----

| Virginia(State of incorporation or organization)                                                                                       | 20-0469337(I.R.S. Employer Identification No.) |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|
| 126 South Main StreetBlackstone, VA  23824(434) 292-7221 (Address and telephone number of principal executive offices)  |

----

| Part I.                     Financial Information |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                       | Page No. |
|                                                                                                                                                       | Item 1. | Financial Statements |   |
|                                                                                                                                                       |   |
|                                                                                                                                                       |   | Consolidated Balance Sheets | 3     |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       |   | Consolidated Statements of Income | 4     |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       |   | Consolidated Statements of Changes in Stockholders’ Equity | 5     |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       |   | Consolidated Statements of Cash Flows | 6     |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       |   | Notes to Interim Consolidated Financial Statements | 7     |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       | Item 2. | Management’s Discussion and Analysis of Financial |   |
|                                                                                                                                                       |   |       Condition and Results of Operations | 18    |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       | Item 4. | Controls and Procedures | 30    |
|                                                                                                                                                       |   |   |   |
| Part II.                     Other Information    |
|                                                                                                                                                       |   |   |   |
|                                                                                                                                                       | Item 1. | Legal Proceedings | 31    |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       | Item 1A. | Risk Factors |   |
|                                                                                                                                                       |   |   |   |
|                                                                                                                                                       | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 31    |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       | Item 3. | Defaults upon Senior Securities | 31    |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       | Item 4. | Reserved | 32    |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       | Item 5. | Other Information | 32    |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       | Item 6. | Exhibits | 32    |
|                                                                                                                                                       |   |   |
| Signatures                                                                                                                                                 | 33    |

----

|                                                                                    |   | March 31                                                                                                        |   |  December 31,                                                                          |
|-----------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|
|                                                                                    |   | 2010                                                                                                            |   | 2009                                                                                        |
| Assets                                                                                  |   | (Unaudited)                                                                                                     |   |                                                                                        |
|                                                                                    |   |                                                                                                            |   |                                                                                        |
| Cash and due from banks                                                                 | $      |              7,045                             | $      |           6,339                           |
| Interest-bearing deposits in banks                                                      |   |                1,081                 |   |             1,108               |
| Federal funds sold                                                                      |   |                7,519                 |   |             9,588               |
| Securities available for sale, at fair market value                                     |   |              77,896                            |   |           66,777                          |
| Restricted securities, at cost                                                          |   |                1,189                 |   |             1,189               |
| Loans, net of allowance for loan losses of $2,911                                       |   |                                                                                                            |   |                                                                                        |
| and $2,673                                                                              |   |             210,695                                 |   |         214,862                                     |
| Premises and equipment, net                                                             |   |                7,466                 |   |             7,544               |
| Accrued interest receivable                                                             |   |                1,856                 |   |             1,860               |
| Other assets                                                                            |   |              10,412                            |   |           10,637                          |
| Other real estate owned                                                                 |   |                1,197                 |   |             1,073               |
|                                                                                    |   |                                                                                                            |   |                                                                                        |
| Total assets                                                                            | $      |           326,356                                             | $      |       320,978                                                 |
|                                                                                    |   |                                                                                                            |   |                                                                                        |
| Liabilities and Stockholders' Equity                                                    |   |                                                                                                            |   |                                                                                        |
|                                                                                    |   |                                                                                                            |   |                                                                                        |
| Liabilities                                                                             |   |                                                                                                            |   |                                                                                        |
| Deposits:                                                                               |   |                                                                                                            |   |                                                                                        |
| Noninterest-bearing                                                                     | $      |             35,819                                  | $      |        33,999                                            |
| Interest-bearing                                                                        |   |             236,917                                 |   |         234,797                                     |
| Total deposits                                                                          | $      |           272,736                                             | $      |       268,796                                                 |
| FHLB advances                                                                           |   |                5,000                 |   |             5,000               |
| Other borrowings                                                                        |   |                6,285                 |   |             5,483               |
| Accrued interest payable                                                                |   |                   951 |   |               955     |
| Accrued expenses and other liabilities                                                  |   |                2,063                 |   |             1,754               |
| Total liabilities                                                                       | $      |           287,035                                             | $      |       281,988                                                 |
|                                                                                    |   |                                                                                                            |   |                                                                                        |
|                                                                                    |   |                                                                                                            |   |                                                                                        |
| Stockholders' Equity                                                                    |   |                                                                                                            |   |                                                                                        |
|      Preferred stock, $0.50 par value; authorized 1,000,000 shares; |   |                                                                                                            |   |                                                                                        |
| none outstanding                                                                        | $      |                   -   | $      |                - |
|      Common stock, $0.50 par value; authorized 10,000,000 shares;   |   |                                                                                                            |   |                                                                                        |
| issued and outstanding, 2,365,239 in 2010 and                                           |   |                1,183                 |   |             1,186               |
| 2,371,139 in 2009                                                                       |   |                                                                                                            |   |                                                                                        |
|      Retained earnings                                              |   |              38,319                            |   |           38,177                          |
|      Accumulated other comprehensive loss                           |   |                  (181)     |   |              (373)         |
| Total stockholders' equity                                                              | $      |             39,321                                  | $      |         38,990                                      |
|                                                                                    |   |                                                                                                            |   |                                                                                        |
| Total liabilities and stockholders' equity                                              | $      |           326,356                                             | $      |       320,978                                                 |
|                                                                                    |   |                                                                                                            |   |                                                                                        |

