31, 2009 |   |
| Non-interest bearing   |   | $ | 80,874 |   |   |   | 27 | % |   | $ | 76,575 |   |   |   | 26 | % |
| Interest bearing       |   |   | 119,562 |   |   |   | 41 |   |   |   | 121,398 |   |   |   | 41 |   |
| Brokered deposits      |   |   | 17,176 |   |   |   | 6 |   |   |   | 17,849 |   |   |   | 6 |   |
| Time deposits          |   |   | 77,976 |   |   |   | 26 |   |   |   | 78,460 |   |   |   | 27 |   |
| Total                  |   | $ | 295,588 |   |   |   | 100 | % |   | $ | 294,282 |   |   |   | 100 | % |

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Index

| Capital and capital adequacy ratios                                 |
|---------------------------------------------------------------------|
|                                                                |   |   |
|                                                                |   | September 30, 2010 |   | December 31, 2009 |
| (dollars in thousands)                                              |   | Amount |   | Ratio |   | Amount |   | Ratio |
| Leverage Ratio                                                      |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                              |   | $ | 40,984 |   | 11.8% |   | $ | 39,865 |   | 11.4% |
| Minimum regulatory requirement                                      |   | $ | 13,938 |   | 4.0% |   | $ | 13,982 |   | 4.0% |
|                                                                |   |   |   |   |   |   |   |   |
| Valley Business Bank                                                |   | $ | 40,807 |   | 11.7% |   | $ | 39,845 |   | 11.4% |
| Minimum requirement for “Well- Capitalized” institution |   | $ | 17,422 |   | 5.0% |   | $ | 17,472 |   | 5.0% |
| Minimum regulatory requirement                                      |   | $ | 13,933 |   | 4.0% |   | $ | 13,977 |   | 4.0% |
|                                                                |   |   |   |   |   |   |   |   |
| Tier 1 Risk-Based Capital Ratio                                     |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                              |   | $ | 40,984 |   | 15.8% |   | $ | 39,865 |   | 14.8% |
| Minimum regulatory requirement                                      |   | $ | 10,365 |   | 4.0% |   | $ | 10,804 |   | 4.0% |
|                                                                |   |   |   |   |   |   |   |   |
| Valley Business Bank                                                |   | $ | 40,807 |   | 15.8% |   | $ | 39,845 |   | 14.8% |
| Minimum requirement for “Well- Capitalized” institution |   | $ | 15,542 |   | 6.0% |   | $ | 16,201 |   | 6.0% |
| Minimum regulatory requirement                                      |   | $ | 10,361 |   | 4.0% |   | $ | 10,801 |   | 4.0% |
|                                                                |   |   |   |   |   |   |   |   |
| Total Risk-Based Capital Ratio                                      |   |   |   |   |   |   |   |   |
| Valley Commerce Bancorp and Subsidiary                              |   | $ | 44,584 |   | 17.1% |   | $ | 43,277 |   | 16.0% |
| Minimum regulatory requirement                                      |   | $ | 20,730 |   | 8.0% |   | $ | 21,608 |   | 8.0% |
|                                                                |   |   |   |   |   |   |   |   |
| Valley Business Bank                                                |   | $ | 44,406 |   | 17.0% |   | $ | 43,256 |   | 16.0% |
| Minimum requirement for “Well- Capitalized” institution |   | $ | 25,904 |   | 10.0% |   | $ | 27,002 |   | 10.0% |
| Minimum regulatory requirement                                      |   | $ | 20,723 |   | 8.0% |   | $ | 21,601 |   | 8.0% |

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Index

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Index

ITEM 3

ITEM 4

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Index

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

ITEM 1A – RISK FACTORS

ITEM 2 – CHANGES IN SECURITIES AND USE OF PROCEEDS

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

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Index

ITEM 4 – RESERVED

ITEM 5 – OTHER INFORMATION

ITEM 6 – EXHIBITS

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Index

SIGNATURES

|                    | VALLEY COMMERCE BANCORP |
|-------------------------|-------------------------|
|                    |                    |
|                    |                    |
| Date: November 15, 2010 | By:                     | /s/ Allan W. Stone |
|                    |                    |   |
|                    |                    | Allan W. Stone, President and Chief Executive Officer |
|                    |                    |   |
|                    |                    |   |
|                    |                    |
| Date: November 15, 2010 | By:                     | /s/Roy O. Estridge |
|                    |                    |   |
|                    |                    | Roy O. Estridge, Chief Financial Officer |

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Index

Exhibit Index

| 31.1 | Rule 13a-14(a)/15d-14(a) Certification |
|------|----------------------------------------|
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification |
| 32.1 | Section 1350 Certifications            |

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