----

|                                                                 |   | Three Months EndedMarch 31, |   |
|----------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                 |   | 2010                        |   | 2009 |   |
| Interest and Dividend Income                                         |   |                        |   |   |   |
|   Loans, including fees                                    | $      | 3,420                       | $      | 3,457 |   |
|   Investment securities:                                   |   |                        |   |   |   |
| Taxable                                                              |   |  498                   |   |  368 |   |
| Tax-exempt                                                           |   |  160                   |   |  137 |   |
|   Federal Funds sold                                       |   |  5                     |   |  5 |   |
|   Other                                                    |   |  4                     |   |  57 |   |
| Total interest and dividend income                                   | $      | 4,087                       | $      | 4,024 |   |
|                                                                 |   |                        |   |   |   |
| Interest Expense                                                     |   |                        |   |   |   |
|   Deposits                                                 | $      | 1,131                       | $      |  1,315 |   |
|   Other borrowings                                         |   |  37                    |   |  59 |   |
| Total interest expense                                               | $      | 1,168                       | $      |  1,374 |   |
|                                                                 |   |                        |   |   |   |
|       Net interest income              | $      | 2,919                       | $      |  2,650 |   |
|                                                                 |   |                        |   |   |   |
| Provision for loan losses                                            |   |  300                   |   |  45 |   |
|                                                                 |   |                        |   |   |   |
| Net interest income after provision                                  |   |                        |   |   |   |
|        for loan losses            | $      | 2,619                       | $      | 2,605 |   |
|                                                                 |   |                        |   |   |   |
| Noninterest Income                                                   |   |                        |   |   |   |
|   Service charges on deposit accounts                      | $      |  261                   | $      |  287 |   |
|   Net gain on sales of securities                          |   |  4                     |   |  3 |   |
|   Net gain on sales of loans                               |   |  10                    |   |  22 |   |
|   Income from bank owned life insurance                    |   |  68                    |   |  70 |   |
|   ATM fee income                                           |   |  150                   |   |  127 |   |
|   Other                                                    |   |  64                    |   |  88 |   |
| Total noninterest income                                             | $      | 557                         | $      | 597 |   |
|                                                                 |   |                        |   |   |   |
| Noninterest Expense                                                  |   |                        |   |   |   |
|   Salaries and employee benefits                           | $      |  1,364                 | $      | 1,317 |   |
|   Net occupancy expense                                    |   |  153                   |   |  147 |   |
|   Equipment expense                                        |   |  131                   |   |  144 |   |
|   FDIC deposit insurance                                   |   |  156                   |   |  68 |   |
|   Other                                                    |   |  564                   |   |  556 |   |
| Total noninterest expense                                            | $      |  2,368                 | $      | 2,232 |   |
|                                                                 |   |                        |   |   |   |
|        Income before income taxes |   |  808                   |   | 970 |   |
|                                                                 |   |                        |   |   |   |
|        Income taxes               |   |  200                   |   | 260 |   |
|                                                                 |   |                        |   |   |   |
|        Net income                 | $      |  608                   | $      | 710 |   |
| Earnings per share, basic & diluted                              | $      |  0.26                  | $      | 0.30 |   |

----

|                                                                                                     |   |        |   |         |   | Accumulated   |   |        |   |         |
|----------------------------------------------------------------------------------------------------------|--------|-------------|--------|--------------|--------|---------------|--------|-------------|--------|--------------|
|                                                                                                     |   |        |   |         |   | Other         |   |        |   |         |
|                                                                                                     |   |        |   |         |   | Compre-       |   |        |   |         |
|                                                                                                     |   |        |   |         |   | hensive       |   | Compre-     |   |         |
|                                                                                                     |   | Common      |   | Retained     |   | Income        |   | hensive     |   |         |
|                                                                                                     |   | Stock       |   | Earnings     |   | (Loss)        |   | Income      |   | Total        |
|                                                                                                     |   |        |   |         |   |          |   |        |   |         |
| Balance at December 31, 2008                                                                             | $      |  1,196 | $      |  37,198 | $      |  (2,052) |   |        | $      |  36,342 |
| Comprehensive income:                                                                                    |   |        |   |         |   |          |   |        |   |         |
|    Net Income                                                                             |   |  -     |   |  710    |   |  -       | $      |  710   |   |  710    |
|    Other comprehensive income, net of taxes                                               |   |        |   |         |   |          |   |        |   |         |
|        Unrealized gains on securities available                       |   |        |   |         |   |          |   |        |   |         |
|            for sale, net of deferred taxes        |   |  -     |   |  -      |   |  299     |   |  299   |   |  299    |
|        Less: reclassification adjustment for                          |   |        |   |         |   |          |   |        |   |         |
|            gain on sale of securities, net of tax |   |  -     |   |  -      |   |  (2)     |   |  (2)   |   |  (2)    |
|        Other comprehensive income                                     |   |        |   |         |   |          |   |  297   |   |         |
|        Total comprehensive income                                     |   |  -     |   |  -      |   |  -       | $      |  1,007 |   |  -      |
| Shares repurchased                                                                                       |   |  (4)   |   |  (85)   |   |  -       |   |        |   |  (89)   |
| Cash dividends declared ($0.17 per share)                                                                |   |  -     |   |  (405)  |   |  -       |   |        |   |  (405)  |
| Balance at March 31, 2009                                                                                | $      |  1,192 | $      |  37,418 | $      |  (1,755) |   |        |   |  36,855 |
|                                                                                                     |   |        |   |         |   |          |   |        |   |         |
| Balance at December 31, 2009                                                                             | $      |  1,186 | $      |  38,177 | $      |  (373)   |   |        | $      |  38,990 |
| Comprehensive Income:                                                                                    |   |        |   |         |   |          |   |        |   |         |
|    Net income                                                                             |   |  -     |   |  608    |   |  -       | $      |  608   |   |  608    |
|    Other comprehensive income, net of taxes                                               |   |        |   |         |   |          |   |        |   |         |
|        Unrealized gains on securities available                       |   |        |   |         |   |          |   |        |   |         |
|            for sale, net of deferred taxes        |   |  -     |   |  -      |   |  195     |   |  195   |   |  195    |
|        Less: reclassification adjustment for                          |   |        |   |         |   |          |   |        |   |         |
|            gain on sale of securities, net of tax |   |  -     |   |  -      |   |  (3)     |   |  (3)   |   |  (3)    |
|        Total other comprehensive income                               |   |        |   |         |   |          | $      |  192   |   |         |
|        Total comprehensive income                                     |   |  -     |   |  -      |   |  -       | $      |  800   |   |  -      |
| Shares repurchased                                                                                       |   |  (3)   |   |  (63)   |   |  -       |   |        |   |  (66)   |
| Cash dividends declared ($0.17 per share)                                                                |   |  -     |   |  (403)  |   |  -       |   |        |   |  (403)  |
| Balance at March 31, 2010                                                                                | $      |  1,183 | $      |  38,319 | $      |  (181)   |   |        | $      |  39,321 |

----

| Consolidated Statements of Cash Flows (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |               |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|
|                                                                                                       (Dollars in thousands) | Three Months Ended |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  March 31,    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               | 2010 |   | 2009 |   |
| Cash Flows from Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               |   |   |   |   |
|   Net Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $                  |  $608 | $ |  710 |   |
|   Adjustments to reconcile net income to net cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |               |   |   |   |   |
|      provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |               |   |   |   |   |
|          Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |               |  146 |   |  148 |   |
|          Provision for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |               |  300 |   |  45 |   |
|          Net (gain) on sales of loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |               |  (10) |   |  (22) |   |
|          Origination of loans held for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |  (721) |   |  (1,527) |   |
|          Proceeds from sales of loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |               |  731 |   |  1,549 |   |
|          Net (gain) on sales and calls of securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |               |  (4) |   |  (3) |   |
|          Net amortization of securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               |  49 |   |  43 |   |
|          Changes in assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |   |   |   |   |
|              Decrease (increase) in accrued interest receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |               |  4 |   |  (6) |   |
|              Decrease (increase) in other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |               |  126 |   |  (41) |   |
|              (Decrease) in accrued interest payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               |  (4) |   |  (22) |   |
|              Increase in accrued expenses and other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |               |  309 |   |  394 |   |
|          Net cash provided by operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $                  |  1,534 | $ |  1,268 |   |
| Cash Flows from Investing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               |   |   |   |   |
|   Activity in available for sale securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |               |   |   |   |   |
|          Calls and sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $                  |  8,805 |   |  6,640 |   |
|          Maturities and prepayments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |               |  1,993 |   |  2,136 |   |
|          Purchases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |               |  (21,670) |   |  (14,143) |   |
|   Purchase of restricted securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |               |  - |   |  (28) |   |
|   Net decrease (increase) in loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |               |  3,743 |   |  (3,910) |   |
|   Purchases of land, premises and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |               |  (68) |   |  (67) |   |
|          Net cash (used in) investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $                  |  (7,197) | $ |  (9,372) |   |
| Cash Flows from Financing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               |   |   |   |   |
|   Net increase in deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $                  |  3,940 | $ |  2,105 |   |
|   Net increase (decrease) in other borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |               |  802 |   |  (1,686) |   |
|   Repurchase of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |               |  (66) |   |  (89) |   |
|   Dividends paid                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |               |  (403) |   |  (405) |   |
|          Net cash provided by (used in) financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $                  |  4,273 | $ |  (75) |   |
|          Net (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $                  |  (1,390) | $ |  (8,179) |   |
| Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |   |   |   |   |
|   Beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |               |  17,035 |   |  29,928 |   |
|   End of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $                  |  15,645 | $ |  21,749 |   |
| Supplemental Disclosures of Cash Flow Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |               |   |   |   |   |
|   Cash paid during the period for:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |               |   |   |   |   |
|       Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $                  |  1,172 | $ |  1,396 |   |
|       Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $                  |  104 | $ |  - |   |
| Supplemental Disclosures of Noncash Investing and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |               |   |   |   |   |
|    Financing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |               |   |   |   |   |
|       Other real estate acquired in settlement of loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $                  |  124 | $ |  80 |   |
|       Unrealized gains on securities available for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $                  |  291 | $ |  450 |   |

----

|                                         |   |  March 31, 2010                             |
|----------------------------------------------|--------|--------------------------------------------------|
| (Dollars in thousands)                       |   |                                             |   | Gross |   | Gross |   |   |
|                                         |   | Amortized                                        |   | Unrealized |   | Unrealized |   | Fair |
|                                         |   | Cost                                             |   | Gains |   | (Losses) |   | Value |
| U.S. government and                          |   |                                             |   |   |   |   |   |   |
|      federal agency | $      |        34,821 | $ |  53 | $ |  (121) | $ |  34,753 |
| State and municipal                          |   |  18,807                                     |   |  388 |   |  (80) |   |  19,115 |
| Mortgage-backed                              |   |  23,044                                     |   |  579 |   |  (388) |   |  23,235 |
| Corporate                                    |   |  754                                        |   |  39 |   |  - |   |  793 |
| Securities available for sale                | $      |  77,426                                     | $ |  1,059 | $ |  (589) | $ |  77,896 |

|                                 |   |   December 31, 2009 |
|--------------------------------------|--------|-------------------------------|
|                                 |   |                          |   | Gross |   | Gross |   |   |
| (Dollars in thousands)               |   | Amortized                     |   | Unrealized |   | Unrealized |   | Fair |
|                                 |   | Cost                          |   | Gains |   | (Losses) |   | Value |
| U.S. government                      |   |                          |   |   |   |   |   |   |
|    and federal agency | $      |  26,383                  | $ |  47 | $ |  (60) | $ |  26,370 |
| State and municipal                  |   |  19,012                  |   |  267 |   |  (179) |   |  19,100 |
| Mortgage-backed                      |   |  20,450                  |   |  566 |   |  (486) |   |  20,530 |
| Corporate                            |   |  754                     |   |  23 |   |  - |   |  777 |
| Securities available for sale        | $      |  66,599                  | $ |  903 | $ |  (725) | $ |  66,777 |

----

|                                        |   | Amortized    |   | Fair         |
|---------------------------------------------|--------|--------------|--------|--------------|
|                                        |   | Cost         |   | Value        |
|                                        |   |         |   |         |
| Maturing within one year                    | $      |  1,295  | $      |  1,304  |
| Maturing after one year through five years  |   |  24,445 |   |  24,571 |
| Maturing after five years through ten years |   |  15,248 |   |  15,343 |
| Maturing after ten years                    |   |  13,394 |   |  13,443 |
| Mortgage-backed securities                  |   |  23,044 |   |  23,235 |
| Securities available for sale               | $      |  77,426 | $      |  77,896 |

|                |   |  Less than 12 Months                                                           |   |  12 Months or More                                                                                         |
|---------------------|--------|-------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|
|                |   |  Fair                                                                          |   |  Unrealized                                                                                                |   |  Fair |   |  Unrealized |
| March 31, 2010      |   |  Value                                                                         |   |  (Loss)                                                                                                    |   |  Value |   |  (Loss) |
|                |   | (Dollars in thousands)                                                              |
| U.S. government     |   |                                                                                |   |                                                                                                            |   |   |   |   |
| and federal agency  | $      |          14,388                        | $      |              (111)                             | $ |               501 | $ |                (10) |
| State and municipal |   |              1,143 |   |                   (6) |   |              2,776 |   |                 (74) |
| Mortgage-backed     |   |              3,165 |   |                 (26)            |   |              1,956 |   |                (362) |
| Total temporarily   |   |                                                                                |   |                                                                                                            |   |   |   |   |
| impaired securities | $      |          18,696                        | $      |              (143)                             | $ |            5,233 | $ |              (446) |

|                |   |  Less than 12 Months                                                           |   |  12 Months or More                                                                                         |
|---------------------|--------|-------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|
|                |   |  Fair                                                                          |   |  Unrealized                                                                                                |   |  Fair |   |  Unrealized |
| December 31, 2009   |   |  Value                                                                         |   |  (Loss)                                                                                                    |   |  Value |   |  (Loss) |
|                |   | (Dollars in thousands)                                                              |
| U.S. government     |   |                                                                                |   |                                                                                                            |   |   |   |   |
| and federal agency  | $      |            9,461             | $      |                (60)                  | $ |                 - | $ |                 - |
| State and municipal |   |              5,226 |   |                 (54)            |   |              2,350 |   |                (125) |
| Mortgage-backed     |   |              1,036 |   |                   (1) |   |              3,022 |   |                (485) |
| Total temporarily   |   |                                                                                |   |                                                                                                            |   |   |   |   |
| impaired securities | $      |          15,723                        | $      |              (115)                             | $ |            5,372 | $ |              (610) |

----

|                                                      |   | (in thousands) |
|-----------------------------------------------------------|--------|----------------|
|                                                      |   |           |
| Credit losses recognized in earnings, beginning of period | $      |  60       |
|                                                      |   |           |
| Recognition of credit losses for which an OTTI was not    |   |           |
| previously recognized                                     |   |  -        |
|                                                      |   |           |
| Credit losses recognized in earnings, end of period       | $      |  60       |

| (Dollars in thousands)                                      |   | March 31,     |   | December 31,  |
|-------------------------------------------------------------|--------|---------------|--------|---------------|
|                                                        |   | 2010          |   | 2009          |
| Real estate loans:                                          |   |          |   |          |
|    Commercial                                | $      |  65,526  | $      |  67,740  |
|    Residential 1-4 family                    |   |  107,358 |   |  107,166 |
|    Construction                              |   |  12,492  |   |  12,660  |
|    Total real estate loans                   | $      |  185,376 | $      |  187,566 |
|                                                        |   |          |   |          |
| Commercial loans                                            |   |  15,211  |   |  15,705  |
| Consumer loans                                              |   |  13,019  |   |  14,264  |
|         Total loans | $      |  213,606 | $      |  217,535 |
|                                                        |   |          |   |          |
| Less:  allowance for loan losses                  |   |  2,911   |   |  2,673   |
|         Loans, net  | $      |  210,695 | $      |  214,862 |

----

|                                                      |   Three Months Ended |
|-----------------------------------------------------------|---------------------------|
|   (Dollars in thousands, except % data)              |   March 31,          |
|                                                      |                      | 2010 |   | 2009 |   |
| Balance at the beginning of period                        | $                         |  2,673 | $ |  2,167 |   |
| Provision for loan losses                                 |                      |  300 |   |  45 |   |
| Loans charged off                                         |                      |  (66) |   |  (31) |   |
| Recoveries of loans previously charged off                |                      |  4 |   |  9 |   |
| Balance at the end of the period                          | $                         |  2,911 | $ |  2,190 |   |
|                                                      |                      |   |   |   |   |
| Ratio of allowance for loan losses to end of period       |                      |   |   |   |   |
|      loans, net of deferred fees |                      | 1.36% |   | 1.01% |   |
|                                                      |                      |   |   |   |   |
| Ratio of net charge-offs (recoveries) to average          |                      |   |   |   |   |
|     loans net of deferred fees1       |                      | 0.12% |   | 0.04% |   |
| 1 Net charge-offs are on an annualized basis.             |                      |   |   |   |   |

----

|                                                                                                                               |   | March 31,     |   | December 31,  |
|------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|--------|---------------|
| (Dollars in thousands, except % data)                                                                                              |   | 2010          |   | 2009          |
|                                                                                                                               |   |          |   |          |
| Total impaired loans                                                                                                               | $      |  6,012   | $      |  6,116   |
|                                                                                                                               |   |          |   |          |
| Impaired loans with a valuation allowance                                                                                          | $      |  3,806   | $      |  4,031   |
| Valuation allowance                                                                                                                |   |  (1,003) |   |  (869)   |
|     Impaired loans, net of allowance                                                                           | $      |  $2,803  | $      |  3,162   |
|                                                                                                                               |   |          |   |          |
| Impaired loans without a valuation allowance                                                                                       | $      |  2,206   | $      |  2,085   |
|                                                                                                                               |   |          |   |          |
| Average investment in impaired loans                                                                                               | $      |  6,047   | $      |  6,167   |
|                                                                                                                               |   |          |   |          |
| Interest income recognized on impaired loans                                                                                       | $      |  147     | $      |  493     |
|                                                                                                                               |   |          |   |          |
| Non-accrual loans excluded from the impairment                                                                                     |   |          |   |          |
|     disclosure                                                                                                 | $      |  2,546   | $      |  2,033   |
|                                                                                                                               |   |          |   |          |
| Non-performing assets:                                                                                                             |   |          |   |          |
| Non-accrual loans                                                                                                                  | $      |  5,701   | $      |  5,259   |
| Loans past due 90 days or more and still accruing                                                                                  |   |  -       |   |  83      |
| Total non-performing loans                                                                                                         |   |  5,701   |   |  5,342   |
|                                                                                                                               |   |          |   |          |
| Foreclosed property                                                                                                                |   |  1,197   |   |  1,073   |
|                                                                                                                               |   |          |   |          |
| Total non-performing assets                                                                                                        | $      | $6,898        | $      |  6,415   |
|                                                                                                                               |   |          |   |          |
| Ratio of non-performing loans to gross loans, net of      deferred loan fees, at end of period       |   |   2.67%  |   |   2.46%  |
|                                                                                                                               |   |          |   |          |
| Ratio of loans past due 90 days or more and still       accruing to loans, net of deferred loan fees |   |   0.00%  |   |   0.04%  |
|                                                                                                                               |   |          |   |          |
|  Ratio of allowance for loan losses to nonperforming      loans1                                     |   |   51.06% |   |   50.04% |
|                                                                                                                               |   |          |   |          |
|   1 The Company defines nonperforming loans as total non-accrual loans and loans 90 days or more past due and still accruing. |   |          |
|                                                                                                                               |   |          |   |          |

----

|                           |     | Three Months Ended |
|--------------------------------|----------|--------------------|
|                           |     | March 31,          |
| (in thousands)                 |     | 2010               |   | 2009 |
|                           |     |               |   |   |
| Balance at beginning of period |   $ |   1,073       |   $ |  957 |
| Additions                      |     | 124                | $ |  80 |
| Disposals                      |     |  -            |   | -  |
| Balance at end of period       | $        |  1,197        | $ | 1,037 |

|                        |     | Three Months Ended |
|-----------------------------|----------|--------------------|
|                        |     | March 31,          |
| (in thousands)              |     | 2010               |   | 2009 |
|                        |     |               |   |   |
| Net loss (gain) on sales of |   $ |   -           |   $ |                 - |
|    real estate    |     |               |   |   |
| Operating expenses, net of  |     | 3                  |   |                 4  |
|    rental income  | $        | 3                  | $ |                 4 |

|                                              |   | March 31,   |   | December 31, |
|---------------------------------------------------|--------|-------------|--------|--------------|
| (Dollars in thousands)                            |   | 2010        |   | 2009         |
|                                              |   |        |   |         |
| Five-year / two-year convertible advance at 2.47% |   |        |   |         |
|    maturing February 5, 2013       | $      |  5,000 | $      |  5,000  |

----

|                               | Three Months Ended |
|------------------------------------|--------------------|
|                               |               | March 31, |
| (Dollars in thousands)             |               | 2010 |   | 2009 |
|                               |               |   |   |   |
| Service cost                       | $                  | 69 | $ |  75 |
| Interest Cost                      |               |  66 |   |  62 |
| Expected return on plan assets     |               |  (73) |   |  (56) |
| Amortization of prior service cost |               |  (24) |   |  (24) |
| Amortization of net actuarial loss |               |  19 |   |  31 |
| Net periodic benefit cost          | $                  | 57 | $ | 88 |

----

|                                            |   | March 31, 2010 |   | December 31, 2009 |
|-------------------------------------------------|--------|----------------|--------|-------------------|
|                                            |   | Carrying       |   | Fair              |   | Carrying |   | Fair |
|                                            |   | Amount         |   | Value             |   | Amount |   | Value |
|                                            |   |           |   | (in thousands)    |   |   |
| Financial assets:                               |   |           |   |              |   |   |   |   |
|    Cash and cash equivalents     | $      | 15,645         | $      |  15,645      | $ |  17,035 | $ |  17,035 |
|    Securities available for sale |   |  77,896   |   |  77,896      |   |  66,777 |   |  66,777 |
|    Loans, net                    |   |  210,695  |   |  208,742     |   |  214,862 |   |  212,870 |
|    Accrued interest receivable   |   |  1,856    |   |  1,856       |   |  1,860 |   |  1,860 |
|                                            |   |           |   |              |   |   |   |   |
| Financial Liabilities:                          |   |           |   |              |   |   |   |   |
|    Deposits                      | $      |  272,736  | $      |  269,128     | $ |  268,796 | $ |  265,240 |
|    Other borrowings              |   |  11,285   |   |  11,445      |   |  10,483 |   |  10,632 |
|    Accrued interest payable      |   |  951      |   |  951         |   |  955 |   |  955 |

| Level 1 | inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|---------|---------------------------------------------------------------------------------------------------------------------------|

| Level 2 | inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Level 3 | inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
|---------|-----------------------------------------------------------------------------------------------------|

----

|                                         |   |          |   | Fair Value Measurements at March 31, 2010 Using |
|----------------------------------------------|--------|---------------|--------|-------------------------------------------------|
|                                         |   |          |   | Quoted Prices                                   |   |   |   |   |
| (Dollars in thousands)                       |   |          |   | in Active                                       |   | Significant |   |   |
|                                         |   |          |   | Markets for                                     |   | Other |   | Significant |
|                                         |   | Balance as of |   | Identical                                       |   | Observable |   | Unobservable |
|                                         |   | March 31,     |   | Assets                                          |   | Inputs |   | Inputs |
| Description                                  |   | 2010          |   | (Level 1)                                       |   | (Level 2) |   | (Level 3) |
| Assets:                                      |   |          |   |                                            |   |   |   |   |
|   Securities available             |   |          |   |                                            |   |   |   |   |
|       for sale | $      |  77,896  | $      |  0                                         | $ |  77,896 | $ |  0 |
|                                         |   |          |   |                                            |   |   |   |   |

|                                         |   |          |   | Fair Value Measurements at December 31, 2009 Using |
|----------------------------------------------|--------|---------------|--------|----------------------------------------------------|
|                                         |   |          |   | Quoted Prices                                      |   |   |   |   |
| (Dollars in thousands)                       |   | in Active     |   | Significant                                        |   |   |
|                                         |   |          |   | Markets for                                        |   | Other |   | Significant |
|                                         |   | Balance as of |   | Identical                                          |   | Observable |   | Unobservable |
|                                         |   | December 31,  |   | Assets                                             |   | Inputs |   | Inputs |
| Description                                  |   | 2009          |   | (Level 1)                                          |   | (Level 2) |   | (Level 3) |
| Assets:                                      |   |          |   |                                               |   |   |   |   |
|   Securities available             |   |          |   |                                               |   |   |   |   |
|       for sale | $      |  66,777  | $      |  0                                            | $ |  66,777 | $ |  0 |

----

|                                                    |   |          |   | Fair Value Measurements at March 31, 2010 Using |
|---------------------------------------------------------|--------|---------------|--------|-------------------------------------------------|
|                                                    |   |          |   | Quoted Prices                                   |   |   |   |   |
| (Dollars in thousands)                                  |   |          |   | in Active                                       |   | Significant |   |   |
|                                                    |   |          |   | Markets for                                     |   | Other |   | Significant |
|                                                    |   | Balance as of |   | Identical                                       |   | Observable |   | Unobservable |
|                                                    |   | March 31,     |   | Assets                                          |   | Inputs |   | Inputs |
| Description                                             |   | 2010          |   | (Level 1)                                       |   | (Level 2) |   | (Level 3) |
| Assets:                                                 |   |          |   |                                            |   |   |   |   |
|   Impaired Loans, net of                      |   |          |   |                                            |   |   |   |   |
|       valuation allowance | $      |  2,803   | $      |  0                                         | $ |  0 | $ | 2,803 |
|                                                    |   |          |   |                                            |   |   |   |   |
|   Other real estate owned                     | $      | 1,197         | $      | 0                                               | $ | 0 | $ | 1,197 |

|                                                    |   |          |   | Fair Value Measurements at December 31, 2009 Using |
|---------------------------------------------------------|--------|---------------|--------|----------------------------------------------------|
|                                                    |   |          |   | Quoted Prices                                      |   |   |   |   |
| (Dollars in thousands)                                  |   | in Active     |   | Significant                                        |   |   |
|                                                    |   |          |   | Markets for                                        |   | Other |   | Significant |
|                                                    |   | Balance as of |   | Identical                                          |   | Observable |   | Unobservable |
|                                                    |   | December 31,  |   | Assets                                             |   | Inputs |   | Inputs |
| Description                                             |   | 2009          |   | (Level 1)                                          |   | (Level 2) |   | (Level 3) |
| Assets:                                                 |   |          |   |                                               |   |   |   |   |
|   Impaired Loans, net of                      |   |          |   |                                               |   |   |   |   |
|       valuation allowance | $      | 3,162         | $      | 0                                                  | $ | 696 | $ | 2,466 |
|                                                    |   |          |   |                                               |   |   |   |   |
|   Other real estate owned                     | $      |  1,073   | $      |  0                                            | $ | 0 | $ | 1,073 |

----

----

----

----

----

----

----

|   | · | An increase in the provision for loan losses of $255 thousand. |
|--------|--------|----------------------------------------------------------------|

|   | · | A decrease in noninterest income of $40 thousand. |
|--------|--------|---------------------------------------------------|

|   | · | An increase of $88 thousand in deposit insurance expense. |
|--------|--------|-----------------------------------------------------------|

----

|   | · | An increase of $269 thousand in net interest income. |
|--------|--------|------------------------------------------------------|

|   | · | A decrease in the effective income tax rate of 24.75% at March 31, 2010 from the effective rate of 26.80% at March 31, 2009. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                            |   | Three Months Ended March 31,  |
|-------------------------------------------------------------------------------------------------|--------|------------------------------------|
|                                                                                            |   |  2010                         |   |  2009 |
|                                                                                            |   | Average                            |   |   |   | Average |   | Average |   |   |   | Average |
| (Dollars in Thousands)                                                                          |   | Balance                            |   | Interest |   | Yield/Rate |   | Balance |   | Interest |   | Yield/Rate |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| ASSETS:                                                                                         |   |                               |   |   |   |   |   |   |   |   |   |   |
| Interest earning assets:                                                                        |   |                               |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits with other banks and                                                  |   |                               |   |   |   |   |   |   |   |   |   |   |
|    other short-term investments                                                  | $      |  $1,091                       | $ |  4 |   | 1.39% | $ |  9,454 | $ |  57 |   | 2.42% |
| Loans (1)                                                                                       |   |  215,749                      |   |  3,420 |   | 6.43% |   |  213,844 |   |  3,457 |   | 6.56% |
| Investment securities available for sale  (2)                                         |   |  72,812                       |   |  742 |   | 4.08% |   |  47,536 |   |  576 |   | 4.84% |
| Federal funds sold                                                                              |   |  7,586                        |   |  5 |   | 0.24% |   |  8,101 |   |  5 |   | 0.22% |
|    Total interest earning assets                                                 | $      |  297,238                      | $ |  4,171 |   | 5.69% | $ |  278,935 | $ |  4,095 |   | 5.95% |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| Total average non-earning assets                                                                |   |  27,832                       |   |   |   |   |   |  27,476 |   |   |   |   |
| Less: allowance for credit losses                                                               |   |  2,762                        |   |   |   |   |   |  2,180 |   |   |   |   |
|    Net average non-earning assets                                                |   |  25,070                       |   |   |   |   |   |  25,296 |   |   |   |   |
|    TOTAL AVERAGE ASSETS                                                          | $      |  322,308                      |   |   |   |   | $ |  304,231 |   |   |   |   |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS'                                                                   |   |                               |   |   |   |   |   |   |   |   |   |   |
|    EQUITY:                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                                   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand                                                                         | $      |  37,569                       | $ |  16 |   | 0.17% | $ |  34,992 | $ |  14 |   | 0.16% |
| Savings                                                                                         |   |  66,460                       |   |  167 |   | 1.02% |   |  33,911 |   |  66 |   | 0.79% |
| Time deposits                                                                                   |   |  132,177                      |   |  948 |   | 2.91% |   |  144,941 |   |  1,235 |   | 3.46% |
| Other borrowings                                                                                |   |  10,699                       |   |  37 |   | 1.44% |   |  16,277 |   |  59 |   | 1.47% |
|    Total interest bearing liabilities                                            | $      |  246,905                      | $ |  1,168 |   | 1.92% | $ |  230,121 | $ |  1,374 |   | 2.42% |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| Noninterest bearing liabilities:                                                                |   |                               |   |   |   |   |   |   |   |   |   |   |
| Noininterest bearing demand                                                                     |   |  33,322                       |   |   |   |   |   |  33,881 |   |   |   |   |
| Other liabilities                                                                               |   |  2,614                        |   |   |   |   |   |  3,201 |   |   |   |   |
|    Total noninterest bearing liabilities                                         |   |  35,936                       |   |   |   |   |   |  37,082 |   |   |   |   |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                                            |   |  39,467                       |   |   |   |   |   |  37,028 |   |   |   |   |
|    TOTAL LIABILITIES AND STOCKHOLDERS'                                           |   |                               |   |   |   |   |   |   |   |   |   |   |
|        EQUITY                                                | $      |  322,308                      |   |   |   |   | $ |  304,231 |   |   |   |   |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                             |   |                               | $ |  3,003 |   |   |   |   | $ |  2,721 |   |   |
| Net interest spread                                                                             |   |                               |   |   |   | 3.77% |   |   |   |   |   | 3.53% |
| Net interest margin                                                                             |   |                               |   |   |   | 4.10% |   |   |   |   |   | 3.96% |
|                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |
| (1) Includes Loans Held for Sale and average daily balance of non-accrual loans.                |   |                               |   |   |   |   |   |
| (2) Income and yield are reported on a tax equivalent basis assuming a federal tax rate of 34%. |   |                               |   |   |   |

----

|                                                         |   | Three Months ended |
|--------------------------------------------------------------|--------|--------------------|
| (Dollars in thousands)                                       |   | March 31,          |   | March 31, |   | % |
|                                                         |   | 2010               |   | 2009 |   | Change |
|                                                         |   |               |   |   |   |   |
| Noninterest Income                                           |   |               |   |   |   |   |
|    Service charges on deposit accounts        | $      |  261          | $ |  287 |   | -9.1% |
|    Net gain on sales of loans                 |   |  10           |   |  22 |   | -54.5% |
|    Net gain on sale of securities             |   |  4            |   |  3 |   | 33.3% |
|    Income from bank owned life ins.           |   |  68           |   |  70 |   | -2.9% |
|    ATM fee income                             |   |  150          |   |  127 |   | 18.1% |
|    Other income                               |   |  64           |   |  88 |   | -27.3% |
|       Total noninterest income | $      |  557          | $ |  597 |   | -6.7% |

|   | · | Service charges on deposit accounts decreased 9.1% or $26 thousand chiefly due to the Bank’s revised policies regarding overdraft accounts and the continuing growth of “totally free” checking products.  The revised overdraft policies limited the daily amount of overdraft fees that a customer could be assessed, the automated closure of long-term overdrawn checking accounts, and providing customers’ information on overdraft fees charged to their account in the current cycle and for the year-to-date. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Net gain on sales of loansdecreased 54.5% for the quarter primarily as a result of the slowdown in the number of secondary market loans being sold in the first quarter of 2010 over the first quarter of 2009. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Net gain on sale of securities increased 33.3% for the quarter.  The investment portfolios of the Company and the Bank are realizing gains in 2010 not from actual sales of securities but as a result of securities being called by issuers at par and therefore resulting in securities gains. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | ATM fee income increased 18.1% for the quarter as a result of increased ATM and point of sale transactions by the Bank’s customers and fees received from non-customers using the Bank’s ATMs. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other income decreased $24 thousand or 27.3% in the quarter ended March 31, 2010 versus the same period a year ago.  The majority of the change was a result of the Bank receiving a one-time rebate of $20,000 in the first quarter of 2009. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                          |   |  Three months ended |
|--------|---------------------------------------------------------------|--------|--------------------------|
|   | (Dollars in thousands)                                        |   | March 31,                |   | March 31, |   | % |
|   |                                                          |   | 2010                     |   | 2009 |   | Change |
|   |                                                          |   |                     |   |   |   |   |
|   | Noninterest Income                                            |   |                     |   |   |   |   |
|   |    Salaries and employee benefits              | $      |  1,364              | $ | 1,317 |   | 3.6% |
|   |    Net occupancy expense                       |   |  153                |   |  147 |   | 4.1% |
|   |    Equipment expense                           |   |  131                |   | 144 |   | -9.0% |
|   |    FDIC Insurance                              |   |  156                |   | 68 |   | 129.4% |
|   |    Data Processing                             |   |  75                 |   |  80 |   | -6.3% |
|   |    Other operating expense                     |   |  489                |   |  476 |   | -2.7% |
|   |       Total noninterest expense | $      |  2,368              | $ |  2,232 |   | -6.1% |

|   | · | Salaries and employee benefits increased 3.6% or $47 thousand for the quarter primarily due to increases related to cost of living salary adjustments and a decline in loan origination cost deferrals since there were fewer new loans being closed during the first quarter. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Net occupancy expense increased 4.1% or $6 thousand for the quarter primarily as a result of slightly higher utilities costs associated with colder winter temperatures and costs associated with clearing bank properties of higher amounts of snowfall during the first quarter of 2010 than the year-earlier period. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Equipment expense decreased $13 thousand for the quarter primarily as a result of equipment replacement which reduced or eliminated the need for service contracts and lower equipment depreciation expense as equipment becomes fully depreciated. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | FDIC deposit insurance increased $88 thousand for the quarter primarily as a result of higher insurance premiums both for regular quarterly premiums, TAGP premium and the one-time special assessment to replenish the Deposit Insurance Fund due to bank failures, nationwide. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Data processing expense decreased $5 thousand in the quarter due to renegotiated contracts with the Bank’s core processing vendor and the network communications contract. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other operating expense increased $13 thousand for the quarter.  Costs related to the ATM network and the Commonwealth’s Franchise Tax were primarily responsible for other operating expenses being higher than last year. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| CenterState Bank                                          |  $     6,000,000 |
|-----------------------------------------------------------|------------------------------------------------|
| Community Bankers Bank                                    |  11,400,000                               |
| Federal Home Loan Bank of Atlanta                         |  40,115,000                               |
| Federal Reserve Bank of Richmond                          |  4,872,000                                |
| First Tennessee Bank NA                                   |  10,000,000                               |
| SunTrust                                                  |  8,000,000                                |
|    Total Off-Balance Sheet Borrowing Lines |  $   80,387,000            |

----

|   | · | changes in general economic and business conditions in our market area; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | level of market interest rates; |
|--------|--------|---------------------------------|

|   | · | risks inherent in making loans such as repayment risks and fluctuating collateral values; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | the value of securities held in the Company’s investment portfolio; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | successfully manage the Company’s growth and implement its growth strategies; |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | the successful management of interest rate risk; including changes in interest rates and interest rate policies; |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | rely on the Company’s Management team, including its ability to attract and retain key personnel; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | continue to attract low cost core deposits to fund asset growth; |
|--------|--------|------------------------------------------------------------------|

|   | · | changes in banking regulations, generally accepted accounting principles and; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | compete with other banks and financial institutions and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the ability to rely on third party vendors that perform critical services for the Company; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | technology utilized by the Company; |
|--------|--------|-------------------------------------|

|   | · | maintain expense controls and asset qualities as new branches are opened or acquired; |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | demand, development and acceptance of new products and services; |
|--------|--------|------------------------------------------------------------------|

|   | · | maintain capital levels adequate to support the Company’s growth; and |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | plan for changing trends in customer profiles and behavior. |
|--------|--------|-------------------------------------------------------------|

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|              |   |         |   |        |   | Total number                       |   | Maximum number |
|-------------------|--------|--------------|--------|-------------|--------|------------------------------------|--------|----------------|
|              |   |         |   |        |   | of shares                          |   | of shares that |
|              |   | Total number |   | Average     |   | purchased as                       |   | may yet be     |
|              |   | of shares    |   | price paid  |   | part of publicly                   |   | purchased      |
| Period            |   | purchased    |   | per share   |   | announced plan                     |   | under the plan |
| January 1 to      |   |         |   |        |   |                               |   |           |
| January 31, 2010  |   | 0            | $      |  -     |   | 0                                  |   | 17,309         |
| February 1 to     |   |         |   |        |   |                               |   |           |
| February 28, 2010 |   | 5,400        |   |  11.25 |   |    5,400                 |   | 11,909         |
| March 1 to        |   |         |   |        |   |                               |   |           |
| March 31, 2010    |   | 500          |   |  11.25 |   |       500 |   | 19,500         |
| Total             |   | 5,900        | $      |  11.25 |   |    5,900                 |   | 19,500         |

----

----

|               |  CITIZENS BANCORP OF VIRGINIA, INC.       (Registrant) |                                  |
|--------------------|------------------------------------------------------------------------------------------------|---------------------------------------|
|               |                                                                                           |                                  |   |
|               |                                                                                           |                                  |   |
| Date: May 14, 2010 | By:                                                                                            | /s/Joseph D. Borgerding               |   |
|               |                                                                                           | Joseph D. Borgerding                  |   |
|               |                                                                                           | President and Chief Executive Officer |   |
|               |                                                                                           |                                  |   |

|               |   |                                                   |   |
|--------------------|--------|--------------------------------------------------------|--------|
| Date: May 14, 2010 | By:    | /s/Ronald E. Baron                                     |   |
|               |   | Ronald E. Baron                                        |   |
|               |   | Senior Vice President and Chief Financial Officer |   |
|               |   |                                                   |   |

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|   | 31.1 | Rule 13a-14(a) Certification of Principal Executive Officer |
|--------|------|-------------------------------------------------------------|

|   | 31.2 | Rule 13a-14(a) Certification of Principal Financial Officer |
|--------|------|-------------------------------------------------------------|

|   | 32.1 | Statement of Principal Executive Officer Pursuant to 18 U.S.C. ss.1350 |
|--------|------|------------------------------------------------------------------------|

|   | 32.2  | Statement of Principal Financial Officer Pursuant to 18 U.S.C. ss.1350 |
|--------|------------|------------------------------------------------------------------------|

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